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Zohr brings turnaround in Egypt’s LNG fortunes

Wed 16 May 2018 by Mike Corkhill

Zohr brings turnaround in Egypt’s LNG fortunes
Operations at the Idku LNG export terminal are slowly getting back up to speed

With the start of the third production unit at Egypt’s giant Zohr offshore gas field earlier this week, the country’s need for LNG imports is rapidly drawing to a close.

Production at Zohr, which only began in December 2017, now stands at 1.1Bn ft3 per day (bcfd). Eni, the operator of the Zohr field, along with its partners in the project and Egyptian National Gas Holding Company plan to boost the venture’s output to 2 bcfd by the end of 2018 and to reach a plateau production level of 2.9 bcfd by 2019. At that rate Zohr alone will meet 60% of Egypt’s entire gas demand.

The recently discovered Zohr field, with some 30Tn ft3 (tcf) of recoverable reserves, is the largest deposit of gas in the Mediterranean. It lies in the Shorouk Block 190 km north of Port Said.

Zohr is helping Egypt emerge from a gas-deficit scenario, which manifested itself earlier in the decade amid the Arab Spring uprising and the depletion of domestic gas reserves, much more quickly than anticipated.

But Zohr is not the only gas windfall for Egypt. Other new gas fields have been discovered in the country’s territorial waters and in February this year Noble Energy and its partners agreed with the Egyptian company Dolphinus Holdings to sell gas from Israel’s giant offshore fields to Egypt.

This latest new supply of gas will most likely be piped across the Mediterranean via a subsea line to various Egyptian landfalls. Some of the gas could be directed to Damietta and Idku, Egypt’s two liquefaction plants, for processing and export as LNG.

That the eastern Mediterranean is rich in gas is becoming more obvious by the day. Cyprus is the latest country to announce a sizeable offshore gas find and early discussions on the development of the resource – the 4 tcf Aphrodite field – have included an option to pipe the gas to Egypt.

Egypt’s first involvement with LNG came with the construction of the two export terminals early in the new millennium following the discovery of significant gas deposits. The 5 mta Damietta facility dispatched its inaugural cargo in January 2005 while the 7.2 mta Idku terminal commenced operations four months later. During their peak year of 2008 the two facilities exported an aggregate 10.0M tonnes of LNG to world markets.

However, the rapid field depletion mentioned above, coupled with burgeoning domestic demand, forced Egypt to shut down its LNG and pipeline gas exports and launch two LNG import projects using floating storage and regasification units (FSRUs) to meet gas needs. Damietta ceased export shipments in February 2013 and Idku followed suit 12 months later.

The FSRU Hoegh Gallant went on station at Ain Sokhna in April 2015 and in October 2015, BW Singapore commenced regasification operations in the same Red Sea port. In 2016, the peak year for Egyptian imports, the two 170,000 m3 FSRUs regasified 7.5M tonnes of LNG.

LNG imports went into decline in 2017 and in January 2018 Egypt received only three LNG cargoes, the lowest monthly level of shipments since the FSRU-based imports began. One of the FSRUs has already become redundant and, while LNG imports are likely to cease altogether by the end of this year, the remaining FSRU could be kept on station for a while longer for security purposes. 

Over the period of declining imports, LNG exports from the Shell-run Idku liquefaction terminal restarted. Following the loading of a handful of cargoes in 2016, Idku exported 0.78M tonnes of LNG in 2017, a 52.9% year-on-year jump. With all the new gas becoming available, there is a possibility that both Damietta and Idku could be operating at their nameplate LNG export capacity by the end of 2019.
 

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