US firm seeks restart of Egypt gas flow to Israel

Mon May 30, 2011 5:23am EDT

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* Gas supplies stopped for more than a month

* EGI says disruptions affect U.S.-Egypt agreement

JERUSALEM, May 30 (Reuters) - U.S. investors in the East Mediterranean Gas Co (EMG) have taken legal steps against the Egyptian government to ensure gas flow resumes to Israel, an official from a U.S. partner in EMG told Reuters on Monday.

EMG exports Egyptian natural gas to Israel, though following explosions on the pipeline in the wake of political turmoil in Egypt, the supplies have been halted for over a month.

In a letter to the Egyptian government, U.S.-firm EGI, a partner in EMG, said it was seeking international arbitration over Egypt's failure to protect their investment, as stipulated in a U.S.-Egyptian agreement.

The letter accuses the Egyptian government of "failing to provide EMG with full protection and security" for its investment and "refusing to resume delivery of gas to EMG."

Arbitration, which could lead to a ruling that Egypt violated its agreement and force it to pay a large compensation, could take place in Washington within six months, the official said.

Israel receives natural gas from Egypt under a 20-year deal signed in 2005.

"We don't think there is a political decision to stop gas exports to Israel, but rather a problem in the decision making process within the Egyptian government," said the official, speaking on condition of anonymity.

The official said that since the April 27 disruption, Egypt was losing $4 million a day.

EMG is owned by Egyptian businessman Hussain Salem, Egypt Natural Gas Co, Thailand's PTT, American businessman Sam Zell, chairman of EGI, Ampal-American Israel Corp AMPL.O AMPL.TA and Israel's Merhav. (Reporting by Ari Rabinovitch; editing by James Jukwey)

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