Government to import gas at $17 per million BTUs due to poor domestic gas production

Mohamed Adel
4 Min Read

The government is preparing to import shipments of liquefied natural gas (LNG) at $17 per million British Thermal Units (BTUs), according to an official from the Egyptian Natural Gas Holding Company (EGAS).

To do so, EGAS is circumventing paying dues to foreign partners by encouraging them to produce gas from Egyptian fields, the official added.

The official noted that Egyptian gas price currently does not exceed $3 per million BTUs.

Importing LNG will cost the state over $12bn over the next four years. Although the state is unable to pay back its dues for foreign partners, totaling $6bn, it is encouraging these companies to increase their production of gas from Egyptian fields.

Government efforts to negotiate with international banks to repay $1.5bn of this debt will not solve the problem, especially so given the debt will only increase again over a few months. The government had negotiated paying back a part of its debt (worth $1.5bn), yet over the course of 5 months it accrued the same amount in debt.

Gas shortages are predicted to rise to approximately 1.3bn cubic feet of gas per day during the current fiscal year, with average gas production not to exceed 5.03b cubic feet per day. The gas shortages are due to the slowdown of interest by foreign partners to develop and explore wells in Egypt. The country’s actual need for gas totals approximately 6.4b cubic feet per day, said the official.

The Ministry of Petroleum predicts that the natural gas deficit will reach about 2.4bn cubic feet per day during the fiscal year 2017/2018. The prediction comes in contradiction to earlier statements by the government that the crisis will end by that time.

The government is currently preparing to launch an international tender worth $12bn for the import of gas for power plants over the next four years, according to the EGAS official.

He added that the government plans to add about 1.8bn feet of gas production by year’s end, to add approximately 600m cubic feet of gas to the national network. The rest of the amount will be used to compensate for the natural attrition of fields, given that domestic production of Egyptian gas has reached 4.7bn cubic feet per day.

He stressed that there is no substitute for rationing electricity consumption – even if there is availability at fuel stations . Production decreases as a result of rising temperatures, and many fuel stations are operating at an efficiency of just 42% or less , wasting fuel.

The power plants will need to use about 80% of Egyptian gas production during the current fiscal year.

He added that the blackouts will continue at the same rates until 2018, despite the import of LNG. The state budget cannot afford to import more than 500m cubic feet per day, with the petroleum sector bearing the financial burden in light of the Ministry of Finance’s inability to manage liquidity, according to the official.

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