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    [Premium] Egypt's Zohr Field to Exceed Daily Plan: Eni

Summary

Gas output from the giant Egyptian Zohr field will exceed the originally-announced 2.7 bn ft³/day, which many in the industry even then doubted, according to Eni CEO Claudio Descalzi, on the sidelines of the Egyps 2018 conference in Cairo February 13.

by: Charles Ellinas

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[Premium] Egypt's Zohr Field to Exceed Daily Plan: Eni

Gas output from the giant Egyptian Zohr field will reach 2.9 bn ft³/day next year, up from the initially announced 2.7 bn ft³/day, which many in the industry even then doubted, according to Eni CEO, Claudio Descalzi. Speaking on the sidelines of the Egyps 2018 conference in Cairo February 13, he also confirmed that output is expected to reach at least 1.8 bn ft³ by the end of this year.

Egypt's petroleum minister Tareq El Molla said that the country now produces 5.5 bn ft³/day. With domestic gas demand expected to reach 6.4 bn ft³/d by mid-2019, clearly Egypt is heading for a substantial surplus even earlier than expected.

Not to be left behind, BP also announced that production from its Atoll gasfield, which started production in December 2017, has now reached 0.35 bn ft³/day, seven months earlier than originally planned.

BP says the Atoll field is its first new project to come into production in 2018, adding to the series of higher-margin projects successfully brought online over the past few years. The 13 projects that started-up globally through 2016 and 2017 provided more than 500,000 barrels of oil equivalent a day (boed) of new net production capacity for the UK major. Total net production from BP’s new projects is now expected to be 900,000 boed by 2021.

BP CEO Bob Dudley said “The longstanding partnerships we have in Egypt allowed us to fast-track Atoll’s development and deliver first gas only 33 months after discovery.”

Adding Atoll’s production to that of Zohr, by mid-2019 Egypt’s total natural gas production is expected to reach 8.4 bn ft³/day. This would more than satisfy Egypt’s domestic gas needs, and could result in as much as 2.0 bn ft³/day surplus gas.

Given that the combined capacity of the two existing liquefaction plants at Idku and Damietta is 1.7 bn ft³/day, Egypt could be is a position to resume full capacity LNG exports before the end of 2019. This would allow the country to fulfill its contractual obligations under its interrupted LNG contracts, mostly to Europe.

This is momentous news for a country that until now has been forced to import LNG due to gas shortages caused by past short-sighted policies. Stopping such imports and resuming LNG exports will provide a major boost to Egypt’s economy.

The good news for the region does not stop there. Descalzi also confirmed at Egyps 2018 that Eni’s new gas discovery Calypso 1 in block 6 in Cyprus could even exceed 6 to 8 trillion ft³. He said “It could be more, it could be in that range, but for sure it cannot be less… It's good news for the East Med hub, which could become powerful if they all put their resources together.”

One way of selling Calypso gas would be a connection to the Zohr infrastructure, Descalzi said: "It could be connected to Zohr…it depends on the dimensions."

Another option, of course, would be, in combination with Aphrodite’s 4.5 trillion ft³ gas, to revive the idea of a liquefaction plant at Vasilikos, a port in Cyprus. The combined quantities would be sufficient to justify two and possibly three 5mn mt/yr liquefaction trains, thus improving the economics. This could be reinforced further by a discovery in block 10 when ExxonMobil completes drilling by the second half of 2018.

The other option would be to take all discovered gas to Egypt, expand its liquefaction facilities and export the gas as LNG, thus fulfilling Egypt's aspiration to become a regional gas hub. With Egypt’s existing gas infrastructure, and favourable regional geopolitics, this may be a more cost-effective option.

All these options of course depend on the state of the global gas market. Low gas prices pose a challenge to gas exports. Most offshore gasfields in the region are deepwater and expensive to develop.

However, development of Cyprus’ gas is not without problems. Challenges by Turkey are increasing tension in the region. Hopefully the dialogue between Greek and Turkish Cypriots will resume soon and this time come to a successful conclusion.

The Egypt Petroleum Show (Egyps 2018) conference runs from February 12 to 14.