A FEW YEARS AGO, the prospects for Egypt's hydrocarbons sector looked bleak. Oil output was falling, the gas sector had yet to take off, and it seemed likely Egypt's main importance to global energy markets would be its control of the Suez Canal, through which oil tankers from the Gulf move through to reach the Mediterranean. But the North African country's hydrocarbon fortunes have recently taken a turn for the better and a string of important discoveries are turning Egypt into a gas exporter of some standing.
Although Eni-Agip discovered Egypt's first commercial gas field at Anu Madi as long ago as 1967, the country's success as a gas producer is more recent, with exports beginning in 2000. Egypt's proven reserves increased from 36 trillion cubic feet (tcf) in 1999 to 67 tcf by 2005 and this figure is set to rise further as a result of ongoing deepwater exploration. Some sources now claim that Egypt has the second largest deepwater gas reserves in the world.
Apart from the Arab Gas Pipeline (AGP), which already exports gas to Jordan and is set to be extended, most of Egypt's gas exports take the form of liquefied natural gas (LNG). With three LNG liquefaction trains already up and running, the country is now the sixth biggest LNG producer in the world. The one-train Damietta plant, which is owned by Union Fenosa of Spain, Eni-Agip and BP, has been operating since the start of 2005 but its 770m cubic feet a day (cf/d) capacity is expected to almost double by 2009, as a second train reaches completion.
The country's second LNG producer is the Idku plant, owned by BG (formerly British Gas) and Petronas. The two 500m cf/d trains were brought on stream in March and September 2005 respectively and technical changes will boost production capacity by up to 100m cf/d by 2008.
Both consortia expect to develop additional trains in the near future. Meanwhile, a Shell gas-to-liquids (GTL) project within Egypt could provide yet another market for domestic gas.
Egypt's significance as a gas supplier is also relevant to the European Union (EU). Natural gas can be piped directly to Southern Europe through pipelines beneath the Mediterranean, while LNG carriers face only a short journey that need not pass through third party jurisdictions, making Egypt a favoured supplier on security grounds. Gulf suppliers, such as Qatar, do not enjoy such unimpinged access to European markets, a fact that counts against them in the race to secure long-term LNG supply deals.
Russia is currently the dominant European gas supplier but the gas shortages generated by the gas dispute between Ukraine and Russia earlier this year have made many European governments nervous of relying more heavily on the Russian gas company Gazprom.
The chief executive of Eni-Agip, an offshoot of ENI Power, Enrico Grigesi, says with regard to Europe: "Egypt is an important potential supplier: we can expect that in 10 to 15 years they will be able to supply Europe with 20 to 30bn cubic metres of gas a year. …