The European Investment Bank (EIB) is lending EUR 100 million to the Egyptian Natural Gas Holding Company (EGAS) towards construction of a 393 km south-north gas pipeline across Jordan (Aqaba to Rehab) to bring Egyptian natural gas to major power plants, industries and consumers throughout Jordan. The pipeline is also known as Arab gas pipeline or Jordanian gas transmission pipeline.

The agreement was signed today in Cairo in the presence of Eng. Sameh Fahmy, Minister of Petroleum of Egypt by Eng. Mohamed I. Tawila, Chairman of EGAS and Mr Philippe de Fontaine Vive, Vice-President of the EIB with special responsibility for FEMIP, on the occasion of his official visit to Egypt to chair the 4th FEMIP Ministerial Meeting taking place in Alexandria on 7 June 2004.

As a South-South regional project, the gas pipeline is a priority project under FEMIP and a prime example of its catalyst role in investment in the MPCs.

Against the current high level of oil prices, it will provide economic benefits to Jordan, Egypt, and potentially to other countries in the region.

In Jordan, the project will help reduce power generation costs by replacing oil with gas at existing power stations. Additionally, the supply of gas to new combined cycle plants will raise the overall efficiency of the power system, increase supply of electricity to meet demand growth and diversify the energy system. Jordanian industry will also benefit from a lower cost of electricity and will be able over time to adopt internationally competitive gas based technologies. At the same time this conversion has very beneficial effects on the environment as it will significantly reduce polluting emissions.

Egypt will benefit from the upstream activity and gas sales revenues, which to some extent will be shared with European and other international companies participating in the exploration and production sector. Moreover, the project is an important regional development in the Euro-Med area. It establishes international trade in gas between Egypt and Jordan, and opens up the potential to include Syria and Lebanon when the pipeline is extended in the future. Subsequent phases of the project would enable onward connections to Turkey and the European gas system.

This operation underpins FEMIP's continuing support to Egypt to develop, through private and public sector investments, its promising gas sector following the important gas discoveries made in the country over the last years. The structure of the operation underlines moreover, the key role which EGAS and its subsidiaries - important beneficiaries of EIB support since 1998 - play in the country's policy to foster natural gas exports in order to generate foreign exchange reserves.

FEMIP is a major step forward in financial and economic cooperation between the Union and the Mediterranean Partner Countries (MPCs). It foresees EUR 8-10 billion funding of investment in the MPCs by 2006. It has at its disposal funds under the existing Euro-Mediterranean mandates, risk capital resources and technical assistance funds from the EU budget. FEMIP's top priority is to promote private sector development (especially SMEs and FDI) and support projects helping to establish a favourable climate for private investment (economic infrastructure, health and education schemes). FEMIP's ultimate goal is to help the MPCs meet the challenges of economic and social modernisation and enhance regional integration in the run-up to the creation of a Euro-Mediterranean free-trade area planned for 2010.

The EIB has had operational links with Egypt since 1978 and has channelled financing of some EUR 3 billion to the country. This has been concentrated on support for infrastructure, environmental schemes and private sector businesses - encompassing both large corporates stemming from cooperation between local and European operators and SMEs financed in partnership with the Egyptian banking sector. In 2003, the Bank lent a total of EUR 509.5 million for the construction of an LNG plant at Idku, the construction of second 650 MW module for a natural gas-fired combined-cycle power plant at Nubariya and modernisation and extension of the wastewater collection and treatment network in Cairo.