Brighter prospects for Egypt after gas discovery

Friday 04/09/2015
Field development is expected to include approximately 20 wells

CAIRO - A potentially transform­ing discovery of a mas­sive natural gas field in the Mediterranean could ease an energy deficit that has hampered the Egyptian economy.
Italian energy company Eni an­nounced on August 30th that the so-called Zohr prospect, about 180 kilometres off the coast of Port Said, could hold “super-giant” reserves of 850 billion cubic metres of lean gas.
The company said Zohr could satisfy Egypt’s energy demands for decades. Eni Chief Executive Offic­er Claudio Descalzi, speaking to US cable outlet CNBC, said the field “is changing the game for Egypt”.
In Egypt, the discovery was viewed as a heaven-sent gift to a country steeped in trouble and need. Egypt turned from a net pro­ducer of gas to a net importer in a ten-year period. Egypt, which has natural gas reserves of 2 trillion cubic metres, produces 127 million cubic metres of gas every day but consumes 200 million cubic metres a day.
“To bridge the gap between pro­duction and consumption, we have to depend on imports,” oil expert Ramadan Abdel Qadir said. “But this puts unbearable burdens on the state budget.”
People are looking to the Zohr discovery to bridge the gap. They say this and future gas discoveries could end an Egyptian energy crisis.
The lack of fuel seems to be an unbeatable challenge for economic planners as they strive to market in­vestment opportunities in Egypt. As it shrugs off years of turmoil follow­ing the 2011 uprising, Egypt needs investments to create jobs for its large number of unemployed youth.
After digging a waterway to allow two-way transit in the Suez Canal, Egypt aspires to turn the banks of the canal into an international in­dustry and service hub. This is one of several ambitious economic pro­jects planned by Egyptian President Abdel Fattah al-Sisi.
However, electricity outages are so common that Egypt’s factories are closing and farmers are often unable to harvest crops because they lack necessary fuel. Economics expert Rashad Abdo says some fer­tiliser companies have shut down because of a lack of fuel.
“Together with this, other factory closures induced by the shortage of fuel are costing the national econ­omy dearly,” Abdo said. “Egypt’s products are gradually disappearing from world markets.”
Abdel Qadir said that not far from the new gas find, several factories have closed because of the lack of fuel. The shortages might become something of the past when pro­duction starts in the Zohr field. Eni is expected to do that in about three years, according to the company and Egypt’s Petroleum Ministry.
Field development is expected to include approximately 20 wells, said Khaled Abdel Badie, chairman of Egypt’s state-run Natural Gas Holding Company (EGAS). He said development will initially cost $3.5 billion, an amount that will double with full field development.
Eni, which has been operating in Egypt for almost 60 years, an­nounced two other gas finds earlier in 2015. One of the discoveries — off the coast of the northern city of Al­exandria — was reported to have po­tential reserves of 425 million cubic metres of gas.
In June, Eni signed an energy ex­ploration deal with Egypt’s Petrole­um Ministry worth $2 billion allow­ing it to explore in Sinai, the Gulf of Suez, the Mediterranean and areas in the Nile Delta.
In the past two years, Egypt signed 56 oil exploration deals with international companies with total investments of $13 billion.
While Eni’s Zohr discovery might gain energy investment in Egypt, the country will not likely turn into a natural gas exporter in the fore­seeable future, experts say.
Former EGAS chairman Moham­ed Shoeib says Egypt needs more than just this discovery in order to become a natural gas exporter.
“We need at least five or six dis­coveries this size in order to have natural gas surpluses to export,” Shoeib said. “As for the current find, it will only help us satisfy our local consumption.”
New natural gas discoveries might make Egypt less dependent on imports and also put in question plans for future imports. In March, Russia’s Gazprom signed a deal with EGAS to provide Egypt with 35 ship­ments of liquefied natural gas by 2020.
Egypt was also reported to have plans to import natural gas from Is­rael where two major fields with to­tal potential reserves of 566 billion cubic metres were discovered.
Egypt is expected to keep the deal with Gazprom intact but this might not be the case with gas importa­tion plans from Israel, according to Shoeib.
“Such plans might be altered if production starts at the new field quickly,” Shoeib said.