Authorities are in talks to lease a floating storage regasification unit (FSRU), with plans to dock the terminal at the Gulf of Suez, an Oil Ministry source told Enterprise. The government is seeking a five-year extendable contract, they added.

Why? Because we’re back to importing LNG. The government has purchased at least two shipments of LNG and could contract for more shipments soon as it looks to stock up on gas supplies ahead of peak consumption in summer, our source said. The first two shipments will be regasified in Jordan’s Aqaba to be delivered next month.

ICYMI: Egypt and Jordan last year inked anagreement to reduce operational costs of LNG shipments by jointly using the floating LNG terminal at Jordan’s southern port of Aqaba.

Remember: Egypt had bid farewell to the era of leasing FSRU years ago when it ended a contract with the Norwegian Höegh Gallant in 2018 as the government pulled the plug on gas imports following the discovery of Zohr field, which has allowed Egypt to re-emerge as a natural gas export hub.

This comes as we sit tight awaiting blackouts to resume: The shift in course happens on the back of the government re-introducing power outages that are expected to be resumed after Eid Al Fitr break, a source in the electricity sector previously told Enterprise.

IN CONTEXT-

But aren’t we a net exporter of LNG? After becoming a net exporter of LNG in 2018, Egypt has been trying to position itself as an important LNG exporter to Europe and to fully utilize the 12 mn tons a year capacity from its two liquefaction plants in Damietta and Idku. However, a fall in domestic gas production resulted in LNG exports dropping 52% y-o-y to 3.52 mn tons in 2023. Domestic natural gas production has dropped to 5.5 bn cubic feet per day from 7 bn cubic feet per day following the Zohr discovery, our source said, explaining that it’s normal for gas fields to yield less output over time. Israeli imports bring total production to 8.8 bn cubic feet per day, he added.

While consumption is on the rise: With hotter weather arriving earlier than usual this year on the back of climate change, this summer is expected to lead to a higher consumption of energy than last year, our source said. Consumption is also expected to remain higher than production as the government sets up more power stations and as the uses of domestic and industrial gas expand.

LNG is currently cheaper than mazut: The government’s move seeks to capitalize on a fall in global gas prices as it looks to bypass the rising cost of mazut imports and stock up on LNG supplies before prices rise again, our source said.

Remember: The government has been resorting to Mazutshipments to help fire up power stations following the blackouts.

LNG imports could be a temporary resort: Steps recently taken by the government to payoverdue arrears to international oil firms could draw further foreign investment into the sector, potentially ramping up production and curbing the need for imports, our source said.

The story got ink in Bloomberg: here and here.

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