The Arish–
Ashkelon pipeline is a long submarine gas pipeline with a diameter of , connecting the Arab Gas Pipeline with Israel. The physical capacity of the pipeline is of gas per year. Technical upgrades can increase its capacity to per year. While it is not officially a part of the Arab Gas Pipeline project, it branches off from the same pipeline in Egypt. The pipeline is built and operated by the East Mediterranean Gas Company (EMG), a joint company of Mediterranean Gas Pipeline Ltd (28%), the Israeli company Merhav (25%),
PTT (25%), EMI-EGI LP (12%), and
Egyptian General Petroleum Corporation (10%). The pipeline became operational in February 2008, at a cost of $180–$550 million. The exact figure is disputed. It has since ceased operation due to sabotage of its feeder pipeline in Sinai and gas shortages in Egypt. Although originally intended for transporting gas from Egypt to Israel, the gas shortages in Egypt have raised the possibility of operating the pipeline in the opposite direction,
i.e., from Israel to Egypt, beginning in 2019.
Initial supply agreement Egypt and Israel originally agreed to supply through the pipeline of natural gas per year for use by the
Israel Electric Corporation. This amount was later raised to per year to be delivered through the year 2028. In late 2009, EMG signed contracts to supply through the pipeline an additional per year to private electricity generators and various industrial concerns in Israel and negotiations with other potential buyers were ongoing. In 2010, the pipeline supplied approximately half of the natural gas consumed in Israel, with the other half being supplied from domestic resources. With the capacity to supply per year, it made Israel one of Egypt's most important natural gas export markets. In 2010, some Egyptian activists appealed for a legal provision against governmental authorities to stop gas flow to Israel according to the obscure contract and very low price compared to the global rates. The provision was denied by Mubarak regime for unknown reasons. In 2011, after the
Egyptian revolution against
Mubarak regime, many Egyptians called for stopping the gas project with Israel due to low prices. After a fifth bombing of the pipeline, flow had to be stopped for repair.
2012 cancellation Following the removal of Hosni Mubarak as head of state, and a perceived souring of ties between the two states, the standing agreement fell into disarray. According to Mohamed Shoeb, the head of the state-owned
EGAS, the "decision we took was economic and not politically motivated. We canceled the gas agreement with Israel because they have failed to meet payment deadlines in recent months". Israeli Prime Minister
Benjamin Netanyahu also said that according to him the cancellation was not "something that is born out of political developments". However,
Shaul Mofaz said that the cancellation was "a new low in the relations between the countries and a clear violation of the peace treaty". Eventually, gas shortages forced Egypt to cancel most of its export agreements to all countries it previously sold gas to in order to meet internal demand.
Litigation and settlement The Egyptian state entities supplying the pipeline attempted to declare
force majeure in cancelling the gas agreement with EMG and the Israel Electric Corporation, while the latter contented the cancellation amounted to a unilateral
breach of contract. The matter was referred to the International Court of Arbitration of the
International Chamber of Commerce in Geneva. After four years of proceedings the arbitration panel ruled against Egypt and ordered it to pay approximately US$2 billion in fines and damages to EMG and the IEC for unilaterally cancelling the contract. Egypt then appealed the panel's decision to the Swiss courts, who also ruled against Egypt in 2017. A settlement over the fine was reached in 2019 underwhich Egypt will pay the IEC US$500 million over the course of 8.5 years as compensation for halting the gas supplies. The settlement clears the way for gas exports from Israel to Egypt to begin.
Reverse flow agreement Since the Egyptian revolution, Egypt has been experiencing significant domestic shortages of natural gas, causing disruptions and financial losses to various Egyptian businesses who rely on it, as well as curtailing exports of natural gas from Egypt through the Arab Gas Pipeline (even during periods when it has been available for operation) and via
LNG export terminals located in Egypt. This situation raised the possibility of using the Arish-Ashkelon Pipeline to send natural gas in the reverse mode. In March 2015, the consortium operating Israel's
Tamar gas field announced it reached an agreement, subject to regulatory approvals in both countries, for the sale of at least of natural gas over three years through the pipeline to Dolphinus Holdings – a firm representing non-governmental, industrial and commercial consumers in Egypt. In November 2015 a preliminary agreement for the export of up to of natural gas from Israel's
Leviathan gas field to Dolphinus via the pipeline was also announced. The cost of rehabilitating the pipeline and converting it to allow for flow in the reverse direction is estimated at US$30 million. In September 2018 it was announced that the consortium operating the Tamar and Leviathan fields and an Egyptian partner will spend US$518 million to buy a 39% stake in EMG in anticipation of beginning gas exports from Israel to Egypt through the Arish–Ashkelon pipeline. Test flows through the pipeline from Israel to Egypt are expected to begin in summer 2019. If tests are successful, small amounts of gas will be exported on an interruptible basis until after the Leviathan field comes online in late 2019 at which point more substantial amounts could be supplied. The reverse flow became commercially operational in 2020. == Discontinuation and resumption of service ==