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Egypt: gas to the rescue

A booming natural gas sector means a return to self-sufficiency and a chance to overcome some of Egypt's economic and social problems

The crews of liquefied natural gas carriers which deliver weekly cargoes to Egypt will soon be taking their last look at Ain Sokhna port on the Red Sea. This is where two floating storage and regasification units (FSRUs) are anchored. Over the past two years these have helped Egypt cope with severe shortages of its own natural gas, which in turn have led to domestic power cuts and significant disruption to industry.

But now the picture is changing as huge new reserves of gas start to come on line. Egypt plans to halt imports by 2019. A proposal to install a third FSRU has been torn up, and talks are underway with LNG suppliers to phase out future orders as the country gradually reaches the point of gas self-sufficiency.

Egypt's energy minister Tariq al-Molla has said that one of the FSRUs will be shut down as early as 2018—as production from the mega-giant Zohr offshore gasfield increases. First gas from Eni-operated Zohr, with reserves of some 30 trillion cubic feet, is expected by the end of this year. Output will eventually reach 1.2bn cf a day, the equivalent to about one-fifth of current Egyptian production (5.2bn cf/d). Earlier this year, BP announced that gas was starting to flow from its 1.2bn-cf/d West Nile Delta field, and other fields, onshore as well as offshore, are being developed by a range of IOCs.

The picture is looking rosy. Recent discoveries in Egypt's offshore—Zohr in particular—have convinced IOCs that there's lots more gas to be found. The companies also like the look of the fiscal terms offered by the Cairo authorities and the fact that a gas delivery infrastructure is already in place. Marc Benayoun, chief executive of Italy's Edison spoke earlier this year of Egypt's "very competitive operating costs" compared to those in other regions. As for BP, it's investing more money in Egypt than any other country. "We have a lot of confidence in Egypt," chief executive Bob Dudley said.

Such is the Egyptian government's belief in the future of Egypt's gas sector that Molla is talking in terms of output rising by 50% next year and 100% in 2020. This will mean resumption of capacity output from the country's two almost idle LNG plants, at Idku and Damietta, helping Egypt achieve its aim of becoming an energy hub for the East Mediterranean region.

Above all, from President Abdel-Fattah el-Sisi's perspective, ample gas production should ensure summers free from electricity cuts, thus eliminating one of the potential causes of social unrest. Not that this will mean an end to all the president's worries. The decline of the tourism industry over recent years has left tens of thousands of Egyptians without work. Most seriously of all, a jihadist Islamist revolt in the Sinai is resulting in heavy military and civilian casualties.

So far the security services have prevented the unrest affecting the energy sector. Their priority will be to maintain this state of affairs. For a stable, secure and thriving natural gas sector offers Egypt a unique opportunity to rise out of its current economic and social morass.

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