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Eastern Mediterranean gas discoveries redefine LNG playing field

Wed 28 Mar 2018 by Mike Corkhill

Eastern Mediterranean gas discoveries redefine LNG playing field

The Eastern Mediterranean is fast becoming a gas hub, with numerous LNG projects, plentiful recent gas finds and likely further discoveries

Newly discovered offshore gas deposits in the exclusive economic zones (EEZs) of Egypt, Israel and Cyprus, coming on top of similar major finds in recent years, are poised to alter the energy map of the Eastern Mediterranean irrevocably. LNG projects, which already play a key role in the region’s gas distribution logistics, will be impacted by the upcoming development of the Eastern Mediterranean gas fields. 

The majority of the LNG projects in the area are import schemes, and floating storage and regasification units (FSRUs) have proved to be the most popular route to securing access to new gas supplies quickly and at relatively low cost. Turkey, Egypt, Israel and Jordan make use of FSRUs to import LNG while Greece, Cyprus and Lebanon are evaluating FSRU projects.

There are also two liquefaction plants in the region. Both are in Egypt and both have lain largely idle in recent years due to lack of sufficient feed gas. However, the discovery of new gas fields in Egyptian and neighbouring waters hint at an imminent turnaround in fortunes for the two LNG export facilities.     

Egypt and Turkey are the region’s biggest and fastest-growing natural gas consumers by a wide margin, with annual gas usage in each of the two countries around the 50Bn m3 (bcm) mark. Israel consumes approximately 10 bcm per year and Jordan 3.5 bcm, while Greek gas use has slumped by 30% in recent years, to 2.8 bcm.

LNG in the mix

Greece’s only LNG terminal, on the small islet of Revithoussa to the west of Athens, has been in service since February 2000. DESFA, Greece’s state-owned gas transmission authority, is adding a third in-ground tank to boost the terminal’s storage capacity by 73%, to 225,000 m3, and increasing the regas capacity by 40%, to 4.7 mta of LNG. The expansion project is set for completion by the end of 2018.

The Greek government is seeking to promote the country as a transit hub, in terms of both LNG terminals and gas pipelines. The privatisation of certain state assets, including a significant shareholding in DESFA, is also on the cards.

In addition to the Revithoussa expansion in the south, plans for two FSRU-based LNG terminals in northern part of the country have been tabled as part of the drive to establish Greece as a gas hub. The most advanced is the 4.5 mta Alexandroupolis facility, a project being led by gas utility Gastrade and in which GasLog has a 20% stake and is set to provide the required 170,000 m3 FSRU.  

An expected final investment decision on the scheme has recently been delayed, to late 2018. The aim is to integrate the Alexandroupolis FSRU operation with the planned Trans-Adriatic Pipeline (TAP) and Greece-Bulgaria Gas Interconnector (IGB) links.

Greece’s second proposed FSRU terminal, Aegean LNG in Kavala Bay, would also operate in tandem with the envisaged east-west and north-south pipeline links if it comes to fruition.  

Turkey has a large and well-established gas market and, like Greece, depends almost exclusively on imports to meet its gas needs. Pipeline deliveries from Russia, Iran and Azerbaijan predominate but LNG purchases are gaining in importance as the country seeks to diversify energy supplies.

Turkey is also the oldest member of the Eastern Mediterranean’s LNG community. The country began importing LNG in August 1994 when an inaugural shipment from Algeria was discharged at the Marmara Ereglisi terminal operated by Botas.

Turkey’s second shore-based import terminal, the EgeGaz facility at Aliaga, did not receive its inaugural cargo until December 2006, even though it had been commissioned more than three years earlier. It was the world’s first LNG receiving terminal to be constructed without firm capacity contracts in place.

Turkey has recently turned to expansions of its two shore terminals as well as three new FSRU-based projects to boost its LNG import capabilities. Throughput capacities at both the Marmara Ereglisi and EgeGaz Aliaga terminals will be increased by two-thirds, in 2018 and 2021, respectively.

