Page 5 - AfrOil Week 23 2022

AfrOil COMMENTARY AfrOil

Libya wells and all sorts of complex technologies.
bna: So then how about Libya? Companies are only going to do that if they
JH: Leaving aside Libya’s governance and know they can make money. Otherwise, they
security issues and the fact that it is more of an simply go elsewhere. This is the perennial battle
oil producer and less of a gas producer, it does between countries and corporations.
have a major gas export project and Green- bna: Has Egypt now learned its lesson?
Stream, a functioning gas pipeline that goes to JH: Egypt learned the hard way. Leading up
Italy, run by the Italian company Eni in a joint to the Arab spring, investment in the gas sector
venture, Mellitah Oil and Gas. But it is currently dwindled so much so that Egypt flipped from
underused. Libya simply hasn’t got the gas. being a gas exporter back to being a gas importer
bna: Are you saying Libya has run out of gas? again. They then ran out of gas for their power
JH: Actually, I haven’t quite gotten to the plants, and couldn’t afford to import diesel. This
bottom of what the issue is. I know that Eni resulted in massive blackouts, which were defi-
has been developing new offshore gas fields nitely a contributing factor to the overthrow of
in Libya, but I also know that Libya has built a the Mubarak regime.
lot of local gas-fired power plants. That means bna: But you said Egypt is now back in a posi-
Libya needs more gas now for domestic con- tion to export?
sumption. I’ve seen reports over the past several JH: Yeah. After Mohamed Morsi was kicked
months of the gas-fired power plants being shut out and the army took power in 2013, Abdel
down or having to switch to more expensive die- Fattah el-Sisi – in his very military way – got a
sel fuel. Whether the shortage is due to a lack grip on things. He immediately offered oil and
of gas under the ground, I am not sure. It may gas companies better terms. Production started
just be due to a lack of capacity in the gas net- increasing again and by 2016 or 2017, Egypt was
work, related to the ongoing upheavals, which is back to exporting again, although not much yet. It turns out to be
a different problem. It’s hard to get good infor- not so easy to
mation from Libya. But the fact is that even if Co-operation with Israel
the country were able to increase production, bna: So how can Egypt increase exports in the say: ‘Yes, we will
it would not happen quickly and it would not a short term?
game-changing amount. JH: Well, what the Egyptians have done in the make this multi-
last few years – which is quite wise in my view –
Egypt is hedge their bets. They realised they can’t see billion dollar
bna: So then how about Egypt? into the future; they don’t know how much gas commitment’
JH: Egypt is probably in the best position of they will find. Nobody can know that. So what
any country in Africa to increase gas exports in they’ve done is negotiate a deal with the Israelis.
the short term. Over the last several years, the bna: The Israelis? To export or import?
Egyptians have turned around their gas indus- JH: Import. They just recently signed the
try, after having made some mistakes. In the deal. Israeli gas will go into the Egyptian net-
early 2000s, Egypt built two huge LNG export work and then it will probably be exported, via
terminals, the ELNG terminal at Idku and the Egypt’s LNG terminals, to Europe.
Segas terminal at Damietta. They were quite bna: How does the gas move from Israel to
gung ho about ramping up gas production and Egypt?
for a decade or so, Egypt was a successful gas JH: Ha! That’s a story: A pipeline had been
exporter. But then it stopped in 2010 and 2011, built to export Egyptian gas to Israel that shut
mostly because they got the commercial frame- down in 2012, after Egypt stopped producing.
work wrong. It stayed empty for five years, but when Israel
bna: Financial framework? started producing gas they reinvested to get the
JH: Basically, they weren’t paying inter- pipeline to go in both directions. Now gas can go
national companies enough, so they stopped to Egypt from offshore wells in Israel.
investing. The Egyptians were never as bad as bna: And Israel can transit its gas to Europe
the Algerians, but they too got it wrong. It’s the via Africa?
mistake that national oil companies make all JH: Exactly.
over Africa, and elsewhere. Political leaders
often take a maximalist position, saying: “This Other African prospects
is our gas. Why are we giving it to wretched bna: Surely Israel is not the only country that can
foreigners? We’ll pay them to come and help us increase gas exports from Africa to Europe?
exploit our resources but they still belong to The JH: I don’t know of others. Huge projects are
People. We cannot simply give them away.” underway in Mozambique and Tanzania, where
bna: So African countries need to be more the proven reserves are enormous. But the thing
generous with their natural resources if they about gas is that it is incredibly difficult and
want to attract investors? expensive to set up. With oil, all you have to do
JH: Yes, because the investments that compa- basically is drill a hole. When you find some, you
nies need to make are so huge. In Saudi Arabia can ship it or truck it any old how. Gas is much
back in the 50s and 60s, you just had to pop a more complicated, and dangerous because it has
tube into the ground and oil would come out. a tendency to explode. To export it, you need to
Now, the resources that are available are much turn it into LNG, which costs billions. So inter-
harder to extract, so international companies national companies need to be sure their invest-
must invest hundreds of millions into ultra-deep ments are sound before they give the go-ahead.

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