Friday, August 29, 2014

Who Can Meet Egypt's Energy Needs? | Forbes


 1,547 views

Who Can Meet Egypt's Energy Needs?


As a tumultuous summer grinds to a close, Egypt is still struggling to close the gap meets its daunting energy needs without further strain to its economy or the patience of the general public. Under new leadership, Cairo has looked at home and abroad for some energy relief, but found that political realities often make certain options impossible.
In addition to the unnerving task of meeting the needs of the region’s most populous country, Cairo has struggled to keep energy prices manageable while coping with a sharp decline in foreign investment and domestic production, all while drawing down an unsustainable public subsidy program.
This summer, the notion of addressing energy shortages through a reversal of gas trade agreements with Israel become a possibility with reports of a new agreement. In June, production partners in Israel’s Leviathan offshore gas field has signed a non-bindingagreement with the BG Group to export gas from a “floating production, storage and offloading [vessel]” and connected to an LNG facility through a subsea pipeline.
For BG, a link to the field’s estimated 18 trillion cubic feet of gas would help ease pressure from the significant drop in gas output from Egyptian projects that has occurred over the last three years. The letter of intent comes shortly after a similar deal was struck to export 2.5 trillion cubic feet of gas over 15 years from Israel’s Tamar field through the Damietta LNG plant in Egypt, which is operated by Union Fenosa Gas. According to the project planning, much of the gas would likely move on to other markets, though Cairo appeared insistent that some would have to be set aside to address domestic demand.
However, last week it appeared that the new government would nix any possible imports from Israel. According to Egyptian state media, President Abdel Fattah al-Sisi said that Egypt would not pursue any import or export agreements with Israel.
In the three years, the possibility of buying Israeli gas has become a political land mine as critics were quick to cite investigations that allege years of selling Egyptian gas to Israel for far less than market prices. Revealed in the weeks after the collapse of the Mubarak government, the allegations included payments to Mubarak officials in exchange for low cost gas, including a now-cancelled 20-year agreement.
Coupled with ongoing tension between the governments of the two countries, the recent memory of these agreements and lost revenue that resulted from them, the possibility of a revived trade agreement has been a difficult policy to sell. Earlier this year, Sherif El Diwany, Executive Director of the Egyptian Center for Economic Studies in Cairo suggested that Isreali imports would be especially difficult be that purchasing gas would likely cost far more than what Egypt had ever charged them.
“In a volatile political situation, its not wise to become dependent on Israel – el-Sisi  will not do it,” he said, suggesting import alternatives from Gulf producers instead.
On the domestic front, Egypt has launched a series of local efforts to recover the decline in production that followed the disruption of the Arab Spring. A few days before the new year, the Egyptian government announced plans to auction 22 oil and gas concessions through this month.  Promoted by Egypt’s General Petroleum Corporation and Natural Gas Holding Company, the concessions are spread across the country, including opportunities in the “Suez Canal, Egypt’s western desert, the Mediterranean sea and the Nile Delta”. However, necessary cooperation from foriegn firms has been made difficult by the country’s struggle to draw down its substantial energy sector debt to international importers.
This week, Cario did receive some positive news with reports that production had begun at the Denise-Karawan offshore gas project, which is operated by Italy’s Eni. According to an Oil and Gas Journal report, the project will include five subsea wells, production systems and marine pipelines towards a peak production of 6.5 million cubic meters a day, which it is expected to reach in early 2015.


Link to source: http://www.forbes.com/sites/christophercoats/2014/08/29/who-can-meet-egypts-energy-needs/

Σημαντική εξέλιξη: «Ναι» Αιγύπτου στη συνεκμετάλλευση κοιτασμάτων | ΦΙΛΕΛΕΥΘΕΡΟΣ

Ισχυρό μήνυμα προς Τουρκία

Σημαντική εξέλιξη: «Ναι» Αιγύπτου στη συνεκμετάλλευση κοιτασμάτων


Λευκωσία: Η Αίγυπτος επικύρωσε χθες την Συμφωνία που υπέγραψε τον περασμένο Δεκέμβριο στο Κάιρο ο Πρόεδρος Αναστασιάδης με τον Πρόεδρο της Αιγύπτου Αμπντέλ Φατάχ αλ Σίσι.

Το γεγονός έχει πολλαπλή σημασία αφού επιβεβαιώνει τις στενές σχέσεις Κύπρου – Αιγύπτου και στα κρίσιμα θέματα εκμετάλλευσης των υδρογονανθράκων.

