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Egypt lays gas-hub foundations

President Sisi has signed into law new gas-sector regulations expanding the role of the private sector

A casual reader of Egypt's Official Gazette mightn't find much in the way of excitement in Law 196 of 2017. But for anyone interested in the country's burgeoning natural gas sector it's hugely important.

In effect, Egypt is taking a giant step towards becoming the region's natural gas hub and putting itself beyond the reach of potential competitors like Cyprus and Turkey. The new law allows private-sector firms to use the state import and distribution infrastructure to trade in natural gas.

Section 3 of the regulations states clearly that one of the main aims is to "attract and promote investment in gas-market activities, and encourage a climate of competition in order to establish a competitive gas market". Private firms will be able to import, distribute and store natural gas in Egypt, under the supervision of a state regulatory body.

The deregulation measures will greatly enhance the flexibility of the Egyptian gas market, creating a liberal atmosphere conducive to Egypt becoming a regional gas hub. This kind of flexibility is absent, for example, in Turkey, another country that aspires to this role.

The regulatory body, according to Law 196, will be chaired by the petroleum minister. The chief executive will be chosen from within the energy sector. Other members will include three representatives from the state natural gas sector and two from outside it, with technical, economic or legal expertise. The task of another member is to head a team ensuring free competition and eliminating monopoly practices.

Full details of how the measures will be implemented, along with the mechanics of authorising firms to take part and setting tariffs are expected to be announced before the end of September. The deregulation of the gas sector is leading to speculation that private firms may seek to import gas from Israel's offshore fields, where operators are eager to find overseas markets.

Allowing the private sector to deal in Israeli gas might be a convenient way of establishing trade without the Cairo government backing down from its official positionthat there can be no deal until a legal dispute over the halting of Egyptian gas exports to Israel is resolved.

The deregulation of the gas sector comes as Egypt prepares for the start of production from the mega-giant Zohr offshore gasfield (with reserves of 30 trillion cubic feet). The operator, Eni, says that the red-letter day will be in December. Output will eventually reach 1.2bn cf a day, equivalent to about one-fifth of current Egyptian production (5.2bn cf/d). Earlier this year BP and Rosneft bought into the $12bn venture, taking a 30% and 10% stake respectively. Egypt's natural gas bandwagon isn't just rolling, it's reaching impressively high speeds.

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