Egypt benefits from a sizable supply of natural resources, including gas reserves that place it amongst the top three producers on the African continent. While a steep rise in domestic demand has increased pressure on producers, prompting a rethink in how the country uses its gas, new gas finds and temporary gas imports will help alleviate concerns.
On October 8, German energy firm RWE announced a gas find at its Disouq block in the heart of Egypt’s Nile Delta. In a statement, the company “confirmed a further extension of the South Sidi Ghazy-1x discovery,” adding that “the latest development well follows the successful appraisal of the North Sidi Ghazy-1x discovery reported in August 2012”.
RWE’s local subsidiary, RWE Dea Egypt, plans to start production on the 5375-sq-km onshore Disouq block next year, having been awarded the concession in 2004. It has already made several discoveries and is working on developing the field.
In August, BP Egypt, the Egyptian branch of the UK-based oil major, announced that it had discovered gas at Taurt North and Seth South, in the North El Burg Offshore Concession, Nile Delta. This takes the number of BP discoveries in the concession to five, and BP said that it was considering options for connecting the new finds to existing infrastructure.
The North El Burg concession, in waters 60m-100m deep, was awarded to BP in 2005 and is being developed in a joint venture with the International Egyptian Oil Company (IEOC), a subsidiary of Italian state monopoly Eni. BP has interests in 11 offshore blocks in the Delta region, and operates six.
BP is also the leading investor in the West Nile Delta project, in which RWE Dea is a partner. This is a $15bn programme that the British firm says could potentially boost Egypt’s gas output by 22%.
While Egypt exports liquefied natural gas (LNG) to markets that include Europe, the US and South Korea and pipes gas to neighbouring countries including Jordan, the demands of an increasing home market due to a rising population, economic growth and industrial output have increased pressure on supply. In recent years, although new discoveries have continued, gas output has slowed slightly and reserve-to-production ratios have started to decline, making current finds all the more significant.
Gas production reached 2.17trn cu feet (tcf) in 2011, down 0.1% from 2010. This followed a doubling in production from 0.74 tcf to 1.5 tcf between 2000 and 2006. Natural gas reserves totalled 77.46 tcf at the end of the 2010/11 fiscal year, according to the Egyptian Natural Gas Holding Company (EGAS), Egypt’s parastatal gas company and regulator. This was down from 78.1 tcf at the end of the 2009/10 fiscal year, though still well above 52.9 tcf at the end of 2000. Meanwhile, despite the effects of last year’s revolution, consumption in 2011 was 1.75 tcf, up 10% from the previous year.
In June EGAS launched a bid round for 15 exploration blocks in the Gulf of Suez, the Western Desert, the Eastern Desert and Sinai; two in the Gulf of Suez were offshore, with the remainder onshore. The bidding will close on November 14. This will follow the expected announcement of the results of another bid round from September 2011 for 15 oil and gas blocks opened by the Egyptian General Petroleum Company, which are due this month.
Although discussions are under way to examine the current balance of exports and domestic consumption in the gas sector, the government is aware that not all domestic needs will be met by domestic supply in the immediate future, particularly with the government aiming for 5-6% annual growth. For this reason, Egypt’s minister of petroleum and mineral resources, Osama Kamal, visited Qatar in September to negotiate a gas import deal that could see Qatar sell 400m-500m cu feet of LNG to Egypt per day. Kamal also said that he expected Egypt to establish “many facilities that are capable of receiving Qatari LNG and that can provide fuel to industries, utilities and petrochemicals units”.
With relations between Qatar and Egypt blossoming, and plenty of mutual interest in an LNG trade deal, the North African country seems to have found a good way of diversifying its gas supply, although in the long-term, policy makers will have to consider rebalancing the amount of gas destined for export markets.