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Egypt Halts Gas Flow to Israel, Jordan After Pipeline Blast

Nov. 28 (Bloomberg) -- Natural-gas flows from Egypt to Israel halted after an explosion on the Sinai pipeline network that delivers the fuel, Egyptian and Israeli officials said.

Exports to Jordan and some domestic supplies were also suspended because of the blast, Egypt’s Oil Ministry said today in an e-mailed statement.

“An alleged terror attack” at about 1 a.m. local time caused an explosion near the city of El Arish, said Ampal-American Israel Corp., which owns 12.5 percent of East Mediterranean Gas Co., the company transporting Egyptian gas to Israel. Ampal shares fell 0.2 percent in Tel Aviv trading.

The attack was the ninth affecting gas pipeline infrastructure in the Sinai since February, when a popular uprising forced former Egyptian President Hosni Mubarak to resign. Egyptian opposition groups have criticized sales of the fuel to Israel, which has relied on Egyptian gas to generate 40 percent of its electricity.

The attack highlights Egypt’s challenge in securing the pipeline and threatens to worsen its already soured ties with its eastern neighbor.

Magdy Tawfik, chairman of Egyptian Natural Gas Co., said unidentified men planted three explosives, two of which detonated and caused a fire that was later extinguished, according to the ministry statement. The extent of the damage is unknown, Ampal said in an e-mailed statement.

‘Easy Target’

The attack coincided with the start of voting in the country’s first election since the toppling of Mubarak as the police and the military, which is currently running the country, focus their efforts on security at polling stations.

“Securing this pipeline has proved very hard for the Egyptian authorities as they just don’t have the manpower in the area to be able to monitor every inch of it, making it very easy for militants to attack it,” Alan Fraser, a Middle East analyst at U.K. risk consultants AKE Group, said. “The fact that it was attacked on the first day of the elections was probably to gain more media attention. The militants obviously want to make a political point, and what better way to do it than taking attention away from the first democratic elections following the toppling of Mubarak.”

Replacing Egyptian gas with more expensive diesel fuel cost the Israeli economy an average of 10 million shekels ($2.6 million) a day during the summer, Israel’s National Infrastructures Ministry said. Israel Electric Corp. said it may need to raise rates by as much as 30 percent next year. Ampal, which has fallen 85 percent this year, dropped to 1.28 shekels at 3:43 p.m. in Tel Aviv trading.

Not Last Time

“I think it’s clear this won’t be the last time the pipeline is attacked,” Fraser said. “We may see regular attacks until we see some sort of change in relations with Israel, and the export of gas between the two.”

Relations between Israel and Egypt have chilled since the January uprising that overthrew Egyptian President Mubarak, straining a three-decade peace treaty between the countries. Egypt’s ruling military council declared a state of emergency to restore order after protesters in Cairo attacked the Israeli embassy on Sept. 9, forcing an evacuation of diplomatic personnel.

East Mediterranean Gas filed a request in October for arbitration with the International Chamber of Commerce, seeking compensation from Egyptian General Petroleum Corp. and Egyptian Natural Gas Holding Co. for damages incurred due to the frequent interruptions of gas supplies.

To contact the reporters on this story: Calev Ben-David in Jerusalem at cbendavid@bloomberg.net; Ola Galal in Cairo at ogalal@bloomberg.net

To contact the editor responsible for this story: Andrew J. Barden at barden@bloomberg.net

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