Πρόκειται για συμφωνία που καθορίζει τις διαδικασίες που θα ακολουθούνται για να καθοριστούν τα δικαιώματα κάθε χώρας, σε περίπτωση που ανακαλυφθούν κοιτάσματα στα όρια των ΑΟΖ Κύπρου και Αιγύπτου που εκτείνονται και στις δύο ΑΟΖ, κάτι που είναι πολύ πιθανό να προκύψει τα αμέσως επόμενα χρόνια.

Να σημειωθεί ότι τα τεμάχια 4, 5, 10, 11 και 12 έχουν τα νότια τους όρια στη διαχωριστική γραμμή των ΑΟΖ Κύπρου και Αιγύπτου.

Ταυτόχρονα, ξεκαθαρίζει σημαντικά θέματα για τις εταιρείες που έχουν τα δικαιώματα στα τεμάχια αυτά και κυρίως στα τεμάχια 10 και 11 τα δικαιώματα έρευνας και ανάπτυξης των οποίων έχει η Γαλλική TOTAL.

Επίσης, εμμέσως επαναβεβαιώνει την πλήρη αναγνώριση της Αιγύπτου ως προς την Κυπριακή ΑΟΖ, αφού το τεμάχιο 4,  είναι ένα από αυτά που προσπαθεί να αμφισβητήσει η Τουρκία.

Οι διαπραγματεύσεις για την επίτευξη της συμφωνίας αυτής ξεκίνησαν το 2011 ωστόσο καθυστέρησαν λόγω των γεγονότων στην Αίγυπτο.

Η επίσκεψη του Αιγύπτιου υπουργού Ενέργειας στην Κύπρο τον περασμένο Φεβρουάριο αλλά και του Κύπριου Υπουργού Ενέργειας στην Αίγυπτο προ δύο εβδομάδων, επέδρασαν καταλυτικά στην προώθηση και επίσπευση της επικύρωσης της διακρατικής συμφωνίας από την Αίγυπτο.

Source

Wednesday, August 27, 2014

Cypriot president: Underwater gas fields can help unite island | CNN

By John Defterios and Eoghan Macguire, CNN, August 25, 2014 -- Updated 1348 GMT (2148 HKT)


STORY HIGHLIGHTS
  • Cyprus is sitting on large underwater reserves of natural gas
  • Country is expected to exploit fields in coming years and generate billions of dollars in process
  • Cypriot president believes energy discovery could help unite the island
Editor's note: Watch the full interview with Nicos Anastasiades on Marketplace Middle East Facetime on CNN .Click here for the show times
(CNN) -- It may be early days in the quest for energy underneath the crystal blue waters of the Mediterranean -- but the eventual bounty may be sizable for Cyprus.

The Eastern Mediterranean is considered a new energy frontier with a 2010 report from the U.S. Geological Survey estimating there to be 122 trillion cubic feet of gas in the area.

Nearby Israel, Lebanon and Egypt have also marked their offshore territories and are evaluating their potential.

But for Cyprus, still bitterly divided between a Greek Cypriot south and Turkish Cypriot north, the rewards could be more than just financial.

According to the Republic of Cyprus' president Nicos Anastasiades, this rich supply of energy could help unite the island.

"The benefits out of the exploitation of the wealth of energy is going to the interest of all the people of Cyprus whether they are Greek or Turkish Cypriots," Anastasiades told CNN.

"What I'm saying and trying to convince our compatriots is that the wealth is belonging to the state, the residents of Cyprus. You (Turkish Cypriots) have the nationality of Cyprus as well, let's find a solution on the basis as has been agreed then you will have your proportion in participating in this wealth."

Texas based Noble Energy undertook its first drilling work in Cypriot waters last summer. French firm Total and ENI of Italy, meanwhile, will start exploration later this year.

In between the ports of Limassol and Larnaca there are plans for a $10 billion facility to manage the natural gas discovered offshore.

Cypriot officials say that the reserves in the one block that has been surveyed so far, when brought to market, would represent more than 100% of the country's GDP of $23 billion dollars.
Early indications from Noble also hint that there are many millions of barrels of oil in their field as well.

With such a potentially valuable asset, Anastasiades believes it is important to take heed of the experiences of other countries with large energy reserves and for Cyprus not to be caught out by the resource curse.

