Egypt is in talks with Italian energy company Eni to build a USD 150 mn regasification unit in Damietta, an unnamed government official told Enterprise. The investment ticket does not include development costs for a warehouse to store LNG shipments.

What we know: The unit will be built on land adjacent to the Damietta LNG facility — operated by a joint venture between Eni and the Egyptian Natural Gas Holding Company (EGAS) — to receive LNG shipments and regasify them, Asharq Business reports. The investment ticket does not include development costs for a warehouse to store LNG shipments. The main objective is to bridge the gap between higher-than-expected local consumption, which was up 12% y-o-y in July, and dwindling domestic gas production. Egypt is also negotiating the development of a floating regasification unit with Eni.

What's next? Egypt’s EGAS has contracted an international consultancy firm to conduct studies to establish a regasification unit and an LNG warehouse in the Damietta liquefaction plant, Asharq reports. The planned storage capacity is set at some 160k cubic meters of LNG.

Remember: Egypt currently has access to two regasification units, one in Jordan’s terminal in Aqaba, which Egypt was given the right to in an agreement inked last year, and a newly-leased Norwegian floating storage and regasification unit currently docked in Ain Sokhna. The state contracted the unit after a fall in domestic production pushed the country from being a net exporter to a net importer of LNG. The government is in talks with Jordan to jointly purchase a new floating regasification unit, with discussion of leasing out the ship to other countries should our supply gap diminish.

But that’s not enough: Our source tells us that Egypt needs at least three regasification units to meet the increasing industrial and commercial demand for gas.

Long-term leases leave the market short on available units: There are currently no regasification units up for lease from manufacturers, since leasing contracts typically extend for 15-20 years, the source told us.

Locking in low prices: The source noted that the country’s gas needs have been secured until February of next year after the government took advantage of current low oil prices to contract more shipments. Finance Minister Ahmed Kouchouk last week said that the government is moving quickly to take advantage of lower commodity prices amid a meltdown in global markets.

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