Israel hopes to increase the share of Natural Gas in its fuel mix (especially for electricity generation, currently dominated by Coal-fired plants) for energy security, economic, and environmental reasons. Over the next few years, natural gas will be replacing fuel Oil in several of the older coastal power plants, as Well as newer inland facilities. Demand for natural gas is expected to reach 282.5 billion cubic feet (Bcf) by 2010 and increase significantly thereafter. Israel has been looking into various supply options. One possibility is natural gas imports from Egypts Nile Delta and offshore regions, either overland across the Sinai peninsula, or via underwater Pipeline to the Israeli coast. Israel also is developing its limited domestic natural gas reserves.
The East Mediterranean Gas (EMG) Company, a consortium of the Egyptian General Petroleum Corporation (EGPC), the Merhav group of Israel, and Egyptian businessman Hussein Salem, was established in 2001 to pursue the option of importing Egyptian natural gas. A government-to-government framework agreement, which was signed in June 2005, and calls for 60 Bcf per year of Egyptian gas to be imported to Israel for fifteen years, beginning in October 2006, with a possibility of a five year extension. A $300 million, 80.8-mile marine pipeline with a maximum capacity of 247.2 Bcf per year will be constructed from El Arish on Egypts Sinai peninsula to the Israeli coastal city, Ashkelon, with delivery and receiving facilities in both Egypt and Israel. Besides Israeli consumption, Egyptian natural gas could theoretically be used for power generation in the Palestinian Authority at a reported cost 3.5 cents per kilowatt-hour, about half the price charged by the IEC. Currently, Gaza is almost totally dependent on the IEC for its electricity needs. However, the EMG line is likely to bypass Palestinian territorial waters off the Gaza Strip and go directly from Egyptian to Israeli waters. A commercial agreement has yet to be signed.