"That's why we are talking about the Norwegian model," he said referring to the Scandinavian nation's sovereign wealth fund that invests a large chunk of the money generated from its own underwater oil and gas fields.

At the same time Anastasiades hopes to manage expectations as to the level of wealth Cypriots can expect to gain.

"We are trying to pass on to people that when we talk about energy we are talking about future generations and not for the present only." However it is important that they "do not have any expectations that we are going to become like the Arab Gulf Emirates and so on," he added.

Anastasiades also recognizes that external factors have the potential impact how this lucrative new industry develops in the region.

He points out that Turkey has been "violating (Cyprus's) economic zone" in recent years as they attempt to influence relations between Greek and Turkish Cypriots.

These actions may still come to impact attempts to unify the country in the future, he said, but he is confident that will ultimately not be the case.

"All of us nowadays are realizing that it's a high time to give an end to these this protracted problem. This is why I have mentioned before as an incentive the energy, the hydrocarbons and all these kinds of things."


Link to source: http://edition.cnn.com/2014/04/23/business/cyprus-president-energy-gas-oil/index.html?sr=sharebar_twitter

Tuesday, August 26, 2014

Can LNG Save Greece From A Russian Gas Collapse? | Forbes

Can LNG Save Greece From A Russian Gas Collapse?

This past week, Greece appealed to the European Union for assistance ahead of a possible halt in natural gas from Russia, by way of Ukraine. The country’s heavy dependence on natural gas imports from Russia, which makes up about 60 percent of its domestic demand, has added Greece to the list of European consumers with an uncertain energy future. As tensions have continued to rise between Russia, Ukraine and most of Europe, the threat of a possible halt in gas imports has forced many to seek out possible alternatives to meet their energy needs, especially ahead of the coming winter months.
Like Italy, Greece has sought solutions both at home and abroad, including new import agreements and the possibility of domestic production. For Athens, this would mean building on existing pipeline traffic from Azerbaijan and expanding the country’s LNG capacity, which led to last week’s appeal to Brussels. In a letter addressed to European Energy Minister Guenther Oettinger, Greek Energy Minister Yannis Maniatis asked for some assurance that surplus LNG would be made available in anticipation of a delay or halt in Russian imports.
Any increase would likely work within Greece’s existing LNG infrastructure as relevant plants are long term and expensive efforts, making it unlikely they would play a part in the short term. Greece may be able to win EU support for LNG expansion in the long term as a part of a concerted effort to invest in connectivity infrastructure projects deemed to ensure energy security for European member states, but any such relief would be very long term.
One possible source of relief for Athens could come in the form of less dependence on Russian gas, which is sold the country at often prohibitively high rates compared with other European consuming countries. While any decline in Russian imports would provide plenty of reason for concern among the country’s commercial and industrial consumers, an increase in LNG could provide lower, comparative pricing arrangements.
Greece has also begun pushing for more domestic production to help ease the country’s consistent dependence on costly imports. Like many in the region, Greece has seized onto the possibility of offshore reserves as neighbors like Cyprus and especially Israel make real headway towards exploration and export revenue. In December, Prime Minister Antonis Samaras suggested that Greece could be home to 4.7 trillion cubic meters of gas could one day provide up to 25 percent of European demand. However, many critics have warned against overstating the country’s potential and the long journey from early studies to actual, viable domestic energy production.
Over the last three years, Athens has also made a concerted effort to lay claim to the Eastern Mediterranean’s recent energy rush, both as a potential transport hub for Israeli and Cypriot gas reserves. Earlier this year, Athens entered the transport conversation by offering a tender for a pipeline project that would transport about 8 billion cubic meters of gas into the European market from offshore fields controlled by Cyprus and Israel. According to a Reuters report, the project would link Israel’s Leviathan natural gas field to Europe by way of Greece through the IGI-Poseidon pipeline, managed by Italy’s Edison and Greece’s state-backed utility, DEPA.


Link to source: http://www.forbes.com/sites/christophercoats/2014/08/26/can-lng-save-greece-from-a-russian-gas-collapse/

Turning a Successful Start to a Success Story: Greek Offshore Exploration 2014 - NATURAL GAS EUROPE

August 26th, 2014

The Greek authorities officially announced the 2014 offshore exploration bidding round for 20 offshore blocks in the Ionian Sea and on the South of Crete in a conference that took place in London earlier this summer, with the support of the Greek Energy Forum. As expected, this event was received with great levels of excitement. The various publications in the aftermath of this event however did not highlight the display of commitment from the Greek authorities in on this endeavour, which has been also an achievement in itself for a country looking to re-enter the international hydrocarbon exploration arena. The clarity of the structure of the announced bidding round, along with the announcement of a well-defined timeline and coupled with an authoritative delivery to the audience, set the ground for a successful bidding round.

