Africa Oil & Gas: Egypt may return to LNG exports using feed-gas from East Mediterraneam

Egypt has imported 3.2 million tonnes of LNG in the first half of 2016 and deliveries are expected to reach 6 million tonnes the end of the year as the nation also continues to develop a string of natural gas discoveries with market-changing potential, LNG Journal reports.Over the last couple of years, Egypt has drastically cut LNG and pipeline gas exports and currently imports LNG.

In addition, state-owned Egyptian Gas Holding Co. (EGAS) has had to cut gas supply to industrial and petrochemical projects, diverting more gas to power and residential sectors. Egypt has several major natural gas field development projects and hopes to offset a rapid decline in the existing production and to boost output in the longer term, especially from the world-class Zohr field in the Eastern Mediterranean.

The first development of the Zohr gas field plans to produce 1 billion standard cubic feet per day of gas by 2017.

A second development phase will increase Zohr’s gas output to 2.7 bscf/d by 2019.

The main operator of the Zohr field is ENI and the Italian energy company is also active in other Egyptian gas projects.

Egypt currently has two Floating Storage and Regasification Units deployed at the port of Ain Sokhna (Photo) in the Gulf of Suez to import cargoes from countries such as Qatar to satisfy natural gas demand.

Egypt currently imports LNG via two FSRUs. The first FSRU, “Hoegh Gallant”, has been chartered for a period of five years from Hoegh LNG and has a send-out capacity of 500-550 mmscf/d (up to 4 MTPA of LNG).

The second FSRU, which is chartered from BW Gas of Singapore, has a regasification capacity of 750 mmscf/d (up to 5.6 MTPA).

The Egyptians have already announced a new tender to charter a third FSRU from the third quarter of 2017.

The third FSRU will have a send-out capacity of 750 mmscf/d and is expected to be moored at the Red Sea port of Safaga, 300 kilometres south of Ain Sokhna.

“LNG imports into Egypt may peak at 6-7MT in 2017 but may decline to 5MT in 2018 as new domestic gas supplies come to market,” according to an Egyptian market analysis just published by the Facts Global Energy consultancy whose Chairman is Fereidun Fesharaki.

“Egypt is still projected to import some 3.5-4.0MT of LNG in 2020,” the report added.

The report also sees a possible resumption of LNG exports from the Damietta and Ikdu liquefaction and export plants on the Mediterranean coast near the city of Alexandria.

“The loading of occasional cargoes from the Egyptian LNG export projects are likely over the next 3-4 years,” FGE said.

“However, gas supply from the West Nile Delta and Zohr projects are still not enough to bring the liquefaction Trains back to full operation anytime in the near future,” the report added.

Egypt is still facing a rapid decline in domestic gas production and consequently a severe gas supply shortage.

“The gas output in the country decreased to below 4 bscf/d in July 2016, representing almost a 40 percent (or around 2 bscf/d) decline compared with 6 bscf/d in 2009,” FGE said. The report said that Cairo’s shining light amid the turmoil remained the development of the Zohr gas field.

ENI has already awarded a contract to OneSubsea, a subsidiary of well-known service company, Schlumberger, to drill six wells in Zohr within two years and 14 additional wells by 2019. Furthermore, the first phase of the West Nile Delta project led by BP is expected to produce 800-1,000 mmscf/d of gas from late 2017.

The Nile gas project involves tying back the Giza and Fayoum gas fields to the modified Rosetta facilities, to be integrated with a new onshore plant for processing gas from the Raven field.

FGE noted that so far this year, Egypt has loaded two cargoes from the Idku LNG plant for delivery to India and Japan.

The Idku plant, where Royal Dutch Shell took over the interests of BG Group, is not expected to remain operational continuously but the loading of occasional cargoes are likely over the next three to four years.

“The loading of occasional cargoes may help EGAS to repay a part of the debts to upstream operators such as Shell.

“It is worth noting that EGAS’ debts to Shell have risen to US$1.1 billion after Cairo failed to make a promised US$400 million payment to Shell in June 2016,” the report added.

“In the longer term, Egypt is not expected to return into the LNG market at full capacity unless it ramps up its production through new gas discoveries or starts gas imports by pipeline from Mediterranean countries.

“We believe utilizing the Israeli or Cypriot gas in the Egyptian LNG liquefaction plants will remain as viable economic options for the countries in the long run.

“Given the fact, that Shell has already taken a 35 percent stake in the Cypriot Aphrodite gas field, it will not be surprising to see Cypriot gas eventually flowing to the Egyptian Idku facilities in the future,” the report concluded.(Source: LNG Journal)