Egypt to keep Eni's find for itself, stiffening gas race in the Middle East

By MAHER CHMAYTELLI on 9/1/2015

PARIS (Bloomberg) -- Egypt plans to keep all the natural gas produced at a giant field Eni SpA found off its Mediterranean coast to itself, heightening competition among gas producers in the Middle East and Africa.

“This field is now in competition with the ones in Cyprus, Israel, Mozambique, Tanzania and Iran,” Thierry Bros, an analyst at Societe Generale SA in Paris, said Tuesday by e-mail. “But as we are short of growing demand, especially in Europe, and short of money, only projects that will find a win-win solution with buyers will go ahead.”

Eni on Sunday said the deep-water deposit in the Zohr Prospect in the Shorouk block may hold 30 trillion cubic feet of fuel, making it the biggest gas discovery in the Mediterranean Sea. “All the production will go to internal consumption,” Hamdy Abdel Aziz, director of the Egyptian Petroleum Ministry’s information department, said by phone from Cairo. The field’s reserves can meet Egypt’s needs for more than 10 years, he said.

Gas output in Egypt has been declining since 2011 as the uprising that ended Hosni Mubarak’s rule curtailed investments in exploration and production. Local demand for electricity, most of it generated by gas, is rising by more than 7% a year, and the most populous Arab nation, with almost 87 million people, started buying liquefied natural gas cargoes this year from companies including Noble Group Ltd, BP Plc and Vitol SA.

Before the uprising, Egypt shipped gas to Jordan and Israel by pipeline and processed liquefied gas at plants in Idku and Damietta for sale overseas. Egypt is Africa’s second-largest gas producer after Algeria, according to the U.S. Energy Information Administration.

A project to build a gas link to Egypt from a field discovered in waters off Cyprus will be reviewed as the two countries study data from the Zohr prospect, Cypriot Energy Minister Georgios Lakkotrypis said Monday in an interview with state-run RIK TV.

Eni will achieve a “significant level” of production at Zohr in about 2018 or 2019, as the deposit lies close to fields that are already in operation and can be tied into their infrastructure, London consultant Energy Aspects Ltd. said in a report published Monday. “The region will be long natural gas,” it said.

The Zohr discovery will affect Israel’s plans to export fuel from its own offshore Leviathan field, by removing the option of liquefying Israeli gas for export at existing but disused facilities in Egypt, according to Energy Aspects. Gas from Zohr could enable Egypt to restart its own LNG exports by providing feedstock for Eni’s dormant export facility at Damietta or freeing up gas for export from BG Group Plc’s facility at Idku, Energy Aspects said.

“While the production is being earmarked for domestic consumption, it should be seen as being the end point for Egyptian LNG imports,” the consultant said. “This will displace a considerable volume of LNG demand.”

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