Dubai (Platts)--18Mar2008

A gas pipeline to deliver Egyptian natural gas to Israel is being tested
ahead of the supply of around 150 million cubic feet of natural gas, the head
of the state-owned Egyptian Natural Gas Holding Company was quoted Tuesday as
saying of the project that has outraged the main Islamic opposition group.

The Egyptian oil ministry's website carried details of a news conference
held in Cairo on Monday by Egas President Mahmoud Latif at which he gave
details of Egyptian gas exports and average prices of exported gas and LNG.

Under a 2005 MOU between the two countries, Egypt is expected to supply
gas to Israel via a 100 km (60 mile) pipeline linking from al-Arish on the
Mediterranean Sea to Ashkelon in southern Israel for a reportedly low price of
$2.75/MMBtu, lower than the average price of Egyptian gas sales.

Although Egypt and Israel are bound by a peace treaty -- Egypt was the
first Arab country to sign a peace deal with the Israelis -- the gas agreement
has come under attack by opposition parties in Egypt who want their government
to withhold gas to pressure Israel into ending its military operations against
Palestinians in the Gaza Strip, which is controlled by the radical Hamas
movement.

Latif did not disclose the price at which Egypt is selling the gas to
Egypt but sought to reassure critics saying it was "above cost price and would
give Egypt good returns."

Actual gas deliveries to Israel are expected at the end of March when the
pipeline is linked to Israel's national grid.

Israel said February 26 that it had started receiving natural gas from
Egypt through the subsea pipeline but that it had not yet reached customers.
The gas is being delivered by the East Mediterranean Gas Company, a joint
venture whose investors include Egyptian businessman Hussein Salem, Israeli
businessman Yossi Maiman and Thai energy company PTT.

In 2005 the Egyptian and Israeli governments signed a memorandum of
understanding for the delivery of up to 7 billion cubic meters/year of gas to
Israel.

Latif said that the average price of Egyptian gas exports was $5/MMBtu
though some spot LNG cargoes had been sold at between $8 and $11/MMBtu. He
said that Egypt had recently revised some sales contracts with foreign
partners that will earn the country an additional $18 billion in revenues over
the next 20 years. Egypt had set a cap of $2.65/MMBtu on the purchase of gas
from its foreign partners, he said.

Latif noted that the proposed volume of sales to Israel represents only
2.5% of total natural gas production which he said averaged 6.3 Bcf/d though
he gave no timeline.

Egypt's natural gas reserves have risen to 72.3 Tcf after the addition of
6.2 Tcf to reserves last year with the discovery of new fields and the
development of producing fields, Latif said. He added that the figure was
expected to rise further to 75 Tcf by the end of 2008.

Another Egyptian official said at the same news conference that Egypt had
a right to review its gas sales contracts so they conform with current higher
gas prices internationally.

Sharif Ismail, who heads the Egyptian South Valley Development Holding
Company and former head of EGAS explained that EGAS had in 2005 revised the
price of LNG delivered to Spain three times in line with the rising value of
crude benchmark Brent Blend, to which most gas sales to Europe are linked. The
sales price to Spain had been raised 100% he said and the gas price in other
term contracts would be increased by 50% over the next three years, he said
without revealing the price, which he said would remain confidential.

There have been reports recently that Egypt is seeking a price of
$7/MMBtu for LNG exports.