Egypt is positioning itself as a prominent gas importer during the northern hemisphere summer while becoming a winter exporter. WoodMackenzie points out that “a pragmatic approach to pricing” by the Petroleum Ministry has secured over US$28 billion in new gas field investment since 2015, so “this could be just the start of Egypt's second gas boom.”
Eager to seize opportunities, BP and Eni already increased their already sizeable positions in Egyptian domestic gas projects. As a number of major offshore gas developments come on stream in the next few years, including BP's West Nile Delta and Atoll fields and Eni's massive Zohr find, the North African country will add a cumulative 41 Bcm/y of gas production by 2022.
“These new volumes will push the country's gas market back to surplus,” WoodMackenzie forecasts. Rising gas availability could ultimately give industrial investors, other than state-run utilities, the confidence to build new gas-fired facilities.
Supply/demand fluctuations
This surplus will, however, be seasonal, analysts caution and suggest that “better gas availability will boost domestic consumption in the power sector, peaking in the summer months, while utilisation rates at gas-intensive industries will recover.
“Overall, this will exacerbate Egypt's domestic gas demand seasonality. In the medium-term, LNG imports may still be critical to balance the market in the summer, while Egypt could export surplus volumes during the winter, taking advantage of northern hemisphere winter LNG prices.”
Wild fluctuations in gas supply and demand have been characteristic for Egypt in recent years. The country’s market position shifted from being the world's eighth largest LNG exporter in 2009 to the world's eighth largest LNG importer in 2016.
Inward investment in upstream
The latest upstream expansion, at a time when other regions saw inward investment fall, together with the impending liberalisation of Egypt’s gas sector, is closely monitored by international trading houses and portfolio players.
Looking at the number of high-impact wells planned this year, coupled with Egypt's large untapped potential, WoodMackenzie says “a second gas boom could be on its way”. “Additional exploration success would further strengthen Egypt's ambition to become a regional gas hub, importing and exporting gas and LNG simultaneously. “
Gas rationing to meet demand
Over the summer months, EGAS is often forced to turn gas supplies away from industry to cover surging demand from electric power generators. A tender for a third FRSU was launched in July last year – schedules are tight as Egypt’s energy ministry seeks to have the FRSU in full operation in the second quarter of 2017 to help meet peak summer demand before several domestic gas fields come onstream.
Any delays could evoke another round of gas shortages – an all too familiar hassle for Egypt’s industry and households. As in past years’, gas power generation gets prioritised to meet rampant demand for air-conditioning while the supply rationing for industries is crippling Egypt’s already fragile economic growth. Peak summer gas demand in August can reach 3.9 billion cubic feet per day (Bcf/d), according to EGAT estimates.
In the face of current gas shortages, Egypt is forging ahead with some mammoth gas-fired power projects. Siemens and GE are executing major orders for large-scale plants while APR Energy puts in place decentralised onsite power solutions to bridge supply gaps. The first phase of Siemens' Megaproject in Egypt (4.8 GW) was on March 2, 2017. Stable gas supply is paramount for the vast amount of new-built gas power capacity to start stable operation, as planned.