{"id":548685,"date":"2022-08-17T04:00:13","date_gmt":"2022-08-17T04:00:13","guid":{"rendered":"https:\/\/enterpriseam.com\/egypt\/hardhats\/profiling-egypts-lng-infrastructure-as-it-looks-to-increase-exports-to-the-eu\/"},"modified":"2022-08-17T04:00:13","modified_gmt":"2022-08-17T04:00:13","slug":"profiling-egypts-lng-infrastructure-as-it-looks-to-increase-exports-to-the-eu","status":"publish","type":"hardhat","link":"https:\/\/enterpriseam.com\/egypt\/hardhats\/profiling-egypts-lng-infrastructure-as-it-looks-to-increase-exports-to-the-eu\/","title":{"rendered":"Profiling Egypt\u2019s LNG infrastructure as it looks to increase exports to the EU"},"content":{"rendered":"

<\/a> PROFILE- Egypt\u2019s LNG infrastructure:<\/strong> For the past several years, Egypt has been working to position itself as the hub for liquefied natural gas (LNG) in the region, particularly after we pulled the plug on LNG imports in 2018<\/a> thanks in large part to the supergiant Zohr gas field<\/a>. The push to increase our exports has earned greater urgency since the beginning of the year, with Europe facing a crippling energy crunch after Russia\u2019s invasion of Ukraine led the continent to pledge phasing out imports of Russian fossil fuels by the end of the year<\/a>. We stepped in to fill that gap, signing a nine-year agreement in June<\/a> with Israel to increase gas exports to the EU through Egypt\u2019s LNG facilities.<\/p>\n

Europe now expects to purchase 7 bn cubic meters (bcm) from Egypt this year<\/strong>, up from 5 bcm, theFinancial Times<\/a> reported a spokesperson as saying following the signing of the \u201chistoric\u201d agreement between Egypt, Israel, and the EU.<\/p>\n

How much are we already exporting? <\/strong>Egypt shipped 8.9 bn bcm of LNG in 2021 and 4.7 bcm in the first five months of 2022, according to Refinitiv data<\/a>. It was also good news for our gas revenues, which almost doubled<\/a>to USD 3.9 bn in the first four months of 2022.<\/p>\n

And there\u2019s even room for more: <\/strong>Egypt\u2019s daily production of LNG ranges between 6.6 and 6.7 bn cf\/d, with exports hovering at around 1 bcf\/d, Oil Minister Tarek El Molla said<\/a> in May. Export volumes are expected to rise to 1.5 bcf\/d in the next two years, the minister said at the time.<\/p>\n

Our maximum capacity for LNG exports could reach 12 mn tons per annum <\/strong>in the next three years, the minister also said<\/a> in May.<\/p>\n

Our golden tickets for LNG exports: The Damietta and Idku liquefaction plants.<\/strong> The two plants receive and liquefy natural gas from neighboring countries before shipping it for export to importing markets, including Europe. However, details on the two plants\u2019 capacity and production volume are scant. In December, our LNG exports hit 1.6 bn cubic feet per day (cf\/d), with the Idku and Damietta facilities running at maximum capacity. El Molla said earlier this year<\/a> that Egypt requires new infrastructure development investments to allow us to increase shipments.<\/p>\n

A look at Damietta: <\/strong>With a capacity of 7.5 bn cubic meters (cbm) per year, construction of the USD 1.3 bn Damietta liquefaction plant<\/a> \u2014 the first of its kind in Egypt \u2014 off the Mediterranean coast began in 2001. The terminal\u2019s first train came onstream in 4Q 2004 and exported its first LNG shipment to a terminal at Spain\u2019s Sagunto months later. Plans to construct a second train never materialized due to drawbacks related to securing committed gas supplies.<\/p>\n

The LNG facility went offline in late 2012<\/strong>, when supply of gas was shut off<\/a> amid disruptions in the wake of the political events of the previous year. Years of legal wrangling<\/a> over ownership later followed, after Eni-Naturgy JV Union Fenosa Gas (UFG), a key shareholder in the facility, filed an arbitration claim against the Egyptian government over the disruption. The World Bank\u2019s International Center for Settlement of Investment Disputes ordered in 2018<\/a> that Egypt pay USD 2 bn in settlements to UFG. Egypt eventually reached a settlement agreement with plant operator Spanish Egyptian Gas Company (SEGAS) and UFG in March 2021<\/a>.<\/p>\n

Who owns what:<\/strong> Naturgy reached an agreement<\/a> with Eni to exit UGS in return for a USD 600 mn payment and most of UFG\u2019s assets outside of Egypt. Ownership was redistributed to see ownership between EGAS and the EGPC, who now hold a combined 50%, while Eni holds the remaining 50%.<\/p>\n

And then it set sail: <\/strong>Just weeks before the settlement was signed, the Damietta plant came back to life, and loaded two trial shipments<\/a> to China and Bangladesh in a trial run. Europe\u2019s turn shortly followed, with the first Europe-bound LNG shipment<\/a> from the plant arriving in Belgium in later weeks.<\/p>\n

In the meantime, Idku came along:<\/strong> Located in Beheira\u2019s Idku<\/a>, the USD 2 bn natural gas liquefaction facility has a combined capacity of 7.2 mn tons per annum (Mtpa) through two natural gas liquefaction trains. Production first began in 2005, after the European Investment Bank gave El Beheira Natural Gas Liquefaction Company (EBNGL) a USD 372 mn loan<\/a> to partially finance the construction of the USD 1.1 bn Train-1 in August 2004. EBNGL is a joint venture between Shell (35.5%), Petronas (35.5%), EGAS (12%), EGPC (12%), and Total subsidiary Engie (5%). The remainder of the cost was financed through loans from a syndicate of 42 international banks.<\/p>\n

Who owns what:<\/strong> The Egyptian Liquefied Natural Gas Company (ELNG) \u2014 a joint venture between EGAS and Shell, Petronas, and Engie \u2014 holds ownership of the project and facilities at both trains. Train-1 is owned by EBNGL, while Train-2 is owned by INGL, which includes Shell and Petronas (38% each), along with EGAS and EGPC (12% each).<\/p>\n

Idku\u2019s start:<\/strong> The first shipment carrying 129k cubic meters of LNG from Idku\u2019s Train-1 was dispatched in May 2005, three years after EBNGL signed a 20-year purchase agreement with France\u2019s Engie (previously known as GDF Suez) to supply gas from the region. The first cargo from the facility\u2019s second 3.6 Mtpa train was shipped a few months later, in September 2005. Development of Train-2, which cost c.USD 965 mn, had begun in 2003 per an agreement between the Idku Natural Gas Liquefaction Company (INGL) and UK\u2019s BG group. Liquefaction at the plant slowed following the 2013 uprising that ousted the Ikhwan from power, leading the facility to export only five shipments in 2014<\/a>.<\/p>\n

We\u2019re hungry for more: <\/strong>Egypt is looking to build new LNG terminals<\/a>and pipelines to boost capacity and export volumes, including a planned link to Cyprus\u2019 Aphrodite gas field which could see the start of construction later this year, and a potential direct pipeline to Greece.<\/p>\n

And with our new export agreement signed, the EU could play a big role in that:<\/strong> A draft document picked up by Reuters in June<\/a> suggested that the EU could help finance new energy infrastructure.<\/p>\n

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