Page 6 - AfrOil Week 49

AfrOil COMMENTARY AfrOil

(Photo: Egypt Cranes)

Naturgy will receive a series of cash payments months.
worth $600mn in total. Once these are paid, it Eni said the agreement had come “at an
WHAT: will leave Egypt and end its venture with Eni. important moment.” Thanks to the Italian
OPEC+ has agreed to Eni will also assume responsibility over the major’s fast-tracked gas projects like Zohr and
ease production cuts contract for purchasing gas for Damietta LNG Nooros, “Egypt has regained its full capacity
by 500,000 bpd from and have rights to half of its liquefaction capac- to meet domestic gas demand and can allocate
January 1. ity. Damietta LNG should start back up in the surplus production for export through its LNG
first quarter of 2021, the Italian major said. Eni plants,” it said.
WHY: will also take over UFG’s marketing of gas in Eni is looking to build up its LNG business,
Members had been Spain, expanding its position in the European viewing the fuel as having stronger long-term
pushing to reduce the market. growth potential than oil. It also sees gas playing
cuts, while kingpin Saudi
Arabia had proposed an a key role in the energy transition. By contrast,
extension of the 7.7mn Supply surplus Naturgy president Francisco Reynes welcomed Now that it is
bpd reductions for three The legal dispute at Damietta was over compen- the deal, saying it would simplify and reduce
further months. sation due to the operators after the plant was “the company’s exposure to gas.” self-sufficient in
idled in 2012. At the time, Egypt was running Naturgy will be freed from a 3.5 bcm annual gas, Egypt wants
WHAT NEXT: short of gas for the domestic market, and there- gas procurement contract to supply its com-
The group will meet fore diverted some from its export stream. UFG bined-cycle gas turbine (CCGT) plant in Spain, the fuel to play a
monthly to assess moves was awarded $2bn by the World Bank’s Inter- due to continue until the end of 2029, Reynes
to further ease the output national Centre for Settlement of Investment said. Furthermore, the deal “resolves a com- large role in its
restrictions. Dispute (ICSID) in compensation for Egypt’s plex situation lingering since 2012 and which
actions. couldn’t be resolved in the spring because of the economy
The Egyptian gas market is now very differ- pandemic.”
ent to what it was back then. The country now
enjoys a surplus of supply thanks to the 2017 Home use
launch of the giant Eni-operated Zohr field in Now that it is self-sufficient, Egypt also wants the
the Mediterranean. Several more large gas fields fuel to play a large role in its economy.
have been discovered by Eni and others since Petroleum Minister Tarek El Molla reported
then, ensuring that a surplus will remain for last month on Egypt’s progress in expanding the
some time. use of gas. The country has converted all its ther-
Damietta’s relaunch was anticipated sooner, mal power plants (TPPs) to run on the fuel and
but was held up because of delays in settlement has also begun a programme to increase use by
proceedings. The project partners managed to households and in the transport sector, he said.
reach a deal in February but it collapsed two Some 5mn households have been hooked up
months later after certain terms were not met. to receive gas in the past six years, while there
According to reports, coronavirus (COVID- are now 330,000 vehicles on the road that run on
19) restrictions meant workers could not go in compressed natural gas (CNG), serviced by 215
and inspect the plant. And the slump in global CNG filling stations. The government aims to
gas prices triggered by the pandemic led to the convert a further 260,000 vehicles by 2023, while
asset’s devaluation. bringing the number of filling stations to 600.
Egyptian gas production rose 12.4% year on Eventually it wants to see 1.3mn converted cars
year to a record 7.2bn cubic feet per day in the on the road, with the main focus being vehicles
12 months ending June 30, or 9.3 bcm in total, over 20 years old.
according to Egypt’s petroleum ministry. Egypt The government has subsidised the cost of
has another LNG export terminal in Idku, but vehicle conversions. Egyptians have also seen
the country was among several spot LNG steep hikes in prices for gasoline and diesel since
exporters that were forced to curtail production 2014 as a result of IMF-backed reforms, encour-
this year because of low prices. aging them to switch. Not only is CNG cheaper,
Global LNG prices are now recovering, how- but it is also cleaner than more conventional
ever, and in late October, the 7.2mn tpy Idku fuels, and its expanded use should help improve
plant loaded its first export cargo in over three pollution levels in Egypt’s largest cities. ™

P6 www. NEWSBASE .com Week 49 09•December•2020