GAS AND POWER: Egypt looks to kick‐start East Med gas production
| DOI | http://doi.org/10.1111/oet.12456 |
| Published date | 01 February 2017 |
| Date | 01 February 2017 |
GAS AND POWER
Egypt looks to kick-start East Med gas production
Egypt is planning to increase its gas production, end-
ing shortages at home and creating an export surplus
for the rst time since 2014. Two large new projects are
due on-stream with more to follow in subseque nt years.
Oneofthem,the30tcfoshoreZohreld,couldencour-
agethedevelopmentofotheroshorediscoveriesinthe
Eastern Mediterranean by acting as a hub for gas pro-
ducedoIsrael,LebanonandCyprusandtakingitto
Egypt’s liqueed natural gas (LNG) export terminals at
Damietta and Idku. Such an arrangement could tur n the
Eastern Mediterranean into a signicant gas-exporting
region.at,atleast,isthetheory:thepracticemayturn
out dierently.
New elds
e gas certainly appears to exist in sucient quantities
that would allow this to happen. A number of recent
nds are already being developed o Egypt and there
are plans forlarge-scale developments o the otherthree
countries. is year should see the commissioning of
two of Egypt’s recent discoveries, including ENI’s Zohr
eld, which is exp ected eventually to produce 2.7 bn cfd,
andBP’s5tcfWestNileDeltaproject,whichisexpected
to reach a plateau of 1.2 bn cfd. Other Egyptian elds
are expected on-stream next year, including Phase 1 of
BP’s 1.5tcf Atoll discovery, which should be producing
300 mn cfd in 2018. More gas is likely to be available
from elds onshore in the nextfew years.
Israelhasanestimated40tcfofgaslyingoshore.
One eld, the 1 bn cfd Tamar discovery, is already in
production and there are plans to i ncrease output there
by 20%. A second eld, Leviathan, is awaiting develop-
ment. At 18-22tcf, Leviathan is twice the size of Tamar.
Cyprus’ oshore contains t he 5 tcf Aphrodite discov-
ery and Lebanon plans a bidding round later this year.
Aphrodite and any elds discovered o Lebanon would
almost certainly require a link-up of the sort proposed
with the Zohr eld in order to make their development
economic.
Finding markets
Anumberofproblemshavetobesolvedbeforeanyof
the other countries can seriously contemplate a link to
Egypt’sproposedexportscheme.Oshoreboundaries
have yet to be formally agreed in the Eastern Mediter-
ranean: not only among Israel, Lebanon, and Cyprus,
but also with Syria and Turkey. A sucient number of
buyers will need to be found for any LNG that might be
exported via Egypt, which in the present oversupplied
market will not be easy. ere are also competing pro-
posals for exports from the Le vant and even Cyprus by
pipeline. Israelmay also wish to have its own LNG export
facility for strategic reasons.
Egypt’s priority, in any case, is the domestic market
rather than exporting LNG. Regular exports of LNG
ceased in 2014. Last year, only three cargoes were
exported. Egypt is a net importer of gas and this year
imports are likely to exceed 1bn cfd. e government
doesnotexpectthecountrytohaveanexportsurplus
before 2020, owing to the expected high growth in
domestic demand. In practice, self-suciency in gas
could be delayedfor a few years beyond thatdate, despite
the expected increases in production in the meantime.
e amount of any increase in gas product ion will
depend in part on Egypt’swi llingness to pay an economic
price for gas that is dest ined for the domestic market.
e government has demonstrated its willingness to be
more exible both on gas pricing and on scal and other
terms in its produc tion contracts. ere remains, how-
ever, a backlog of payments to gas rms for expendi-
ture already incu rred, which the government is u nable to
meet at present.More than $3 bn is owed to foreign com-
panies. D elays to repayments m ay hold up future gasel d
developments, postponing the country’s self-suciency
in gas some way beyond 2020.
© 2017 John Wiley& Sons Ltd
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