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Gas export capacity rising fast

North Africa's gas-export capacity is a third higher than at this time last year and is set to rise by an additional 47% – possibly more – over the next four years. In recent months, Libya and Egypt have become substantial gas exporters, joining dominant Algeria. All three countries see prospects for increasing their exports to the expanding gas markets of Europe and the US, Martin Quinlan writes

The three countries' gas-export capacity stands at 83.8bn cubic metres a year (cm/y), made up of 50.0bn cm/y of pipeline capacity and 33.8bn cm/y of liquefied natural gas (LNG) capacity. A year ago, the total was 63.0bn cm/y – so there has been an increase of 33%. Projects with a reasonable certainty of being completed over the coming four years will raise export capacity by another 47%, to 123.5bn cm/y, according to Petroleum Economist's assessment.

Table 1: North Africa – gas-export capacity

bn cm/y

Existing

Rising to

Year

Pipelines

     

Algeria

     

Enrico Mattei (to Italy)

28.5

Pedro Durán Farell (to Spain)

12.5

Medgaz (to Spain)

0.0

8.0

2007

Galsi (to Sardinia and Italy)

0.0

10.0

2009

Egypt

     

Arab Gas Pipeline (to Jordan)

1.0

2.0†

2008

Libya

     

Greenstream (to Italy)

8.0

LNG

     

Algeria

     

Arzew (GL1Z, Sonatrach)

10.7

Arzew (GL2Z, Sonatrach)

10.7

Skikda (GL1K, Sonatrach)

3.5‡

9.0

*

Arzew (GL4Z, Sonatrach)

1.3

Arzew (Gassi Touil, Repsol YPF)

0.0

5.2

2009

Egypt

     

Damietta (Segas)

6.8

Idku Train 1 (BG and partners)

0.0

5.0

2005

Idku Train 2 (BG and partners)

0.0

5.0

2005

Damietta (BP and Eni)

0.0

*

*

Damietta (Shell)

0.0

*

*

Libya

     

Marsa El Brega

0.8

Total

83.8

123.5#

*Uncertain. †Capacity could rise to 10bn cm/y if, as planned,

the pipeline is extended into Syria, Lebanon and beyond.

‡Formerly 6.5bn cm/y. The three trains (out of six) destroyed in

the explosion in January 2004 are to be replaced with a new

single train. #Existing plus net increases.

 

The expansion to come will bring a shift in emphasis from pipelines to LNG: pipeline export capacity is likely to rise by 38%, to 69.0bn cm/y, over the period, while LNG capacity is expected to rise by 61%, to 54.5bn cm/y. The forecast increases make no allowance for Libya's LNG plans – still being formulated – nor for increases in the capacities of the existing pipelines out of the region, which could be implemented at relatively low cost. Given growing markets for the gas, the forecast rise to 123.5bn cm/y could easily be exceeded.

Recent months have seen long-laid plans become reality, with Libya emerging as a large-scale gas exporter in October (when deliveries started to Italy through the Greenstream pipeline), followed by Egypt in January (when the first cargo left the Damietta LNG plant). Meanwhile, Algeria has consolidated its dominant position with increases in the capacities of its export pipelines to Italy and Spain.

The pace of North Africa's gas infrastructure development will accelerate in the coming few years. The three existing pipelines under the Mediterranean will become four by 2007, with construction work on Medgaz (from Algeria to Spain) due to start this summer. A fifth line (from Algeria to Italy) is being planned. Egypt's second LNG facility, at Idku, will start-up in the second quarter and its second train will follow by year-end. In 2009, Algeria plans to complete a new LNG facility at Arzew and work to increase the capacity of the explosion-damaged Skikda complex could also be completed by then.

Pipeline developments
There could also be pipeline developments within the region. Libya's new outward-looking stance could allow years-old plans for North African pipeline links to go ahead – the most intriguing of which would be a pipeline from Mellitah (the coastal terminal of the Greenstream line) eastward to Egypt. Such a line would create an export route to Italy for Egypt's Western Desert gasfields. (In its most recent guise, the plan involves a parallel oil pipeline to take Libyan crude to Egyptian refineries.) Libya has also proposed a pipeline from Mellitah to the Gabès area in Tunisia. Meanwhile, Algeria and Nigeria are carrying out a feasibility study into their planned Trans-Saharan Gas Pipeline, which could deliver gas from southern Nigeria to the Algerian coast at Béni Saf – the export terminal for the Medgaz pipeline.

