Egypt joins major gas-exporters’ club

CAIRO – 17 March 2019: Egyptian Natural Gas Holding Company (EGAS) tendered to sell four cargoes of liquefied natural gas (LNG) for loading in April, people with direct knowledge of the matter told Bloomberg.

The sources, who spoke on condition of anonymity because details of the process are confidential, added that the bids are due on Monday and are valid until March 25.
According to Bloomberg, EGAS is also marketing four cargoes for loading in May and three for loading in June.

This announcement is considered to be the second after a Petroleum Ministry source said that Damietta liquefaction will resume its work in April and export around 550 million cubic feet of natural gas per day.

Meanwhile, Egypt’s natural gas exports from Idku plant rose to currently 800 million cubic feet of liquefied natural gas (LNG) per day up from about 250 million cubic feet per day in early January and 300 million cubic feet per day in 2018.

These steps refer that Egypt started to join the club of major exporters of liquefied natural gas after achieving self-sufficiency of gas.

Commenting on the timing of becoming a gas exporter, Bloomberg said that extra supplies from Egypt would hit a market already battling with the lowest spot prices for the super-chilled fuel since July 2017 following a mild winter that curbed demand across Europe and Asia. “The U.S., Russia and Australia all are contributing to a glut, starting new plants to export the fuel and build market share.”

“The speed and scale with which Egypt has turned from importer to notable exporter is likely to further loosen the already wide supply/demand balance,” Nick Campbell, a director at industry consultant Inspired Energy Plc, told Bloomberg by email. That will exacerbate “the lower demand environment with warmer winters in Europe and Far East, leaving storage levels relatively full.”

When plants restart and come back into the market, sellers have a lack of commercial visibility and doing a tender will allow Egypt to test the market, said Jean-Christian Heintz, founder and director of industry consultant Wideangle LNG in Lugano, Switzerland.

“It is a good way for Egypt to figure out the real appetite and the price level,” he said. “Fragmenting the initial supply in several tenders is a good way to proceed, rather than creating price precedents on mid-term indexed deals.”

With gas production amounting to around 6.4 billion cubic feet per day, Egypt achieved self-sufficiency of gas by the end of September 2018, aiming to become a regional hub of energy.

On Feb. 26, Petroleum Minister Tarek el-Molla said that 2018 witnessed the completion of new stages to increase the production of natural gas from four major fields in the Mediterranean Sea.
He clarified that these fields were put on the production map with investment of more than $27 billion and production rates of 6.5 billion cubic feet per day expected upon the completion of all stages, noting that what has been achieved is the result of the completion and development of natural gas projects.

Egypt’s main contributor of gas supply is Zohr gas Field which is the biggest gas field in the Mediterranean, with an estimated production of 30 trillion cubic feet.

Also, Gas production from the Noras gas field increased to around 1.2 billion cubic feet per day (bcf/day).

Egypt recently signed several oil agreements for the exploration of oil and gas in several areas, including the Mediterranean, Western desert, Nile Delta and the Gulf of Suez.

In fiscal year 2018/2019, the targeted investments in petroleum sector are estimated at LE 145.6 billion ($8.12 billion), marking 15.5 percent of the year’s total investments.

Natural gas investments represent 91 percent of petroleum investments, which amounts to LE 132.8 billion.