ENI's Discovery Offshore Egypt and Israel's Export Plans
The announcement of ENI’s giant discovery offshore Egypt has spurred fears that Israel may no longer be an attractive supplier of natural gas for Egypt. Struggling to meet domestic demand, Egypt has been looking for regional suppliers to ensure a cheap and reliable source of natural gas while the country pursues its efforts to develop indigenous resources to achieve its 2020 natural gas independence target. Once a net natural gas exporter, Egypt’s growing needs at home and its declining production have turned it into a net importer of natural gas. Its underused LNG terminals at Idku and Damietta have also been eyed by neighbouring Cyprus and Israel searching for possible routes to export their newly found riches to European and Asian markets. Some experts have even warned that the new discovery might even impact Israel’s exports to Jordan.
ENI’s newly found field, located 190 km off the coast of Egypt and estimated at 30 Tcf, will no doubt allow Egypt to meet its natural gas domestic demand for decades. Egypt has been engaged in talks with neighbouring Israel to import gas from the Tamar and Leviathan fields. While some experts insist that the new discovery off Egypt’s shores will not only serve the domestic market but leave enough surplus for LNG exports from Egypt, others believe that importing gas from Israel and Cyprus is still on the agenda: “It is going to take five or six years for the gas to begin to flow. In the interim Egypt will still need to import gas to provide for domestic requirements. The Egyptian Government is doing well in attracting foreign investment to improve energy supplies including from ENI, BP and GE (General Electric). Such investments, and the phasing down of energy subsidies, should improve supply to the Egyptian market.”, Senior Advisor to the German Marshall Fund of the US told Natural Gas Europe. Egyptian Minister of Petroleum and Mineral Resources, Sherif Ismail, insisted that while ENI’s offshore field means a great deal to Egypt, it does not cancel any potential deal with Israel and Cyprus. He added that most of the gas produced will serve the domestic market.
The discovery has a great significance for the Italian company. “ENI’s presence in the Eastern Mediterranean is reinforced as a result of the new discovery”, said Leigh. The Italian company has undertaken two exploratory drillings in Block 9 of Cyprus’ Exclusive Economic Zone but failed to discover recoverable amounts of natural gas. The successful drilling in Egyptian waters is a great boost for ENI. The company is scheduled to pursue its exploratory searches offshore Cyprus. The question whether Israel will fully realise its export aspirations in light of Egypt’s giant discovery is a difficult one to answer. “It is still possible that exports of gas from Israel might be feasible, with a view to processing into LNG in the two unused plants in Egypt for sale to world markets. However this would require a multi-billion dollar investment to develop the fields in Israel's EEZ and to build the necessary pipelines. LNG prices are down and new sources of supply are coming on stream all the time. It is not clear whether the necessary investment for exports to Egypt from Israel will be forthcoming now that Egypt has such abundant supplies of its own”, said Leigh.
Karen Ayat is an analyst and Associate Partner at Natural Gas Europe focused on energy geopolitics. Karen is also a co-founder of the Lebanese Oil and Gas Initiative (LOGI). She holds an LLM in Commercial Law from City University London and a Bachelor of Laws from Université Saint Joseph in Beirut. Email Karen karen@minoils.com Follow her on Twitter: @karenayat