Table 2: North Africa – gas production

bn cm/y

2002

2003

% chg

Algeria

80.4

82.8

3.0

Egypt

22.7

25.0

10.1

Libya

5.6

6.4

14.3

Tunisia

2.4

2.4

0.0

Total

111.1

116.6

5.0

 

Source: BP Statistical Review of

World Energy, except Tunisia – estimated

 

New export capacity has already brought new participants to the North African gas trade. Up to October, virtually all of the gas flowing out of the region was owned by Algeria's state-owned Sonatrach – the exceptions being Libya's LNG exports to Spain and Egypt's pipeline deliveries to Jordan, neither amounting to more than 1.0bn cm/y, and the first flows from the BP-Statoil-Sonatrach In Salah development in Algeria (brought on stream in July). But the first deliveries through Greenstream brought Italy's Eni and Libya's National Oil Corporation (NOC) into the business as sellers, and the tolling arrangements under which Egypt's LNG facility operates will bring several more companies into the trade.

Algeria

The authorities' plans call for gas export capacity to rise from the previous target of 60.0bn cm/y – achieved in 1999 – to 85.0bn cm/y by 2010. Despite the disastrous explosion at the Skikda LNG facility in January 2004, there is little doubt that the target will be achieved. Present capacity stands at 67.2bn cm/y and is set to pass 85.0bn cm/y when three active projects are completed – the Medgaz pipeline to Spain, the reconstruction and expansion at Skikda, and the new LNG facility at Arzew.

Direct to Spain
Construction work is due to start on the Medgaz line in July, on a schedule that should see gas flowing in 2007. In contrast to the existing pipeline to Spain, which runs onshore across Morocco and under the Strait of Gibraltar, Medgaz will take a direct route from Béni Saf to Almería – a 200-km offshore section at depths of up to 2,160 metres. A new pipeline in Algeria will link Béni Saf with the Hassi R'Mel hub.

Initial capacity of Medgaz will be 8.0bn cm/y, with doubling envisaged eventually. So far, 7.0bn cm/y of capacity is understood to have been taken up: Spain's Gas Natural is likely to be the lead buyer with 3.0bn cm/y, and Cepsa, Distrigas, Iberdrola and Total are each expected to take 1.0bn cm/y. Ownership of the line will be Cepsa, 20%, Sonatrach, 20%, and, with 12% each: BP, Endesa, Gaz de France (GdF), Iberdrola and Total.

Table 3: North Africa – oil production

'000 b/d

2002

2003

% chg

Algeria

1,681

1,857

10.5

Egypt

753

750

-0.4

Libya

1,376

1,488

8.1

Tunisia

73

66

-9.6

Total

3,883

4,161

7.2

 

Source: BP Statistical Review of World Energy

 

Medgaz will be Algeria's third pipeline under the Mediterranean. The first, the Enrico Mattei (formerly TransMediterranean) pipeline into Italy, has served the country well for 22 years and has had its initial capacity doubled through successive increases. Eni says the capacity of the line in Algeria and crossing Tunisia now stands at 28.5bn cm/y; the figure rises to a mighty 36.9bn cm/y for the section crossing Sicily and into Italy, which also handles gas from Libya.

Algeria's second Mediterranean pipeline, the Pedro Durán Farell (formerly Gazoduc Maghreb Europe) pipeline to Spain, has also seen a capacity increase. The system started flowing at the end of 1996 with a capacity of 8.0bn cm/y; last year, following the construction of a third compressor station, capacity was raised to 12.5bn cm/y. The signs are that the increment is already well-utilised – since 2000, annual deliveries to Spain and Portugal have been exceeding the system's initial design capacity by up to 10%.

The country's planned fourth Mediterranean pipeline, Gasdótto Algeria-Sardegna-Italia (Galsi), will bring gas to Sardinia for the first time. The line is planned to run subsea from Algeria's eastern coast to Cagliari, to cross the island to Olbia, and to continue subsea to enter the Italian mainland near Grosseto (between Rome and Livorno). Initial capacity is now envisaged to be at the upper end of the 8.0bn-10.0bn cm/y range given earlier, according to Galsi's chairman last month, and start-up is targeted for 2009.

Algeria's LNG capacity has amounted to 26.2bn cm/y since January 2004, when the explosion at the Skikda facility destroyed three trains with a combined output of 3.0bn cm/y. Sonatrach has said that the lost trains will be replaced by a new single train of 5.5bn cm/y capacity, but there is no news of contracts or timing.

Algeria has, however, awarded a contract that should lead to the construction of a new LNG plant, at Arzew – the country's first new facility since 1981 and the first in which companies other than Sonatrach will participate. In December, Spanish firms Repsol YPF (60%) and Gas Natural (40%) signed to implement the Gassi Touil Integrated Project, claimed to be the largest gas project yet undertaken by foreign firms in the country. The firms will invest $2.1bn in developing wet-gas fields in the Gassi Touil area of eastern Algeria, in constructing transport infrastructure, and in building the "contemplated" (Repsol YPF's word) LNG facility. The single-train plant is due to start up in 2009 with a capacity of 5.2bn cm/y, doubling if a second train is built later.

