The European Investment Bank (EIB) is lending ECU 50 million (1) to the Egyptian Company for Natural Gas (GASCO) towards construction and commercial operation of two gas pipelines, one on each bank of the Suez Canal designed to carry natural gas from Egypt's offshore fields in the Mediterranean Sea to the Ayoun Moussa Power Station in the Sinai and to industrial and domestic users in the Suez area.

The financing agreement was signed yesterday in Luxembourg for the EIB by Mrs A. Obolensky, Vice-President, and for GASCO by Mr M. Tawila, Chairman and Managing Director.

GASCO, established in 1997 as a private company, to plan, build up, process, supervise and operate natural gas transport and distribution in Egypt, where major shareholder is the Egyptian General Petroleum Company (EGPC).

The 275 km gasline project will be integrated in the existing 3 000 km national gasline system, resulting in increased use of natural gas and the gradual substitution of liquid oil and petroleum products.

The project is expected to benefit from a 3% interest rate subsidy, financed from the Union budget (2), as it will improve substantially the environment. Clean and secure energy supplies are of strategic interest to Egypt and the European Union as vital for sustainable economic development.

The European Investment Bank (EIB) was set up in 1958 under the EC Treaty to provide loan finance for capital investment furthering EU objectives. It participates in the implementation of EU co-operation policies towards third countries that have co-operation or association agreements with the Union. In the Mediterranean region, the EIB operates under the new Euro-Mediterranean Partnership, which complements the EU Member States' own bilateral co-operation policies.

Under the Partnership arrangements, the EIB is committed to lend up to ECU 2 310 million between 1997 and 2000 for investment projects in 12 non EU-Member Mediterranean countries.

This loan follows a number of other loans committed by the EIB, making total financing since 1978 in Egypt exceed ECU 1 billion, to support projects in water supply and waste water treatment, communications, transport, electricity transmission and distribution, agricultural development and industry, including SMEs. In energy supply, the EIB has financed the Abu Qir gasfield in 1982 with ECU 28 million, the gas distribution system in Cairo in 1989 with ECU 25 million and the MIDOR Oil Company in 1995 with ECU 220 million.

(1) The conversion rates used by the EIB for statistical purposes during the current quarter are those obtained on 30 September 1998, when ECU 1= 1.96 DEM, 6.59 FRF, 0.69 GBP, 0.79 IEP, 1.6783 USD, 3.99125 EGP.

(2) MEDA Council Regulation 1488/96 of 23.07.1996.