Inching closer to Europe

Waleed Khalil Rasromani
5 Min Read

CAIRO: Natural gas is an increasingly popular source of energy. It is a cleaner alternative to oil and can be used to generate electricity more efficiently. Its transport, however, is complicated as it requires either the construction of costly pipelines or the condensation of gas into a liquid form prior to storage and shipment.

The supply of and demand for natural gas rose sharply in Egypt following substantial discoveries in the late 1990s. This was accompanied by a decline in oil production, making natural gas the country s number one source of energy.

Having determined that the nation s probable gas reserves exceed domestic requirements, the government has been pursuing export opportunities for several years. Construction of a $1.3 billion liquefaction plant in Damietta, owned by Spanish electricity and gas conglomerate Union Fenosa with minority stakes by Egyptian state-owned oil and gas companies, started in 2001. The plant has an annual production capacity of approximately 7.5 billion cubic meters and began exporting last year with output destined mainly to Spain and the United States.

A second liquefaction plant in Idku, owned mainly by British Gas and the Malaysian Petronas and with two trains worth approximately $1 billion each, also began production last year. Each train has an annual capacity of 3.6 million tons per year which is exported to France, Italy, the U.S. and Spain.

Meanwhile, work is underway to construct a pipeline that may eventually supply Europe with natural gas via Turkey. The Arab Natural Gas Pipeline started providing Egyptian gas to a power station in Aqaba in 2003. This pipeline traversed Suez from Al-Arish in the west to Taba in the east with a small segment submerged in the Gulf of Aqaba and bypassing Israel.

The pipeline was extended to Amman and Rehab in the north of Jordan last December; the third segment of the pipeline is due to reach Homs in central Syria by the end of next year. It will continue from there to Tripoli in the north of Lebanon.

Another pipeline project has proceeded less conspicuously. The East Mediterranean Gas Company, an Israeli-Egyptian joint venture, is building an underwater pipeline that will interconnect the Arab Natural Gas Pipeline from Al-Arish with Ashkelon in Israel, circumventing Gaza. The pipeline is due to begin operation next year and will be used to supply Israel with 1.7 billion cubic meters of gas annually. Israel has committed to purchase this output for 15 years.

In the long-term, however, the government is keen to supply gas to Europe. As a first step toward this goal, Turkey and the four members of the Arab Natural Gas Pipeline project (Egypt, Syria, Lebanon and Jordan) agreed in principle last month to extend the pipeline from Homs to Turkey within two years.

In Turkey, the pipeline may join with the Nabucco grid which connects Turkey with Austria through Bulgaria, Hungary and Romania. Bulgaria and Romania have already expressed an interest in buying Egyptian gas through the pipeline.

Competition will nevertheless be tight in Western Europe, as Egypt will have to contend with Russia and Eastern Europe and the Nabucco pipeline may eventually extend to other major natural gas producers including Iran, Iraq, Azerbaijan and Turkmenistan.

Egypt has 67 trillion cubic feet of proven natural gas reserves; probable reserves may be nearly twice as much. Cumulative gas production until the end of 2004 amounted to 1.5 trillion cubic feet, and the government aims to double exports in five years from the current level of 17 billion cubic feet per year to 35 billion cubic feet.

Exploration activities are likely to intensify with the growth in natural gas production and exports. Several multinational companies including BP and British Gas have already been involved in exploring for gas in Egypt, and the government is currently in the process of tendering 12 exploration blocks in the Mediterranean, the Nile Delta and northern Sinai.

Shell also recently purchased 50 percent of an exploration concession in the Nile Delta from the Canadian Centurion Energy International Inc. Additional liquefaction plants may be constructed if the exploration in this or other blocks confirms the existence of natural gas.

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