Egypt warming up to natural gas prospects

Sunday 03/07/2016
Offshore gas exploration in Egypt.

Cairo - A natural gas find by Brit­ish oil company BP in the Nile Delta adds to a growing list of natural resources discoveries in Egypt and bodes well for the coun­try’s energy future, experts said.
“These discoveries just prove op­timistic forecasts for the economy to be true,” said Hossam Arafat, the head of the oil section at the inde­pendent Commerce Chambers Fed­eration. “When production from these finds comes online, it will make Egypt self-sufficient.”
BP said the Baltim SW-1 explora­tion well, drilled in water depths of 25 metres east of the delta, reached a total depth of 3,750 metres and penetrated approximately 62 me­tres of net gas pay in high-quality Messinian sandstones. This discov­ery, which is only 12km off shore, joins the Nooros field, which was discovered a year ago and is pro­ducing 65,000 barrels of oil equiva­lent per day.
Further appraisals, the company said, will be required to reveal the potential of the discovery, one of a number of recent energy resource finds in Egyptian territory.
Last August, the Italian energy company Eni found what it de­scribed as a “supergiant” gas field in one of its exploration conces­sions in Egyptian Mediterranean waters. The company described the Zohr field as a “game-changer”. Drilling started in December and production from the field is ex­pected to come online in late 2018 or early 2019.
Oil and gas experts say the dis­coveries will alter Egypt’s fortunes, put an end to liquefied natural gas (LNG) imports, save billions of dol­lars and bring Egyptian gas to inter­national markets.
“The government spends bil­lions of dollars every year on gas imports but this is not only about saving this money, it is also about the far-reaching effects the discov­ery of this vast gas wealth will have on the economic conditions of this country as a whole,” said Mukhtar al-Sherif, an economics professor at al-Azhar University.
Thousands of Egypt’s factories closed in recent years due to en­ergy shortages. Power outages are blamed on the lack of gas to keep Egyptian electricity generation plants running. Declining output and power outages forced Egypt in 2014 to suspend gas exports and divert gas, usually sent to liquefac­tion plants, to domestic use.
In 2015, Egypt produced 42 bil­lion cubic metres of gas but this was about 20 million cubic me­tres a day less than the country’s power plants, factories and facili­ties needed. It had to make up for the deficit by importing expensive LNG. The energy deficit is expected to rise to 48 million cubic metres a day in the 2017-18 fiscal year.
Based on the new discoveries, however, Egypt can expect to more than double gas production by 2019-20 by bringing on stream 50 billion-60 billion cubic metres of gas, experts said.
“Apart from achieving self-suf­ficiency and stopping expensive imports, the new discoveries will allow Egypt to export part of its gas to other countries,” Arafat said. “This will reflect positively on the conditions of the national econo­my at the end of the day.”
Once the Zohr field reaches peak production, it is expected to pro­duce 70.8 million-76.4 million cu­bic metres of gas a day. Other gas fields are likely to begin production in the next few years.
In 2015, Egypt awarded four off­shore licences to major interna­tional oil companies. In 2014 and 2015, the government offered 56 concessions in total. It also plans to announce an international tender this year for 11 exploration blocks in the Mediterranean and Nile Del­ta.
Egypt will spend $8 billion on LNG imports in 2016, according to Petroleum Minister Tarek al-Mulla. Economists say this is a drain on the country’s finances. Egypt suf­fers from a shortage of foreign cur­rency and has to depend on Gulf allies to provide it with oil and gas.
“The new discoveries are gifts from on high to a country deeply steeped in economic troubles,” Sherif said. “They will help us save money, turn on the machines of our factories, put an end to power outages and in case of exporting production, they will bring us a lot of badly needed dollars.”