Can Egypt become a world power in LNG?


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Egypt’s long-suffering LNG industry is finally enjoying some success as it takes advantage of the constraints of the European gas market and exploits regional geopolitical developments. Cairo’s dream of becoming a global LNG player was derailed by a combination of the Arab Spring, the conflict with Turkey, and then the destruction of demand for COVID. Today, however, the country’s LNG industry is poised for significant growth, with its largest producer, EGAS, just offering free on board (FOB) cargo for loading on December 28-29. from its LNG plant in Damiette. EGAS LNG’s tender will close on December 13, sources said. EGAS LNG’s latest tenders, which closed on November 29, were successful, as the company sold four of the five cash cargoes to be loaded between December and February.

Egyptian LNG has recently become a hot commodity as European and Asian markets crave additional supplies and peak demand from the Eastern Mediterranean. This week, Lebanese Prime Minister Najib Mikati asked El Sisi for urgent supplies of natural gas to counter the electricity shortage in his country. No mention was made of possible talks between the two leaders over the ongoing talks over the Lebanese-Israeli maritime delimitation, but sources have indicated a possible Egyptian role in the matter in the future. The Israeli-Lebanese maritime discussion is important, as both sides claim offshore waters in which potential vast reserves of natural gas are expected to be found. A maritime solution could even open Lebanon’s possible cooperation with the Eastern Mediterranean Gas Forum, which includes Egypt, Greece, Cyprus and Israel. The integration of Lebanese production (if commercial) would only further strengthen the regional gas market.

Egypt’s own offshore and onshore gas reserves are considered commercially attractive enough for the country to want to increase its LNG liquefaction capacity. The continued supply of Israeli offshore gas to Egypt through the pipeline owned by the East Mediterranean Gas Company (EMG) is important to everyone. The Italian gas pipeline group SNAM, which is also the largest European entity, is now also part of the EMG company. On December 9, SNAM acquired a 25% stake in EMG. The total pipeline project includes a 90-kilometer-long pipeline between the port of Ashkelon in southern Israel and the receiving terminal at El Arish in Egypt. SNAM’s 25% stake is valued at $ 50 million, acquired from Thai energy company PTT Energy Resources. The other main stakeholders are the Israeli company Delek Drilling and the US oil major Chevron.

At the same time, Cyprus and Egypt are stepping up their bilateral discussions. During a meeting between the Egyptian Minister of Petroleum, Tarek El Molla, and the Cypriot Minister of Energy, Trade and Industry, Natasa Pilides, the possibility of increased cooperation in the field of natural gas was raised. been discussed. The main objective of the two countries is to connect the Cypriot Aphrodite offshore natural gas field to Egyptian LNG plants. After years of deliberation, working with Egypt on this front is seen as the main option for Cyprus to enter the European gas market. During the same meeting, Egypt discussed with Chevron its plans to expand its operations in the western Mediterranean Sea and possibly in the Red Sea region.

Related: China Introduces Plan to Cut Heavy Metal Emissions In light of the lingering geopolitical tensions between Egypt and Turkey, caused in large part by Turkey’s support for the Muslim Brotherhood Movement, its policies in the Eastern Mediterranean and its involvement in Libya, it is worth considering a another key development in the region – the thaw in relationships between Turkey and the United Arab Emirates. When Abu Dhabi’s Crown Prince Mohammed Bin Zayed met Turkish President Erdogan, it opened the door to further discussions and a multibillion-dollar spending spree by Emirati companies and funds in Turkey. The impact of this detente could be enormous for Egypt.

After several very turbulent years in bilateral relations between Turkey and Egypt, energy cooperation seems to be strengthening. Reports have emerged indicating that Turkey has become a major LNG export destination for Egyptian LNG cargoes. S&P Global Platts reports that Egypt has emerged as a key supplier of LNG to the Turkish market, with seven cargoes already shipped there in the fourth quarter of 2021. While Egypt still lags behind Qatar, the United States and the United States. Algeria, its share of Turkey’s natural gas market has increased significantly. Considering Turkey’s ever-growing domestic demand for gas, which now exceeds 60 billion cubic meters, Ankara does not have the luxury of choosing its energy partners. Turkey faces the possibility of an energy crisis if it fails to find a solution when its long-term supply contracts expire. The only long-term option still in place is with the Algerian Sonatrach, which is in place until 2024. To counter the late supply of others, such as Russia and Azerbaijan, the only options available are those of the United States, Qatar or Egypt. Since October 2021, LNG shipments from Shell Idku’s 7.2 million tonnes / year and Eni Damietta’s 5 million tonnes / year factories have arrived in Turkey. These LNG deliveries came after Cairo and Ankara reestablished diplomatic relations in early 2021, and those relations may soon improve.

Following Crown Prince Mohammed Bin Zayed’s visit to Turkey and a possible warming of Turkish-Saudi relations, it appears Erdogan is trying to change his position in the region. This change was largely forced on Turkey by economic and financial realities. Turkey is broke, national opposition against Erdogan is intensifying and inflation rates are high and rising, prompting the Turkish leader to open up to regional players for energy and investments.

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For Egypt, this is the perfect opportunity to cash in, as Turkey is willing to pay a significantly higher price for LNG and appears to be taking a less aggressive stance in the Eastern Mediterranean region. This does not mean that all is well in the region, Turkey has again threatened ExxonMobil with any drilling in Cypriot waters. On the other hand, Greece, Egypt and Israel are all ready to send their gas elsewhere if Turkey poses problems.

Egyptian Petroleum Minister El Molla said Egypt’s natural gas exports are at full capacity of around 1.6 billion cubic feet per day (bcf / d) from its two natural gas liquefaction terminals. The minister reiterated that they are working at full power in order to benefit from a surge in international gas prices. He said Egypt’s total natural gas production is between 6.5 and 7 billion cubic feet / day. In the coming period this level is available, but after April it could drop by around 1 billion cubic feet / d due to higher domestic consumption. Total exports are also supported by Israeli gas imports at a level of 450 million cubic feet of gas per day (mmpi3 / d) from Israel. These levels could reach 600 to 650 MMcf / d by the first quarter of 2022. Discussions are currently underway on whether to increase the overall capacity of the pipeline. A memorandum of understanding for a new onshore gas pipeline has been signed, targeting increasing Israeli gas supplies to Egypt. During a meeting on the sidelines of the East Med Gas Forum in Cairo on November 25, Greek gas importer DEPA said it was looking for Egyptian LNG supplies. If available, Egyptian LNG could land at the LNG import terminal in Revithoussa, Greece, and in the future it could also go to Alexandroupolis.

By Widdershoven for Oil Octobers

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