Egypt struggles to meet demand growth for natural gas

Eric Watkins
Oil Diplomacy Editor

LOS ANGELES, Oct. 4 -- Egypt has awarded a drilling contract to the recently formed Egyptian Offshore Drilling Co. (EODC), a joint venture of Toyota Tsusho 50%, Egyptian Natural Gas Holding Co. 35%, and Ganoub El-Wadi Petroleum Holding Co. 15%.

The award comes as Egypt is stepping up efforts to increase its output of natural gas to meet growing domestic demand, as well as hoped-for exports to neighboring Arab countries and the European Union.

EODC will place a $400 million order for drilling rigs with a Singaporean heavy-machinery maker, yet to be named, and drilling is slated to begin as early as 2011.

Trading firm Toyota Tsusho, a subsidiary of Toyota Motor Co., will manage the entire project and procure the rigs, while Egyptian Natural Gas will operate them and carry out test drilling.

The JV has signed a $500 million loan agreement with a bank syndicate consisting of Japanese and Egyptian banks.

JBIC to back JV
In late September, Japan Bank of International Cooperation (JBIC) said it agreed to participate in the syndicated $500 million loan to the Japanese-Egyptian offshore drilling joint venture.

JBIC said the credit will finance the construction and operation of two offshore drilling rigs by EODC.

Also in late September, Egypt offered seven offshore exploration permits in Mediterranean areas potentially rich in natural gas, and companies have until Feb. 9, 2009, to submit bids.

Egypt's reserves of natural gas now stand at 76 tcf, according to Egyptian Minister of Petroleum Sameh Fahmi at a meeting of the Egyptian Holding Co. for Natural Gas on Sept. 22.

But there is growing competition for the supplies, especially in Egypt.

Demand on the rise
According to analyst BMI, Egypt's domestic natural gas demand has grown rapidly as thermal power plants, which account for about 65% of Egypt's total gas consumption, have switched from oil to gas.

BMI forecasts suggest that gas supply could reach 88 billion cu m in 2012 which, with demand of an estimated 40 billion cu m, provides export potential of 48 billion cu m.

In July, Fahmi and Syrian Petroleum and Mineral Wealth Minister Sufiyan al-Aw discussed the possibility of linking the Arab Gas Pipeline to the European gas network to deliver natural gas to Europe via Turkey.

"The fact that the Arab region has big gas reserves highlights the importance of the Arab Gas Pipeline as one of the most important projects linking main gas production centers with consumer centers," Aw said.

Egypt began exporting gas to Syria in July, and according to reports is expected to export some 900 million cu m of gas in the first year of operations, rising to 2.2 billion cu m/year over the next 9 years.

Syria gets gas, Lebanon doesn't
The start of Egyptian supplies is considered a useful boost to Syria which is struggling to stem the decline in production of its own hydrocarbons.

With an eye to eventual sales of gas beyond the Arab world, the AGP is being extended to Homs and Kilis on the Turkish border, widening the link to send the gas on to Turkey and, eventually, Europe.

Europe, meanwhile, is eyeing Egyptian supplies as well. In May, EU energy commissioner Andris Piebalgs said he expects to see the EU importing about 2 billion cu m/year of pipeline gas from Egypt in early 2010 through the AGP.

Still, there could be problems ahead as indicated in September when Egypt announced a delay in gas exports to Lebanon through the AGP until at least January 2009, after initially scheduling them to come on-stream in July or August.

Lebanon's Minister of Energy and Water Alan Tabourian confirmed the lack of current Egyptian supply capacity on his return from a visit to Egypt, adding that it appeared Egypt would only be able to supply half of the agreed volumes—60 MMcfd—when supplies are launched.

"The Lebanese team that traveled to Egypt was surprised to find out that the natural gas shipment has been delayed to January 2009 instead of this month," Tabourian said.

According to one analyst, Lebanon came into the picture "a little too late"—after the Egyptian government had been forced by popular protests to put a moratorium on future gas export contracts and renegotiate gas prices upwards with its buyers.

Contact Eric Watkins at hippalus@yahoo.com.

Related Articles

Alberta’s premier seeks more North American energy integration

02/05/2015 Better policy integration and cooperation will be needed for Canada, Mexico, and the US to fully realize the North American energy renaissance’s po...

Oil, gas infrastructure investments essential, House panel told

02/04/2015 Investments in oil and gas transportation and storage should move ahead because they are essential in continuing the US economic recovery and North...

EPA suggests DOS reconsider Keystone XL climate impact conclusions

02/03/2015 The US Department of State might want to reconsider its conclusions regarding potential climate impacts from the proposed Keystone XL crude oil pip...

EnLink agrees to purchase Coronado Midstream for $600 million

02/02/2015 EnLink Midstream has agreed to acquire Coronado Midstream Holdings LLC, which owns natural gas gathering and processing facilities in the Permian b...

