Natural gas galore: Egypt's high hopes

Nesma Nowar , Thursday 5 Jul 2018

Egypt is pinning high hopes on its natural gas production to cover domestic demand and help it become a regional energy hub

Zohr Gas Field
Egypt's giant gas field Zohr (Photo: Al-Ahram)

New natural gas discoveries have helped Egypt boost its natural gas production, helping it to cover domestic demand and halt natural gas imports as soon as this year.

Petroleum Minister Tarek Al-Molla said imports of liquefied natural gas (LNG) may stop in the fourth quarter of 2018, allowing for exports to start early next year.

He said that the final LNG import tender had been issued to cover domestic demand for the third quarter, and that the fourth quarter should be “imports-free”.

This news comes as Egypt’s giant Zohr Field, discovered by Italian energy company Eni in 2015, will increase gas production to 1.75 billion cubic feet a day by August from 1.2 billion cubic feet at present.

Egypt’s total production is six billion cubic feet a day, and that should increase to 6.5 billion by September, Al-Molla said.

Egypt has been recently working on boosting its natural gas production through accelerating production from new fields as well as intensifying exploration activities. Egypt’s production of natural gas increased in December 2017 to 3.4 million tons, up from 2.7 million tons in December 2016.

The increased production came on the back of starting production from four main fields, including West Delta’s Taurus and Libra fields, as well as the Atoll and Zohr fields. The projects have added some 1.6 million cubic feet to the country’s production of natural gas.

Besides Zohr, other fields are expected to enter production this year. The Fayoum and Giza fields, located within the North Alexandria and West Mediterranean Deepwater concessions in the Mediterranean Sea, are expected to start production before the end of 2018, with a daily output of 500 to 700 million cubic feet.

This is in addition to new projects currently underway that aim to intensify exploration activities and ramp up natural gas production.

The cabinet approved in May a $105 million exploration agreement in the Mediterranean off the coast of North Sinai with Eni and the Egyptian Tharwa Company to search for oil and gas in the Mediterranean off northern Sinai.

Under the deal, Eni and Tharwa will spend $105 million in two stages over six years, which involve drilling one well in the first stage and another in the second.

Though the agreement is yet to be ratified by parliament, press reports surfaced last week of an imminent new natural gas discovery by Eni that would be three times the size of the Zohr Field. The reports were referring to the Nour Field in the offshore Shorouk concession.

However, Eni denied the reports on Monday. “There are prospects and new [geological] structures in Egypt, but we still haven’t discovered anything,” Eni’s Chief Executive Claudio Descalzi told reporters, according to Reuters.

Eni said that it would begin drilling an exploratory well at its Nour Field in two months.

In a recent interview with Al-Molla, Descalzi said that his company had allocated 70 per cent of its global investments to Egypt, saying that it had so far pumped $8.4 billion into Egypt’s Zohr and Nour fields.

He added that an additional $3 billion would be pumped in during the coming period.

Petroleum expert Ramadan Abul-Ela said that a new discovery might be found in the Mediterranean, but it would not be bigger than the Zohr Field. He said that Egypt still did not realise the full potential of the area, saying that the country’s share of the Mediterranean was 50 trillion cubic feet of gas, of which 30 trillion had been discovered in Zohr.

He said that the Zohr Field would help cover domestic demand, but that exports would not be resumed anytime soon. He added that in the case of excess production, it would be better to create added value out of it and channel it into the petrochemicals industries.

Halting gas imports would free up resources for the government to spend on sectors such as education and healthcare. It could also help create new projects, generating jobs, Abul-Ela told Al-Ahram Weekly.

The government is pinning hopes on Egypt’s new discoveries and strategic location helping it to draw in more foreign investment and become an energy hub. Egypt is looking to raise $10 billion in foreign investment for the oil and gas sector for 2018-2019, a 25 per cent increase on the year before.

In February, the country issued long-awaited regulations that allow the private sector to import natural gas. The parliament last year passed a law establishing a Gas Regulatory Authority in a bid to attract greater private-sector participation in the sector.

Meanwhile, Egypt has been investing in infrastructure to become a regional energy hub for the export of natural gas. It has been building fuel depots for ships along the Suez Canal and expanding its refining capacity. Egypt has an extensive pipeline network and two unused gas liquefaction plants ready to export new gas as it arrives.

The country also aims to sign an agreement with Cyprus for a pipeline to transport gas from the Aphrodite Field to its LNG facilities.

Meanwhile, Israel’s Delek Drilling, US-based Noble Energy, and an Egyptian company are reportedly in advanced talks to buy 37 per cent of East Mediterranean Gas (EMG), which operates the undersea pipeline that connects to Egypt’s Sinai Peninsula, according to Bloomberg.

The buyout would clear an arbitration case against Egypt and remove a major obstacle to the use of EMG’s pipeline to transport 64 billion cubic metres of natural gas from Israel’s Tamar and Leviathan fields to Egypt’s Dolphinus Holdings over 10 years.

*A version of this article appears in print in the 5 July 2018 edition of Al-Ahram Weekly under the headline: Natural gas galore 

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