Pipeline blast worries Israel

Israel has expressed concern about its energy security after an explosion ripped though an Egyptian gas terminal on the Sinai Peninsula. It was unclear if the blast, which set off a massive fire, was related to the ongoing protests, but Israel gets about half of its natural gas from Egypt and has been on alert for any disruptions to its supply.

Israel, in an emergency measure, voluntarily turned off the flow of gas from Egypt, which supplies roughly half of the country's natural gas, after Saturday's blast at the facility in the northern Sinai Peninsula.

With Egypt in the second week of mass anti-government protests, Prime Minister Benjamin Netanyahu said the government had been prepared for the possible disruption of Egyptian supplies and arranged for other sources to compensate.

"Because of these advance preparations, no disruptions in the gas supply to Israel are expected," he told his Cabinet.

Officials however said the incident illustrated the risk that Israel faces in relying on Egypt as a key energy supplier. While coal has historically been the dominant fuel source for Israeli electricity plants, the country shifted its reliance extensively to Egypt which, under a 15-year deal signed in 2008, is to sell Israel 1.7 billion cubic meters a year of gas.

Israeli industry analysts see that flow as important to diversifying the country's fuel sources and for maintaining good ties with Egypt, the first Arab country to sign a peace deal with the Jewish state.

The explosion, coming amid a popular uprising against longtime Egyptian President Hosni Mubarak, set off a massive fire that was contained by shutting off the flow of gas to Jordan and Israel. Egypt's natural gas company said the fire was caused by a gas leak, but local officials said a bomb was detonated inside the terminal.

The supply of gas from Egypt has always been dogged by fears that the flow could be disrupted by saboteurs or political forces hostile to the deal and Egypt's 1979 peace treaty with Israel. The recent turmoil in Egypt has only highlighted those fears.

State-run Israel Electric Corp., the largest natural gas client in Israel, can weather the shut-off without disruption for up to two weeks, Chief Executive Amos Lasker told Israel Radio. Should it drag on beyond that, Israel would be forced to use alternate, pricier fuels, he said.

Gas exploration companies have announced two deep-water finds in Israeli territorial waters totaling some 25 trillion cubic meters over the past two years. While that amount that dwarfs the quantity Egypt has contracted to sell Israel, gas is not expected to start flowing from one of those fields, Tamar, before 2013.

Minister of National Infrastructures Uzi Landau wants the government to back loans so financing can be obtained to develop the Tamar field, off Israel's coast in the Mediterranean Sea, a spokesman said. Landau also favors exempting the field's developers from a proposed windfall tax to encourage them to get moving.

"We have to do everything to improve Israel's energy security," Landau told Israel Radio on Sunday. "It is Israel's obligation to remove as soon as possible every obstacle" to developing Tamar, he said.

Landau's spokesman, Chen Ben-Lulu, said the goal was to have gas from Tamar flowing into Israel by 2013., adding that the explosion "just proves" the need to do so.

"We want energy independence and to achieve it as soon as possible," he said.

Various obstacles have held up development of Tamar.

The gas companies developing the field are trying to pressure the government not to apply a proposed windfall tax retroactively to their find.

The companies' prospective lenders also want the government to guarantee the loans to make sure Israel Electric honors its commitment to buy the gas. Ratings firm Standard & Poor's recently downgraded the utility's credit rating to junk status.

The new discoveries — which Lebanon says, without providing proof, lie partly in Lebanese waters — are enough to keep Israel energy self-sufficient for decades, Israeli experts say, and could potentially turn the country into an energy exporter.