So much for cooperation

02/02/2015 Congressional majority leaders and the Obama administration came into 2015 pledging to at least try to be less combative and more cooperative in ru...

Near-term pipeline plans shrink, longer-term growth returns

02/02/2015 Planned pipeline construction to be completed in 2015 slipped 30% from forecasts for 2014, with expected products, crude, and natural gas project c...

Kerry expects to receive other agencies’ Keystone XL reports soon

02/02/2015 US Sec. of State John F. Kerry said he expects to receive other federal agencies and departments’ reports soon on the proposed Keystone XL crude oi...

Russia, Iran outlined joint Caspian position in 2001

02/02/2015 Following are the delineated points of a March 12, 2001, agreement between leaders of Russia and Iran at a meeting on Caspian Sea issues in Moscow

US Senate passes bill approving Keystone XL pipeline project

01/30/2015 The US Senate has passed a bill approving construction of the proposed Keystone XL crude oil pipeline by a 62-36 vote after 3 weeks of debate. Nine...
White Papers

Pipeline Integrity: Best Practices to Prevent, Detect, and Mitigate Commodity Releases

Commodity releases can have catastrophic consequences, so ensuring pipeline integrity is crucial for p...
Sponsored by

AVEVA’s Digital Asset Approach - Defining a new era of collaboration in capital projects and asset operations

There is constant, intensive change in the capital projects and asset life cycle management. New chall...
Sponsored by

Transforming the Oil and Gas Industry with EPPM

With budgets in the billions, timelines spanning years, and life cycles extending over decades, oil an...
Sponsored by

Asset Decommissioning in Oil & Gas: Transforming Business

Asset intensive organizations like Oil and Gas have their own industry specific challenges when it com...
Sponsored by

Squeezing the Green: How to Cut Petroleum Downstream Costs and Optimize Processing Efficiencies with Enterprise Project Portfolio Management Solutions

As the downstream petroleum industry grapples with change in every sector and at every level, includin...
Sponsored by

7 Steps to Improve Oil & Gas Asset Decommissioning

Global competition and volatile markets are creating a challenging business climate for project based ...
Sponsored by

The impact of aging infrastructure in process manufacturing industries

Process manufacturing companies in the oil and gas, utilities, chemicals and natural resource industri...
Sponsored by

What is System Level Thermo-Fluid Analysis?

This paper will explain some of the fundamentals of System Level Thermo-Fluid Analysis and demonstrate...
Available Webcasts


The Alternative Fuel Movement: Four Need-to-Know Excise Tax Complexities

When Thu, Jun 4, 2015

Discussion on how to approach, and ultimately embrace, the alternative fuel market by pulling back the veil on excise tax complexities. Taxes may be an aggravating part of daily operations, but their accuracy is crucial in your path towards business success.

register:WEBCAST



On Demand

Prevention, Detection and Mitigation of pipeline leaks in the modern world

Thu, Apr 30, 2015

Preventing, detecting and mitigating leaks or commodity releases from pipelines are a top priority for all pipeline companies. This presentation will look at various aspects related to preventing, detecting and mitigating pipeline commodity releases from a generic and conceptual point of view, while at the same time look at the variety of offerings available from Schneider Electric to meet some of the requirements associated with pipeline integrity management. 

register:WEBCAST


Global LNG: Adjusting to New Realities

Fri, Mar 20, 2015

Oil & Gas Journal’s March 20, 2015, webcast will look at how global LNG trade will be affected over the next 12-24 months by falling crude oil prices and changing patterns and pressures of demand. Will US LNG production play a role in balancing markets? Or will it add to a growing global oversupply of LNG for markets remote from easier natural gas supply? Will new buyers with marginal credit, smaller requirements, or great need for flexibility begin to look attractive to suppliers? How will high-cost, mega-projects in Australia respond to new construction cost trends?

register:WEBCAST


US Midstream at a Crossroads

Fri, Mar 6, 2015

Oil & Gas Journal’s Mar. 6, 2015, webcast will focus on US midstream companies at an inflection point in their development in response to more than 6 years shale oil and gas production growth. Major infrastructure—gas plants, gathering systems, and takeaway pipelines—have been built. Major fractionation hubs have expanded. Given the radically changed pricing environment since mid-2014, where do processors go from here? What is the fate of large projects caught in mid-development? How to producers and processors cooperate to ensure a sustainable and profitable future? This event will serve to set the discussion table for the annual GPA Convention in San Antonio, Apr. 13-16, 2015.

This event is sponsored by Leidos Engineering.

register:WEBCAST


Emerson Micro Motion Videos

Careers at TOTAL

Careers at TOTAL - Videos

More than 600 job openings are now online, watch videos and learn more!

 

Click Here to Watch

Other Oil & Gas Industry Jobs

Search More Job Listings >>
Stay Connected