Egypt shows commitment to fast-tracking major gas projects

29 February 2016

Giant offshore developments see progress

Over the first two months of 2016 Egypt has seen positive announcements regarding two key offshore gas developments.

On 21 February, the Italian oil and gas company Eni released a statement saying it had been given the green light to develop the giant Zohr gas field, setting the scene for first gas to be produced in 2017.

Less than a week later, on 26 February, the UK-based marine engineering company Subsea 7 announced that it had been awarded a major contract as part of the development of the West Nile Delta North Alexandria Concession, which is operated by BP and is also expected to see first gas in 2017.

Both announcements should be welcomed by direct stakeholders in the projects themselves as well as policymakers who are hoping to see the Egypt’s economic recovery gain momentum.

Domestic gas production in Egypt is failing to meet demand, forcing the government to rely on expensive imports, but bringing these two giant gas fields on-stream could potentially see the country become a net exporter in just a few years.

The West Nile Delta North Alexandria Concession development is estimated to be worth around $12bn, making it Egypt’s biggest ever oil and gas project. The concession has proven reserves of 5 trillion cubic feet of gas and 55 million barrels of condensate.

The North Alexandria development is expected to produce up to 1 billion cubic feet a day of gas when fully operational. This is equal to about 25 per cent of the country’s current consumption.

The discovery of Zohr was announced on 30 August 2015 and Eni says the field could hold 30 trillion cubic feet (cf) of gas, making it Egypt’s largest-ever gas discovery as well as the largest in the Mediterranean.

The rapid development of both projects owes much to government efforts to regain the trust of international energy companies.

In an effort to encourage increased investment in the country’s oil and gas sector over 2014 and 2015 Egyptian officials sustained an intense campaign of meetings and negotiations with the likes of UK-based BG Group, UAE-based Dana Gas, and BP. This is now paying dividends.

If both projects continue to see rapid progress over 2016 it may set the scene for a broader recovery in the country’s industrial sector, which has been held back over recent years due to problems accessing reliable supplies of natural gas to use for both electricity and as a feed stock.

Wil Crisp

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