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LNG World Shipping

Egypt completes return to LNG export nation status

Wed 12 Sep 2018 by Mike Corkhill

Egypt completes return to LNG export nation status
Idku restarted loading LNG export cargoes in 2016 and the pace of activities at the terminal has been increasing steadily ever since

Egypt’s Ministry of Petroleum and Union Fenosa Gas (UFG), the operator of the Damietta LNG project in the Nile Delta, have agreed to restart exports from the plant. Idku, the second of Egypt’s two LNG export terminals had already recommenced overseas shipments in 2016.

At the same time, the country’s LNG import activities at Ain Sokhna on the Red Sea coast, which until recently hosted two floating storage and regasification units (FSRUs) of 170,000 m3 each, are being wound down. Egypt’s short spell as an LNG importer is coming to an end at the same time as its two previously idled export terminals begin to ramp up output.

UFG, owned 50/50 by Naturgy Energy Group and Eni, had earlier in the week been awarded a settlement of US$2Bn by the World Bank’s International Centre for Settlement of Investment Disputes (ICSID). The company had filed a case against Egypt several years ago, complaining that the government had cut off gas flows to its Damietta liquefaction plant, of which it owns 80%. 

The amount awarded by ICSID is likely to be settled in the form of renewed gas supplies to the Damietta liquefaction plant rather than in cash, supporting an early resumption of LNG exports from the terminal. 

Egypt commenced exporting LNG in January 2005 when the single-train, 5-mta Damietta project was commissioned. The two-train 7.2-mta Idku plant, operated by Shell and also situated on the Mediterranean coast, followed shortly afterwards, loading its first cargo in May 2005. During their peak year of 2008 the two facilities exported an aggregate 10M tonnes of LNG to world markets. 

Damietta ceased export shipments in February 2013, citing insufficient quantities of feedgas for its liquefaction train. Idku followed 12 months later, declaring force majeure to its LNG customers due to ongoing diversions of gas supplies to the local market.

With its dwindling gas reserves unable to meet growing domestic demand, Egypt turned to LNG imports to bridge the gap, positioning the two chartered FSRUs at Ain Sokhna in April and October 2015, respectively. In 2016, the peak year for Egyptian imports, the two FSRUs received 7.5M tonnes.

The latest turnaround in Egypt’s gas fortunes is due to the discovery by Eni in 2015 of the Zohr field, as well as some fresh BP finds. Located off the country’s northern coast, Zohr is the largest gas deposit in the Mediterranean and its 30Tn ft3 of gas reserves are not only bringing an end to the need for LNG imports but also meeting local demand and supporting a resumption of LNG exports.

LNG exports from the Idku liquefaction restarted in 2016 with a handful of cargoes. In 2017 Idku exported 0.78M tonnes of LNG, a 52.9% year-on-year jump. 

The possibility that both Damietta and Idku could be operating at their nameplate LNG export capacities by the end of 2019, mooted in a handful of industry reports, may be a shade optimistic. However, Zohr holds the potential to meet the feedgas requirements of the two plants and increasing production from the field is being brought onstream rapidly.

On the import side of the equation, government authorities state that an inbound LNG cargo due to be discharged at Ain Sokhna by the end of this month could be Egypt’s last shipment. 
 

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