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AfrElec COMMENTARY AfrElec

Egyptian LNG plant set for restart

Thanks to the 2017 launch of the Zohr field, Egypt enjoys a gas surplus that it is eager to export

EGYPT ITALY’S Eni has reached deals with Spain’s Egypt has another LNG export terminal in Idku,
Naturgy and its Egyptian partners that pave the but the country was among several spot LNG
WHAT: way for the restart of Egypt’s shuttered Damietta exporters that were forced to curtail production
Eni has reached deals LNG plant. this year because of low prices.
with Naturgy and its Damietta LNG is capable of exporting 5mn Global LNG prices are now recovering, how-
Egyptian partners, tonnes per year (tpy) of LNG but has been idle ever, and in late October, the 7.2mn tpy Idku
under which Naturgy since 2012 because of a legal dispute. Its owner plant loaded its first export cargo in over three
will withdraw from the is SEGAS, which is 80%-controlled by Union months.
Damietta LNG plant Fenosa Gas (UFG), a 50:50 joint venture between Eni said the agreement came “at an impor-
Eni and Naturgy. tant moment.” Thanks to the Italian major’s
WHY: Under the agreements, UFG’s interest will be fast-tracked gas projects like Zohr and Nooros,
The plant was shut down divided between Eni and Egyptian Natural Gas “Egypt has regained its full capacity to meet
in 2012 because of Holding (EGAS), leaving Eni with a 50% stake domestic gas demand and can allocate surplus
domestic gas shortages, in Damietta LNG and EGAS with 40%. Egyp- production for export through its LNG plants,”
but is expected to restart tian General Petroleum Corp. (EGPC) controls it said.
in the first quarter of the remaining 10%. Naturgy will receive a series Eni is looking to build up its LNG business,
2021, now that Egypt has of cash payments worth $600mn in total. Once viewing the fuel as having stronger long-term
surplus supply these are paid it will leave Egypt and end its joint growth potential than oil. It also sees gas playing
venture with Eni. a key role in the energy transition.
WHAT NEXT: Eni will also assume responsibility over the In contrast, Naturgy president Francisco
Egypt is also expanding contract for purchasing gas for Damietta LNG Reynes welcomed the deal, saying it would sim-
the use of gas at home, and have rights to half of its liquefaction capacity. plify and reduce “the company’s exposure to gas.”
with a key focus being the Damietta LNG should start back up in the first Naturgy will be freed from a 3.5 bcm annual
conversion of vehicles to quarter of 2021, the Italian major said. Eni will gas procurement contract to supply its com-
run on CNG also take over UFG’s marketing of gas in Spain, bined-cycle gas turbine (CCGT) plant in Spain,
expanding its position in the European market. due to continue until the end of 2029, Reynes
said. Furthermore, the deal “resolves a com-
Supply surplus plex situation lingering since 2012 and which
The legal dispute at Damietta was over compen- couldn’t be resolved in the spring because of the
sation due to the operators after the plant was pandemic.”
idled in 2012. At the time, Egypt was running
short of gas for the domestic market, and there- Home use
fore diverted some from its export stream. UFG Now that it is self-sufficient, Egypt also wants the
was awarded $2bn by the World Bank’s Inter- fuel to play a large role in its economy.
national Centre for Settlement of Investment Petroleum Minister Tarek El Molla reported
Dispute (ICSID) in compensation for Egypt’s last month on Egypt’s progress in expanding the
actions. use of gas. The country has converted all its ther-
The Egyptian gas market is now very different mal power plants (TPPs) to run on the fuel and
to what it was back then. The country now enjoys has also begun a programme to increase use by
a surplus of supply thanks to the 2017 launch of households and in the transport sector, he said.
the giant Eni-operated Zohr field in the Mediter- Some 5mn households have been hooked up
ranean. Several more large gas fields have been to receive gas in the past six years, while there
discovered by Eni and others since then, ensur- are now 330,000 vehicles on the road that run
ing that a surplus will remain for some time. on compressed natural gas (CNG), serviced by
Damietta’s relaunch was anticipated sooner, 215 CNG filling stations. The government aims
but was held up because of delays in settlement to convert a further 260,000 vehicles by 2023,
proceedings. The project partners managed to while bringing the number of filling stations to
reach a deal in February but it collapsed two 600. Eventually it wants to see 1.3mn converted
months later after certain terms were not met. cars on the road, with the main focus being vehi-
According to reports, coronavirus (COVID-19) cles over 20 years old.
restrictions meant workers could not go in and The government has subsidised the cost of
inspect the plant. And the slump in global gas vehicle conversions. Egyptians have also seen
prices triggered by the pandemic led to the asset’s steep hikes in prices for gasoline and diesel since
devaluation. 2014 as a result of IMF-backed reforms, encour-
Egyptian gas production rose 12.4% year aging them to switch. Not only is CNG cheaper,
on year to a record 7.2bn cubic feet per day in but it is also cleaner than more conventional
the 12 months ending June 30, or 9.3 bcm in fuels, and its expanded use should help improve
total, according to Egypt’s petroleum ministry. pollution levels in Egypt’s largest cities. ™

P6 www. NEWSBASE .com Week 49 10•December•2020