Bloomberg are reporting that Egypt will stop importing LNG in 2018 and may eventually export gas after it starts producing this year at the giant Eni SpA-operated Zohr field off the country’s Mediterranean coast.
Zohr’s output will mostly supply the domestic market, and the nation’s two existing gas-liquefaction facilities are large enough to process any available surplus into LNG for international sale in 2019. If Zohr and other gas fields generate enough supplies, Egypt may consider adding a third LNG-exporting terminal.
Zohr marks a turning point that would spell an end to the tenders that suppliers from Glencore Plc to Trafigura PTE Ltd. have won in past years. The field will also help ease pressure on the economy of the most populous Arab nation, which has been plagued by a shortage of foreign currency since a 2011 uprising. Egypt currently imports liquefied gas at high costs to meet its energy needs. However, Eni’s discovery of Zohr in August 2015 promises to satisfy much of this local demand and may even transform the country back into a gas supplier in the eastern Mediterranean region.
The country expects Zohr to start producing this year at about 350 000 ft3/day. The government will issue another tender for LNG in early 2018 to cover needs for the second quarter, and it plans to stop importing the fuel by the end of next year.
Egypt exported gas until 2014 but had to forego those sales to meet local demand and because sporadic sabotage attacks on its main pipeline in the Sinai Desert throttled shipments. With Zohr expected to begin producing this year, the North African nation targets restarting exports in 2019.
The first phase of Zohr’s development is almost finished, with drilling operations of the phase’s wells completed. Russia’s state-owned producer Rosneft PJSC closed a deal to acquire 30% of the field in October. BP Plc bought a 10% stake in Zohr last year.
Under a law that President Abdel-Fattah El-Sisi signed in August, the government is setting up a regulatory authority that will devise a plan to open Egypt’s gas market to competition. The new law allows private businesses to transport and trade gas using the country’s pipeline network and infrastructure.
The law, more than two years in the making, is the government’s latest push to spur investment in the economy. Over the past year, authorities have enacted sweeping reforms, backed by the International Monetary Fund, that have included floating the currency, cutting subsidies and approving legislation to attract foreign currency.
The country has also adopted a flexible gas-pricing formula to encourage investment and boost supply. Egypt previously paid a fixed price of US$2.65 per thousand cubic feet.
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