Egypt is moving forward with its plans to become a regional natural gas hub as its two liquefied natural gas (LNG) plants are running at full capacity for the first time in more than a decade.
Egypt’s Petroleum Minister Tarek El Molla told news media at the East Mediterranean Gas Forum last month that the two plants, the Eni SpA-operated 5 million metric tons/year (mmty) Damietta plant and the Shell plc-operated 3.6 mmty Egyptian LNG (ELNG), recently reached full capacity, taking advantage of the jump in global LNG prices.
As Egypt meets its domestic gas needs, the country plans to increase LNG exports, boosted by the discovery of the huge offshore Zohr field, the country’s largest gas discovery and the largest discovery in the Mediterranean Sea. At the end of last year, Egypt held 75.5 Tcf of proven natural gas reserves, according to BP plc’s 2021 Statistical Review of World Energy.
“There is definitely enough offshore gas available for Egypt to have a good future as a regional LNG hub, plus it has close proximity to Cyprus and Israel”, said Cyril Widdershoven, founder of the Dutch energy and commodities consultancy Verocy
“And both Israel and Cyprus have agreed to deliver their surplus gas to Egypt’s two liquefaction facilities for export,” he told NGI.
But Egypt’s LNG business has had a bumpy start. Egypt started LNG exports from the Damietta and Idku facilities in 2005. However, Damietta suffered a major setback when it was shuttered for eight years after Egypt declared force majeure in November 2012, and feed gas destined for Damietta was diverted to meet domestic gas shortages.
Damietta restarted last February. The ELNG facility at Idku shut down in 2014, when ELNG declared force majeure again to meet increasing domestic demand. ELNG restarted LNG exports in 2016.
Beginning in 2015, Egypt imported LNG to meet rising domestic gas demand. Egyptian General Petroleum Corp. (EGPC) signed leases for floating storage and regasification units to bring in more LNG, but imports decreased as gas production started from the Zohr field in 2017. LNG imports stopped in 2019.
Egypt exported 4.3 million tons (Mt) of LNG in the first nine months of this year, up from 0.45 Mt in 2020, due to strong gas production and higher LNG prices. Domestic gas production is stable at about 7 Bcf/d. LNG exports are expected to fall to 1 Bcf/d in April from current levels of about 1.6 Bcf/d, Molla said, to meet the increase in domestic consumption during the summer season.
Agreements with other gas-rich countries will help Egypt establish a regional hub. Israel started gas exports to Egypt last year from its offshore Leviathan and Tamar fields through the EastMed Gas Pipeline, Widdershoven said. Egypt currently imports nearly 450 MMcf/d of gas from Israel for reexport and volumes are expected to increase. Cyprus also agreed with Egypt to build a subsea pipeline to bring volumes from the Aphrodite gas field to the Idku plant for export, but Cyprus is still in the drilling phase for Aphrodite.
As Egypt’s domestic production increases, along with surplus gas from Israel and Cyprus moving to the country’s liquefaction facilities, future LNG exports could better help to meet gas demand in international markets. Freight rates via the Suez Canal, maintained by Egypt’s state-owned Suez Canal Authority. would be advantageous for cargoes heading to Asia, Widdershoven noted.
Following Egypt’s return to the export market, Rystad Energy said earlier this year that Egyptian LNG has become the marginal supplier of LNG to the world’s buyers as its production costs are among the highest.
Egypt exported LNG to Spain, Turkey, and the UK last year, according to BP’s statistical review, and could increase export volumes as Eastern Mediterranean gas production rises. The countries could need even more imports in the coming years. The International Energy Agency estimates a 40% drop in Europe’s domestic gas production by 2025 outside of Norway, with the Netherlands and the UK accounting together for more than 80% of that decrease.
