Giant Mediterranean Gas Find Prompts Egypt to End LNG Imports in 2018

Photo: Eni

By Salma El Wardany (Bloomberg) — Egypt will stop importing liquefied natural gas 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, Oil Minister Tarek El-Molla said.

Gas from Zohr 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, El-Molla said Tuesday in an interview in Abu Dhabi. If Zohr and other gas fields generate enough supplies, Egypt may consider acquiring a third LNG-exporting terminal, he said.

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.

Development of Zohr shows “all multinationals that we can do extremely well when we talk about giant discoveries — big projects to be developed and brought on stream in a relatively very short period of time,” El-Molla said.

Easing Pressure

The country expects Zohr to start producing this year at about 350,000 cubic feet a day, he said. 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, El-Molla said.

Egypt exported gas until 2014 but had to forego those sales to meet local needs 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 re-starting exports in 2019.

The first phase of Zohr’s development is almost finished, with drilling operations of the phase’s wells completed, the oil ministry said in an Oct. 29 statement. Russia’s state-owned producer Rosneft PJSC closed a deal to acquire 30 percent of the field in October. BP Plc bought a 10 percent stake in Zohr last year.

‘International Appetite’

“It shows there’s an international appetite,” El-Molla said. “We want to have our plate full of big and important players.”

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 ship, transport, store, market and trade gas using the country’s pipeline network and infrastructure, according to the law as published in Egypt’s Official Gazette.

“The executive regulations of the law will be ratified within the coming days,” El-Molla said.

The law, more than two years in the making, is the government’s latest push to spur investment in an economy that has struggled since the 2011 uprising. Over the past year, authorities have instituted sweeping reforms, backed by the International Monetary Fund, that have included floating the currency, sharp subsidy cuts and enacting legislation aimed at drawing in sorely needed foreign currency.

© 2017 Bloomberg L.P