Two of the Turkish FSRU terminals are already in service while the third is planned for Saros on the Gallipoli peninsula’s northern coast. Etki LNG in Aliaga’s Candarli Bay, the first FSRU terminal, came onstream in December 2016 and makes use of the 145,000 m3 Neptune. Dörtyol LNG at Iskenderun on eastern Turkey’s Mediterranean coast commenced operations in February 2018 and utilises the 263,000 m3 MOL FSRU Challenger, the world’s largest FSRU, under a three-year charter to Botas.
  
Egyptian ups and downs

The discovery of sizeable gas fields off its Mediterranean coast enabled Egypt to construct two LNG export terminals, both of which were commissioned in 2005. Damietta dispatched its inaugural cargo in January while Idku commenced operations in May. During their peak year of 2008 the two facilities exported an aggregate 10M tonnes of LNG to world markets.

However, field depletion was faster than anticipated and burgeoning domestic demand forced Egypt to shut down its LNG and pipeline gas exports and implement FSRU-based import projects to meet gas needs. Damietta ceased export shipments in February 2013 and Idku followed suit 12 months later.

The FSRU Hoegh Gallant went on station at Ain Sokhna in April 2015 and later in the year, in October, BW Singapore commenced regasification operations in the same Red Sea port. In 2016, the peak year for Egyptian imports, the two 170,000 m3 FSRUs received 7.5M tonnes of LNG by means of ship-to-ship transfers from conventional LNG delivery tankers.

More recently, new offshore Mediterranean gas finds signal yet another turnaround in Egypt’s fortunes. In addition to some newly found BP deposits, Eni discovered the Zohr field in 2015. With 30 trillion cubic feet (tcf) of gas reserves, Zohr is the largest gas deposit in the Mediterranean. 

Zohr holds the promise of not only bringing an end to LNG imports and meeting local demand for gas but also supporting a rebound in LNG exports. LNG import volumes handled by the two Ain Sokhna FSRUs are already in steep decline and there is a possibility that both Damietta and Idku could be operating at their nameplate LNG export capacity by the end of 2019.

Israeli export options

In January 2014 Israel became the world’s 30th LNG import nation when Excelerate Energy stationed its 138,000 m3 FSRU Excellence 10 km off the coast near Hadera. Back in 2010 Israel had depended on Egyptian pipeline deliveries to meet 40% of its gas needs but Egypt’s gas difficulties put paid to this supply and prompted FSRU imports. 

Like Egypt, Israel has had the good fortune to discover major deposits of gas offshore in recent years. The most notable of these is 22 tcf Leviathan field but Tamar, with its 10 tcf of reserves, is another major new play. Whereas Leviathan gas is still to flow, Tamar’s riches are already being pumped ashore via a subsea pipeline to Israel. The Hadera FSRU contract has been extended by a further two years, to September 2019, to serve as a backup measure should the Tamar flow be disrupted.

The Israeli government has been studying the best ways to realise the value of the Leviathan and Tamar deposits, which are well beyond the needs of Israel itself. Jordan has already signed up for pipeline deliveries from the two fields, to supplement its Aqaba-based FSRU imports, while negotiations are underway for similar subsea links to Egypt, Turkey and Europe.

The pipelines to Egypt would be directed to Shell’s Idku and Gas Natural Fenosa’s Damietta LNG export terminals and provide an additional source of gas for liquefaction at these plants. The gas for Europe would arrive in Italy via the proposed EastMed Pipeline which would make use of Cypriot and Israeli gas, delivering via Crete and Greece. 

The Shell Idku proposal would also draw on the newly discovered 4 tcf Aphrodite field in the nearby Cyprus offshore EEZ. As a final twist in the Cypriot LNG tale, irrespective of how the Aphrodite gas ultimately plays out, the island EU member state will commence LNG imports under the CyprusGas2EU project banner by 2020 in order to meet its EU clean environment obligations. The FSRU will be based in the port of Vasilikos.

In the meantime, back in Israel two further new gas finds have recently been made. Although the proven reserves of the Karish and Tanin fields stand only at an aggregate 2.4 tcf, the Greek-based Energean Oil and Gas has proposed the construction of a floating LNG production vessel to enable the start of gas production and LNG exports in 2021.
 

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