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Egypt to be regional gas hub after achieving self-sufficiency - Daily News Egypt

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Egypt to be regional gas hub after achieving self-sufficiency

Renewal of Singapore's BW gasification vessel contract next year, says source

Egypt started the process of transforming into a regional energy trading hub since the beginning of this year, after the country achieved self-sufficiency of natural gas and started exporting Egyptian gas to international markets through the Idku liquefaction plant.

A source in the Ministry of Petroleum told Daily News Egypt that it was agreed with the Jordanian side to supply their power plants at a maximum of 150m standard cubic feet (scf) of gas per day, up from the current 100m scf/day.

Benefiting from the Idku and Damietta liquefaction plants, Egypt seeks to expand in natural gas export to international markets via Jordanian and Israeli gas pipelines.

The source pointed out that Egypt has renewed its contract with Singapore’s BW gasification vessel until next year to be used in maneuvering in case of need as Egypt aims to be a global trade energy hub exploiting its infrastructure.

Singapore-Norwegian BW Gas won the tender to provide Egypt with the second gasification vessel which arrived at the port of Ain Sukhna in October 2015.

This plant will convert imported liquefied gas into its gaseous nature, at a maximum of 750m scf/day, in preparation for pumping it into the national gas grid.

Egypt achieved several oil discoveries in the last period which were linked to the national grid successively, with a total production capacity of about 6.5bn scf/day.

The source said that the quantities of gas exported through the Royal Dutch Shell’s Idku liquefaction plant reached about 550m scf/day to be exported to world markets.

The source explained that Egypt has a strong national gas network that allows the reception and distribution of about 9bn scf/day across Egypt, in addition to exporting 1.88bn scf per day.

He explained that the Ministry of Petroleum has a plan to exploit these capacities to achieve high revenues by 2020/21. The law for gas market activities regulation will play a major role in the management of gas in the domestic market and trading it abroad.

The source revealed that Egypt’s agreement with Cypriot to export 700m scf/day by 2020/21 will achieve high returns to the state, including waiver of the arbitration case filed against Egypt by the Unión Fenosa, owner of Damietta liquefaction plant and achieve high revenues as the ownership of the vessel is split between Unión Fenosa by 52% and the Spanish Egyptian Gas Company (SEGAS) by 48%.

The Egyptian government has approached an agreement with Spain’s Unión Fenosa to drop the case filed at the International Center for Settlement of Investment Disputes (ICSID) against the Egyptian Gas Holding Company (EGAS), as the Damietta plant will gradually return to work this year after a six-year hiatus.

The source pointed out that the Ministry of Petroleum is negotiating with its foreign partners in the Damietta plant to compensate the company for the period of suspension with deducted values of EGAS’ share.

He added that the ministry is considering allowing the Damietta plant to export certain quantities of natural gas produced from Cyprus and Israel’s fields in the Mediterranean Sea, thus achieving an economic return in return for ending the arbitration disputes.

The source pointed out that negotiations started with the foreign partners in Damietta plant over determining the selling price of gas and fees for the use of the national network of pipelines.

A decision recently issued by an arbitration panel of the International Center for Settlement of Investment Disputes (ICSID) requiring EGAS to pay $2bn in compensation for the Spanish company.

Minister of Petroleum, Tarek El-Molla, said that the investments of foreign partners increased to $10bn annually during the period from 2017 to 2020, which reflect foreign investors’ confidence in the Egyptian oil sector.

He added that a committee was formed upon a decision by the prime minister, headed by the Minister of Petroleum, including several ministries related to the national project of transforming Egypt into a logistical hub. The committee will follow up this national project and offer all kinds of support to help its implementation.

El-Molla explained that Egypt has many advantages which would enable it to become a regional centre for energy trade. The geographic location is an important element that cannot be overlooked, and the ministry supports this project through establishing a strong gas infrastructure.

Alongside Egypt’s new economic legislations that aim to attract foreign investments, Egypt has the Suez Canal and Sumed pipeline running from the Ain Sukhna terminal on the Gulf of Suez to offshore Sidi Kerir, Alexandria on the Mediterranean Sea, which are two of the most important pillars of the national project to transform Egypt into a regional hub for energy.

The Ministry of Petroleum is working on developing the capacities of Sumed and has finished the operation of a new platform in Ain Sukhna. “We are also intensifying our effort to develop national gas network and expand in exportation of oil and natural gas,” El-Molla said.

He added that the warehouses and transport facilitations of mazot in Ain Sukhna are expected to be completed by next month.

The minister stressed they are accelerating natural gas exploration and production. Additionally, a new law to organise the activities of the gas market prepared by the ministry is being enforced, alongside with many steps that are implemented to turn this national project into a reality.

In a related context, a source at EGAS said that the new discoveries added to the national network have reduced the gap between production and consumption, which contributed to stopping importation.

He added that the first phase of North Alexandria gas field was completed six months ahead of schedule, so was the case for West Delta’s Nawras and Libra fields. Gas production from North Alexandria has started with a capacity of 630m scf/day.

The source added that Italy’s Eni has produced about 2.1bn scf/day instead of 1.65bn scf/day from North Alexandria field last year. The production rate of the project is estimated to reach 2.7bn scf/day mid-year.

The source explained that Dutch Shell aims to connect 9B project to Borollos fields during the first half of this year. Work at this project was halted for three years. Resuming the work came after the company obtained a part of its financial dues and could export shipments of liquefied gas through ADCO liquefaction factory after it was halted for years.

He said that production from 9B was set to start with a production rates ranging between 350m and 400m scf/day, with investments of $750m.

The source added that the Ministry of Petroleum aims to rerun ADCO liquefaction factory at its full capacity to export gas to global markets by 2020/2021. 

The contractual share of ADCO is 1.13bn scf/day. The production rate has started to decline since 2011, until they completely stopped at the beginning of 2015.

The liquefaction factory was designed to operate for 340 days a year and to be halted for a month for maintenance. The maintenance expenses are estimated at $20m annually.

The source noted that the government, represented by the Egyptian General Petroleum Corporation (EGPC), and EGAS has 12% stake each in the liquefaction factory, while Shell and Petronas has 35.5% stake each, and Gaz de France has 5% stake.

The source stressed that the Ministry of Petroleum is working to encourage foreign partners to implement development projects and increase their investments in Egypt.

The ministry aims to increase the production of existing gas fields and develop newly discovered fields to add their production to the national network in order to compensate the decline in production from old fields and Egypt’s total gas production.

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