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    Egypt to Be Regional Energy Hub: El Molla

Summary

The country is restarting LNG and pipeline exports as its gas production rises, and revising contracts to attract more investors.

by: Charles Ellinas

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Egypt to Be Regional Energy Hub: El Molla

After achieving self-sufficiency in gas last September, Egypt’s next goal is to become an energy hub for the region, its minister for petroleum Tarek El Molla told the Egyps 2019 conference in his opening speech February 11. He also confirmed that the results of the oil and gas licensing bidding rounds would be announced February 12.

He outlined Egypt’s many advantages that would allow it to become the regional energy hub, not least its location. With the ramping up of Zohr to 2.1bn ft³/d, Egypt’s natural gas production reached 6.6 bn ft³/d at the end of last year. He confirmed that Zohr plateau production of 3.2bn ft³/d should be reached by the end of 2019. Since the start of 2019 a number of export initiatives have got under way to take advantage of higher output, including the restart of sales to Jordan. Egypt intends to increase these to 150mn ft³/d in 2019. This provides further support to the country’s drive to become the regional energy hub.

Egypt’s natural gas network has the capacity to handle as much 9bn ft³/d. In addition, the maximum liquefaction capacity of the Idku and Damietta LNG plants is 1.88bn ft³/d.

Egypt fully intends to expand LNG exports from the two plants to global markets at full plant capacity. In fact Idku is already exporting about 0.56bn ft³/yr of gas as LNG. Referring to these exports, El Molla said it makes him “happy to honour LNG contractual obligations.”

The inter-governmental agreement signed last year between Egypt and Cyprus, and the approval of a gas pipeline to connect Cyprus’ Aphrodite gas-field with Idku, and possibly Damietta, is opening the way for up to 0.7 bn ft³/d gas exports from Cyprus to the two LNG plants, probably by 2022-2023. A commercial agreement appears to be imminent.

In addition, the Egyptian government appears to be in negotiations with Union Fenosa, operator of Damietta, to drop its arbitration case filed against state marketer Egas at the International Centre for Settlement of Investment Disputes (ICSID). In exchange for this, Union Fenosa and its partners will be compensated through deductions over a period of time from Egas’ share of LNG. Should this be concluded successfully, it would allow Damietta to return back to operation soon.

Egypt’s petroleum ministry has indicated that some of the gas from Cyprus, and possibly from Israel, will go to Damietta. In addition, Eni hopes that some of the gas from Zohr will also be exported as LNG through Damietta. This was confirmed by Eni's gas and power head Massimo Mantovani, at Egyps.

In order to encourage a further increase in investments and exploration, Egypt is releasing new oil and gas contracts that give international oil companies (IOCs) control of their share of production. Coupled with the liberalisation of the internal gas market during the second half of 2018 and accelerated elimination of subsidies, the government hopes that these measures will provide further support to its plan to become the eastern Mediterranean’s energy hub.