Egypt: A Potential Market for East Med Gas
Nikos Tsafos’ policy paper on Egypt as a potential market for Eastern Mediterranean natural gas is the latest of a GMF’s series of papers on Eastern Mediterranean energy issues. The authors highlights Egypt’s imminent need for natural gas imports despite indigenous efforts at energy saving, reduction of subsidies and new investments. The author explains the commercial and technical conditions for Israeli gas to reach European and Asian markets through the under-utilized LNG terminals in Idku and Damietta.
Egypt faces a major challenge, that is ensuring a sustainable and affordable source of energy. The country has turned from being a net exporter of natural gas in the mid 2000s, exporting to Jordan, Syria and Israel, to a net importer of natural gas. In 2015, Egypt is undergoing a severe energy crisis and needs to adopt new measures to solve its energy shortages. The author highlights Egypt’s growing demand due to a growth in its population. Energy demand is growing faster than real GDP, according to the paper, and the share of natural gas in the energy mix is increasing.
Egypt is considering imports from Israel, Cyprus or both via pipeline. So far, the country has opted for LNG imports, highlights the paper. Israel and Cyprus have signed a number of preliminary agreements with Egypt to export gas via pipeline to the Egyptian market and use Egypt’s underused LNG export terminals to reach European and Asian markets. Israel, once solely dependent on Egyptian gas to satisfy its domestic demand in natural gas, is now considering exports from its 10 Tcf Tamar field and 22 Tcf Leviathan field to its Egyptian neighbour. Cyprus is also eyeing the Egyptian market to monetize its 4.54 tcf Aphrodite field. During a visit to Israel by a Cypriot delegation, the two parties discussed the possibility of merging pipelines to reach the Egyptian market.
The paper weighs the pros and cons of LNG vs pipeline imports to Egypt. Egypt has so far opted for the former, as LNG imports require limited upfront investment. The author predicts possible pipeline trade between Israel, Cyprus and Egypt, and warns that a race between Israel and Cyprus might develop if Egypt is not in a position to absorb gas from both. Exporting Israeli and Cypriot gas via Egypt is also a possibility but legal, political and commercial hurdles will need to be overcome, adds the paper. The author’s conclusion is that Egypt will require gas imports until at least mid-2020 and possibly beyond that date. Regional deals with Israel and Cyprus may solve Egypt’s ongoing energy crisis but substantial investments are required to develop the necessary infrastructure.
The paper can be accessed via the following link: file:///home/chronos/u-e951b91f2f5868becda1d08e9ad67e37d6ad26bd/Downloads/Tsafos_EgyptEnergy_Jul15_web.pdf
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