Egypt: Cairo’s ambitions to become a major gas exporter

By Sherif Tarek

Posted on Friday, 28 January 2022 11:25
Projet gazier Zohr en Egypte. © Saipem

The protracted energy crisis, particularly in Europe, could make Egypt’s natural-gas exports more attractive to European and Eastern Mediterranean markets

Egypt’s massive Zohr gas field has turned the country into a gas exporter, and the Cairo government has been signing a raft of deals with neighbouring countries on supplies and infrastructure. Gas is due to be supplied to Lebanon for the first time in late February, and the Greek and Egyptian governments held talks about cooperation on gas projects in November.

Egypt is the fastest-growing Arab exporter of liquefied natural gas (LNG): the country exported 63.6bn cubic feet of LNG in 2020 and relaunched operations at the mothballed Damietta plant after it was closed for eight years. But Egypt is still a small player, with LNG exports far behind its North African peer Algeria.

Edward Moya, a senior market analyst at international brokerage Oanda tells The Africa Report: “Egypt […] could be poised to take advantage of a shortfall in supplies in Europe. Egypt has been wanting to become a major European supplier and this should be a good opportunity to secure long-term contracts for LNG exports. Europe doesn’t want to be dependent on Russia, so this should be an easy opportunity for Egypt.”

Unlike many gas-rich countries, Egypt’s domestic gas consumption is relatively high, as it is the country’s main source of feedstock for power plants.

This limits the country’s potential as an exporter, notes Mostefa Ouki, a senior research fellow at the Oxford Institute for Energy Studies: “According to the latest publicly available information, Egypt’s current domestic natural-gas consumption absorbs over 90% of the country’s indigenous marketed gas production.”

90% of Egypt’s gas production is currently used domestically, but this could change with renewable-energy targets

However, the ongoing shift to renewable energy sources should change this. The government aims for the country to generate 20% of its power from renewable sources by next year and 42% by 2035. Still, “natural gas will continue to be an important part of Egypt’s energy mix,” Ouki says.

New pipelines with Israel

“Egypt has the largest natural-gas infrastructure in the East Med area in terms of gas transportation and gas liquefaction facilities and could play a key role in monetising gas resources developed or planned to be developed within this East Med area,” says Ouki. Egypt has two LNG export plants: one in Idku, east of Alexandria, and the other further east in Damietta. It also has two cross-border gas pipelines connecting with Israel and Jordan.

Israel announced in October that it was mulling over the construction of a new onshore pipeline connecting the Israeli and Egyptian natural-gas grids to boost gas exports. There are already plans to build a second subsea pipeline between Israel and Egypt within a few years.

“But this would very much depend on the commercial viability of gas monetisation options such as LNG exports using non-Egypt gas supplies, contractual and intergovernmental agreement aspects. Obviously, it would also be affected by geopolitical and territorial obstacles,” concludes Ouki.

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