Libya

After wasted decades, Libya became a significant gas exporter in October when the Eni-led Western Libya Gas Project (WLGP) and its associated Greenstream pipeline to Sicily, where it connects with the existing line into Italy, started flowing. The Wafa onshore field and the Bahr Essalam offshore field flow gas to a processing facility at Mellitah, from which it enters Greenstream for export.

Initial capacity of the system is nominally 8.0bn cm/y, supported by purchase contracts with Edison (4.0bn cm/y), GdF (2.0bn cm/y) and Energia (2.0bn cm/y) – but the line is already handling an additional 1.2bn cm/y of spot gas, purchased by Agip. Field facilities are designed to flow 10.0bn cm/y, of which 2.0bn cm/y is destined for use within Libya – but completion of a gas-fired power station has been delayed so there is a surplus.

The Greenstream line, with its diameter of 32 inches, could handle considerably more gas and there are fields to produce it – particularly around Bahr Essalam in the NC-41 block, near the offshore border with Tunisia, where Eni carried out Libya's first limited offshore exploration over 20 years ago. With $8.7bn having been spent on WLGP and Greenstream, additional flows through the system might be welcome for cost-recovery.

LNG plans
The authorities also have plans for LNG, into which Libya made an early, but only partially successful, foray with a plant starting-up in 1971. ExxonMobil's predecessor constructed the facility, at Marsa El Brega, from which exports built up to a peak of 3.6bn cm/y in 1977. However, relations between the government and the oil companies were deteriorating badly at the time – the plant was nationalised in 1980 and prices were raised, with the result that sales plummeted.

Marsa El Brega's output has not exceeded 1.0bn cm/y for many years and it is doubtful whether the facility could produce much more than it does. The sole buyer is Gas Natural's Enagás, whose Barcelona regasification plant is the only terminal at which Libya's LNG can be received – the Marsa El Brega facility was designed to liquefy the natural gas liquids content of the feed gas along with the methane, so the product must be received at a terminal with a fractionating column.

Modernisation and refurbishment of Marsa El Brega has been planned for years, but could go ahead now that Libya is free to import the equipment needed. Shell's strategic partnership agreement with NOC, announced in March 2004, might include this work. More ambitiously, Shell hints at integrated projects involving field developments and the construction of a new LNG facility.

Egypt

Egypt's emergence as a substantial LNG exporter – the first cargo was delivered in January – is one of the more remarkable achievements in the gas business. An unusually structured project, led by Spain's Unión Fenosa – which, as an electricity company, had no LNG experience at the outset and no gas production of its own – overtook other projects led by heavyweight gas companies to take Egypt into the LNG club.

The LNG plant, at Damietta, is a single-train facility with a capacity of 6.8bn cm/y. According to Unión Fenosa, "tangible investment in the plant amounts to around $1.2bn" – making the facility one of the less-costly greenfield LNG developments. It is owned by Spanish Egyptian Gas (Segas), in which Unión Fenosa Gas (a 50:50 venture between Unión Fenosa and Eni) holds 80%, and state-owned Egyptian General Petroleum Corporation and Egyptian Natural Gas Holding Company (Egas) have 10% each. The plant operates on a tolling basis, with gas contracted from Egas and (adding to the supply from 2008) from BP and Eni.

The country's second LNG facility, a single-train 5.0bn cm/y plant at Idku, is due to be brought into production by BG-led Egyptian LNG in second quarter of the year. A second train at Idku of the same capacity will follow by year-end and BG says a third train is under consideration – there is space for up to six trains, the firm says.

The entire output from Egyptian LNG's Train 1 has been sold to GdF, while BG has purchased the entire output of Train 2. In late-January, BG said it had signed an agreement to sell 3.2bn cm/y of Train 2 gas to Italy's Enel, with deliveries starting in 2008 when the Brindisi terminal – being built by a venture between BG and Enel – is due to be operational. Until then, the gas will be sent mainly to the Lake Charles terminal in the US.

Table 4: North Africa – oil and gas reserves

end-2003

Oil

Gas

 

(bn barrels)

(trillion cm)

Algeria

11.3

4.52

Egypt

3.6

1.76

Libya

36

1.31

Tunisia

0.5

0.08

Total

51.4

7.67

     

Source: BP Statistical Review of World Energy,

except Tunisia gas – estimated</FON

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