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Egypt wears the East Med LNG crown

With production rising fast and other East Med countries looking for markets, Egypt is hoping that its LNG plants will soon come into their own

In the context of the Eastern Mediterranean region, mention of liquefied natural gas triggers only one thought: Egypt. The likes of Cyprus, Greece, Israel and Lebanon may spend time considering the arguments for and against developing LNG facilities at some point in the future. But Egypt is in the comfortable and regionally unique position of having two plants that are operational. It has easy access to vast reserves of its own natural gas, onshore and offshore, and could soon start receiving extra volumes from some of its neighbours.

Egypt's two LNG plants—at Idku, east of Alexandria, and Damietta, west of Port Said—are valuable assets. But for the past four years they've been victims of the gas crisis in Egypt that saw more and more volumes diverted away from the liquefaction plants and for consumption within the country. Indeed, the Eastern Mediterranean gas giant, with current production close to 6bn cubic feet a day, and expected to rise to 7bn cf/ by 2020, has been in the embarrassing position of having to import LNG to help meet local gas demand.

These developments have left Egypt's two LNG facilities with nothing to do. As Shell, the operator of the two LNG production trains (7.2m tonnes a year joint capacity) at Idku puts it, "in January 2014 the company issued force majeure notices…reflecting the ongoing diversions of gas volumes to the domestic market". Eni, which through Union Fenosa, operates Damietta, states on its website that "the plant is currently idle due to a lack of feed gas".

Zohr production is around 400m cf/d. By the end of 2019, this figure will have risen to 2.7bn cf/d.

The Egyptian authorities are at pains to say that the current state of affairs will soon come to an end. The hope is that rising natural gas production will enable the country to halt LNG imports by the end of this year, and allow the resumption of exports at some point after that.

There is certainly plenty of gas in prospect. Shell, and its major partner Petronas, recently took a final investment decision on the Phase B development of the West Delta Deep Marine project, gas from which is used to feed the Idku plant. This expansion project will raise production from around 340bn cf/d to 680bn cf/d.

As for Damietta, it stands close to the onshore facilities handling the gas from Eni's offshore Zohr field. This sensational discovery, with at least 30 trillion cf in place, is giving Egypt's gas sector a huge boost. Current Zohr production is around 1.1bn cf/d. By the end of 2019, this figure will have risen to 2.7bn cf/d.

Then there are all the other natural gas finds in the East Med. More and more, both Israel and Cyprus have their eye on Egypt's LNG plants as they consider how to monetise their reserves. Indeed, Israel has taken the first step, with Delek and Noble Energy finding private buyers in Egypt for 226bn cf of gas over a 10-year period from their two major offshore discoveries, Leviathan (21 trillion cf of producible gas) and Tamar (10 trillion). Then there's Cyprus' Aphrodite discovery (4.5 trillon cf), along with likely future finds in the island's offshore, that could well be tied into Egypt's LNG facilities.

So, the days of standing idle could soon be over for the plants at Idku and Damietta. Soon, too, Egypt is likely to realise its ambition of becoming the East Med's energy hub. As Luca Bertelli, Eni's head of exploration, told Gulf Energy Information's recent energy conference in Cyprus, taking advantage of Egypt's two LNG facilities is "the simple, faster and logical way of monetising East Med gas". Music to Egypt's ears.

Source: Petroleum Economist

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