The UK’s BG Group has issued force majeure notices for its liquefied natural gas (LNG) exports from Egypt, as the country continues to divert gas to meet its growing domestic demand.

The announcement comes just days before BG will publish its preliminary results for the fourth quarter of 2013 on 4 February.

In its notice, BG explains the diversion of gas from liquefaction to the domestic market at the end of 2013 was higher than expected. This mean its 2013 arrangements were not honoured. Diversions currently stand at close to 1 billion cubic feet a day (cf/d), close to the company’s capacity.

“As a result, BG Group has been unable to meet in full its obligations to deliver gas to Egyptian LNG and given the current levels of domestic diversions and the continued uncertainty around the level of future diversions, BG Group has served Force Majeure notices under its LNG Agreements to buyers and lenders,” BG said in a statement on 27 January.

At 40.7 million barrels of oil equivalent (boe) Egyptian production is the largest contributor to BG’s global portfolio. It accounted for 17.6 per cent of the firm’s total production in 2013, down from 20 per cent in 2012.

Egyptian LNG is based at Idku in the north of Egypt and operates two LNG trains. BG Group and its partners supply Trains 1 and 2 with gas from the Simian, Sienna, Sapphire and Sequoia fields in West Delta Deep Marine concession. Together, these trains have a productive capacity of 7.2 million tonnes a year (t/y) of LNG. However, there is considerable uncertainty over the number of LNG cargoes Egyptian LNG will produce in 2014. 

Other gas producers in Egypt are also suffering. The Segas LNG plant at Damietta, operated by Italy’s Eni, was shut down in the middle of 2013 due to a lack of gas. More broadly, international oil and gas companies operating in Egypt face major challenges in terms of payments and the renegotiation of contracts. Egypt has been a gas exporter since the mid-2000s, but production has declined to 52.6 billion cubic metres in 2012, while domestic consumption has rocketed to more than 100 billion cubic metres.

Egyptian LNG is a joint venture of state-owned Egypt General Petroleum Corporation (EGPC), Egypt Natural Gas Holding Company (EGAS), BG Group, Malaysia’s Petronas and France’s GDF Suez.