Ups and Downs for Egyptian Gas

RWE Dea recently announced that its “Disouq natural gas project in the Egyptian Nile Delta is progressing successfully," marking the first piece of good news for Egypt' energy market since 2011. 

Germany’s RWE Dea reported it had successfully tapped the well and was producing about 450,000 standard cubic metres of gas per day. These estimations are perfectly in line with the company’s expectations regarding the well’s location, announced one year ago. However, Egyptian natural gas still has setbacks to overcome before it can be considered a reliable supplier. Among other things, the country's government must tackle growing domestic demand and a lack of LNG infrastructure.

DISOUQ NATURAL GAS PROJECT

RWE is operating in consortium with Egypt’s state hydrocarbon company, Egyptian Natural Gas Holding Company (EGAS), along with  the Suez Oil Company (SUCO). The Disouq natural gas project consists of developing seven gas fields in the Nile Delta. The NWK is the first field, brought into production in September 2013. The NWK field produces natural gas from three wells. RWE Dea is also planning to move the Weatherford 94 rig to drill a four-well appraisal and development programme in the South East Sidi Salem and Disouq Fields. By the end of 2014, RWE is expecting to integrate a total of 16 wells, to be located 50 km west of the NWK Field. The consortium plans to produce a total of approximately 400bcf of gas from the seven gas fields in the first phase of the Disouq Development Project.

DOMESTIC DEMAND

According to interim government’s estimates, Egypt's energy equilibriums could worsen in the next fiscal year as gas production fails to meet surging domestic demand. According to a forecast from Egypt’s Petroleum Ministry, in the second semester of 2014 the country’s gas production will be 5.4 billion cubic feet (bcf) per day, while consumption will be a larger 5.57 bcf/day.

 LNG INFRASTRUCTURE

Egypt has two LNG plants, Damietta and Idku, and one gas export pipeline. It exports Egyptian natural gas to Jordan, Syria, and Lebanon, with a branch of the  pipeline going to Isreal. The 1200-kilometre long pipeline’s gas supply to Israel and Jordan stopped in March 2012, due to thirteen separate attacks. In spring 2013, the pipeline resumed operating,  however the actual gas supply to Israel was suspended indefinitely and the supply to Jordan resumed below contracted amounts. The Idku plant’s output capacity has also declined since the 2011 regime chasnge Damietta plants, likewise, have been idle since 2012 because of a confusion over contract terms and the state agency in charge of operations.