• North Alexandria concession holds 5 trillion cubic feet of gas and condensate
  • Production expected to equal a third of Egypt’s consumption
  • Deal thought to include renegotiated gas price

A deal to restart Egypt’s biggest gas field development project has received approval from the country’s State Council, paving the way for an official agreement to be signed by UK oil major BP within the next two months.

The $10bn North Alexandria concession holds estimated recoverable reserves of 5 trillion cubic feet of gas and condensate, and is expected to produce up to 1 billion cubic feet a day of gas when fully operational, or 25 per cent of the country’s current consumption.

This additional production could be transformative for Egypt’s industrial sector, which has suffered over recent years due to an acute natural gas shortage.

Plans to develop the concession were put on hold in the wake of the country’s 2011 uprising and the government has struggled to make a deal to restart the project due to its large debts to foreign oil companies and the low price paid for domestically produced gas.

An agreement between BP and Egyptian Natural Gas Holding Company (Egas) was approved by the cabinet in mid-December and the State Council, a judicial body that drafts legislation, gave approval for the deal in the last week of January, according to a BP spokesperson.

Presidential approval is expected over the coming weeks and the agreement to restart the project is likely to be signed before the end of April, according to officials who are close to the project and who requested anonymity as they are not authorised to speak to the media.

The deal between BP and Egas to restart the scheme is thought to include a renegotiated price for gas produced from the concession.

Both firms declined to comment on what price BP will receive for the gas.

The scope for the project includes:

  • Drilling wells
  • Pipelines
  • Tankage
  • Manifolds
  • Condensate facilities
  • Central treatment plant
  • Utilities

Egypt’s gas shortage caused rolling blackouts in Cairo over 2014 and many industrial gas consumers saw their supplies cut off entirely, something that forced several cement factories to switch to coal as an alternative energy source.

First gas from the concession was originally expected in late 2014. Now, due to the project’s extensive delays, gas is unlikely to be produced until at least 2017.

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