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Egypt's growth means importing gas, Qatar and Iraq probable sellers: Expert

Egypt's status as an exporter of gas is likely to change as economic growth picks up; importing Liquefied Natural Gas is not cost-efficient for Egypt, expert tells Ahram Online

Ahmed Feteha, Tuesday 2 Oct 2012
Egypt mulls buying LNG from Qatar to supply energy to remote areas, but LNG remains much more expensive than dry gas (Photo: Reuters)
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Views: 2978

Egypt is destined to become a net importer of natural gas if the government hits the economic growth targets it has promised, making lining up overseas resources a must, a local energy expert has told Ahram Online.

The new government's pledge for 5-6 per cent growth by 2015 will inevitably mean tapping foreign energy sources, with Qatar and Iraq the best candidates, he says.
"If we are to see real industrial development in the coming five to ten years, we will have to import," Mohamed El-Ansary, chief executive at Egypt based Tri-Ocean Energy, told Ahram Online in an exclusive interview.
"Currently we don’t need to do so, but in the future Egypt will not be self-sufficient in natural gas."
With extensive reserves in the Western Desert, Egypt is the second largest natural gas producer in Africa after Algeria, according to the US Energy Information Administration.
The country currently exports dry and liquefied natural gas (LNG) to Europe, the United States and South Korea. It has also supplied a handful of Arab countries through the Arab Gas Pipeline, completed in 2004.
But such largese is unlikely to last, and Egypt is looking overseas for ways to meet the future needs of its local industry and power stations.
On 22 September, petroleum minister Osama Kamal visited Qatar to negotiate the import of Gulf-sourced LNG, in a move that surprised some. Those familiar with Egypt's strategic needs for natural gas, however, believe it a timely decision.
"If Egypt is targetting average GDP growth of five or six per cent per year, which is barely enough to keeping unemployment from climbing, it can't avoid importing gas," said El-Ansary.
Rising local demand for natural gas will also spark a future import deficit, as the government reins in its export plans.
In 2008, then petroleum minister Sameh Fahmy announced that Egypt would not engage in any new gas export contracts.
The largest proportion of Egypt's natural gas consumption -- some 56 per cent -- comes from the electricity sector, according to a report by the African Development Bank. Another 30 per cent goes to industry.
The current governmental direction to import LNG, which is moved by ship and not via pipeline is not cost-effective, El-Ansary said, but can serve as the fastest current solution for Egypt's needs.
"The areas that are in dire need of development, Sinai and Upper Egypt do not have the necessary pipeline network," the Tri-Ocean Energy executive said. "If we use LNG we don't have to wait until infrastructure is built."
Egypt's unusually hot summer, marred by frequent power cuts, also saw gas supplies partially diverted from factories to power stations in a bid to feed the country's failing electricity grid, leading to complaints from local industrialists.
Among the places bearing the brunt of the shortages are the Red Sea resorts of Hurghada and Marsa Alam which are struggling to find the diesel necessary to run electricity generators.
"LNG could crack this nut right away. We can have a power centre in Safaga [on the Red Sea] and we can start substantially developing the area," El-Ansary said.
Egypt's government will import a daily 400-500 million cubic feet from Qatar if it secures a deal.
But the high price of LNG makes its use very inefficient, Al-Ansary says. LNG is about three times as expensive as the natural gas currently sold to Egyptian industry.
"LNG is even more expensive than diesel sold in the in the black market in Egypt. So I don’t see importing it as efficient," he explained.
El-Ansary believes a better way to secure Egypt's gas needs is to buy from Iraq and adapt existing infrastructure to supply it.
"The cheapest and most efficient way to import gas for Egypt is to reverse the pipeline that now delivers gas to Jordan, extend it to Iraq and get natural gas from there," he explained.
In April, Egypt cancelled its controversial gas export deal with Israel. Nixing the agreement means Egypt keeps an extra 60 billion cubic feet of gas per year that can replace some of the petroleum products imported to meet domestic energy demands.
In 2010, Egypt produced around 2.3 Trillion Cubic Feet (TCF) of natural gas, and consumed just over 1.6 TCF, according to official data.
Egypt's proven gas reserves are currently valued at 77 TCF, an increase from 2010 estimates of 58.5 TCF and the third highest in Africa after Nigeria and Algeria.
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