Egypt’s largest natural gas discovery has given the country a fresh push to become a regional industry hub with plans for new processing facilities on the Red Sea.
Khaled Abubakr, the chairman of the Egyptian energy distribution company Taqa Arabia, said yesterday that the country was looking to capitalise on this infrastructure to help send any extra gas to other markets.
“Egypt will need existing gas from new discoveries, but there are plans to build new facilities on the Red Sea to direct [any surplus] to the Asian market,” he said.
Mr Abubakr is also involved with the Egyptian gas association, working closely with Egypt’s energy ministry.
Italy’s Eni said this week that the Zohr Prospect in the Mediterranean Sea could hold a potential of 30 trillion cubic feet (tcf), a potentially massive boost for a country that faces a natural gas deficit.
Egypt began importing liquefied natural gas this year to satisfy domestic consumption, which increased by an annual average of 7 per cent in the ten years through 2013, according to the US Energy Information Administration (EIA).
In May last year, state-owned Egyptian Natural Gas (Egas) signed a letter of intent with Hoegh LNG of Norway to use one of its floating storage and regasification units for five years to allow Egypt to import LNG, the EIA said.
The unit arrived off the Red Sea coast at the Ain Sukhna port in April this year, along with its first LNG cargo.
Egypt has signed deals to import LNG cargos from Russia’s Gazprom and Algeria’s Sonatrach, along with the trading companies Trafigura, Vitol and Noble, the EIA said.
Mr Abubakr said that Eni had declared to the Egyptian government that the amount of recoverable gas was indeed 30 tcf. “I’ve been working in this sector for 30 years and it’s been easy to manipulate numbers, but this time it’s very serious,” he said.
However, the costs of extraction still remain unknown.
Royal Dutch Shell paid a US$32 million signing bonus for a block on the concession in 1998, committing $150m to a preliminary five-year exploration period. However, the company handed it back to the government five years ago, citing high gas development costs.
A Shell spokesman said that Shell had conducted a 12-year exploration programme on the concession, where it had spent more than the agreed financial plan. “During this time, Shell and its partners only found limited amounts of gas, which were not commercially viable to develop,” the spokesman said. The block was then retendered and awarded to Eni.
Eni said that it was open to the possibility of selling a stake in the important discovery, but when asked if Shell would reconsider joining the concession, the Anglo-British firm said that its focus was to grow operations in the Western Desert.
The reality is that any of the gas from Eni’s “sea of gas” will take several years to hit the market.
“It’s one thing to drill a well, it’s another to have the infrastructure to get it to the market,” said David Carroll, the vice president of the International Gas Union.
Eni’s chief executive, Claudio Descalzi, maintains that existing infrastructure is in place that can be used to allow a “fast production start-up”.
Mr Carroll said that while there may be existing onshore processing facilities, the big question relates to the offshore infrastructure needed to get the gas from 1,450 metres under water to land.
The first step will be for Eni to present the Egyptian government with a development programme, which will outline spending, the number of platforms, construction of offshore facilities and the timeline. The approval process for this programme will take up to six months.
For the gas to hit the market could take more than six years using top technology, but more realistically it will take eight to 10 years to reach full capacity, according to Mr Abubakr.
The amount of gas in the field translates to 850 billion cubic metres (bcm). If Eni produces 40bcm over the next 20 years, the new discovery will present a gas addition of 80 per cent of its current production of 50bcm.
However, Egypt’s current production is in decline, and the figure is expected to drop to 40bcm over the next two years.
“We don’t want to just be a producer and consume; we want to properly plan this time,” Mr Abubakr said. “If there’s a surplus of gas, we will have the luxury and option to expose this gas to other markets – but only if there is a surplus.”
The president Adel Fattah El Sisi has asked Eni for a monthly report from the company’s chief executive. “This is different than in the past, giving the message that failure is not an option,” said Mr Abubakr.
A delegation from Italy’s parliament is expected to arrive on Sunday to meet Egyptian officials to discuss forward plans.
lgraves@thenational.ae
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