Άρχισε να μυρίζει «ενδιάμεσο» φυσικό αέριο | ΦΙΛΕΛΕΥΘΕΡΟΣ

Εμπιστευτική σύσκεψη Λακκοτρύπη με ΡΑΕΚ και ΕΥΚ

Άρχισε να μυρίζει «ενδιάμεσο» φυσικό αέριο



Λευκωσία: Άκρως εμπιστευτική σύσκεψη είχε χθες ο υπουργός Ενέργειας, Γιώργος Λακκοτρύπης, με τα μέλη της Ρυθμιστικής Αρχής Ενέργειας Κύπρου και της Εταιρείας Υδρογονανθράκων Κύπρου, η οποία σύμφωνα με πληροφορίες του «Φ», επικεντρώθηκε στη στρατηγική και τους αμέσως επόμενους χειρισμούς, που αφορούν στην εξασφάλιση της Κύπρου με φυσικό αέριο για σκοπούς ηλεκτροπαραγωγής.

Οι ίδιες πληροφορίες αναφέρουν ότι στην απουσία των εμπλεκομένων με το θέμα της ενδιάμεσης λύσης, δηλαδή της ΔΕΦΑ και του κύριου αγοραστή –της ΑΗΚ– τέθηκαν επί τάπητος τα μέχρι τώρα δεδομένα, που δημιουργούν αισιόδοξες προοπτικές.

Συγκεκριμένα, οι τέσσερις προτάσεις που υποβλήθηκαν στο πλαίσιο του διαγωνισμού της ΔΕΦΑ για την ενδιάμεση λύση,  φαίνεται να είναι πολύ κοντά στις μέγιστες αποδεκτές τιμές φυσικού αερίου. Οι τιμές στις τέσσερις προτάσεις, είναι πολύ κοντά μεταξύ τους και οι τρεις προσφοροδότες (Μ&Μ, Delek, Vitol) που θα κληθούν πρώτοι για διαπραγμάτευση, αν αποδεχθούν κάποιες μειώσεις στις τελικές διαπραγματεύσεις, θα μπορούν να προτείνουν φυσικό αέριο σε τιμές που εξασφαλίζουν ελάχιστες μειώσεις στο κόστος παραγωγής ηλεκτρισμού της τάξης του 5%-8%, το οποίο αποτελεί το ελάχιστο ζητούμενο.

Στις επικείμενες διαδοχικές διαπραγματεύσεις, αναμένεται ότι οι τρεις πρώτοι προσφοροδότες θα ανταγωνιστούν μεταξύ τους με ακόμα χαμηλότερες τιμές, ενώ υπάρχει και η δυνατότητα για τον τέταρτο προσφοροδότη –τη Cyprus Gas– να κάνει τη δική του κίνηση ματ στο τέλος. Αυτό δημιουργεί ελπίδες ότι θα εξασφαλιστούν τιμές που θα προσφέρουν αισθητή μείωση στο κόστος ηλεκτρισμού.

Παράλληλα, η παράταση της ισχύος των προσφορών μέχρι τον Νοέμβριο, που αποδέχθηκαν και οι τέσσερις προσφοροδότες, δίνει ανάσες όχι μόνο στη ΔΕΦΑ για τις διαπραγματεύσεις με τους υποψήφιους μνηστήρες μιας πράξης κόστους €4 δισ. περίπου, αλλά και στην κυβέρνηση για να ξεκαθαρίσει περισσότερο το τοπίο. Κυρίως, το ξεκαθάρισμα αφορά στο αν και πότε μπορεί η Κυπριακή Δημοκρατία να εξασφαλίσει φυσικό αέριο για τις ανάγκες της Κύπρου, το οποίο προφανώς θα είναι πολύ φθηνότερο της ενδιάμεσης λύσης και αφετέρου θα εξασφαλίζει και σοβαρά έσοδα στο ίδιο το κράτος από την πώληση του αερίου. Αυτό θα διαφανεί κυρίως μετά την αποπεράτωση της γεώτρησης στον «Ονασαγόρα», αφού θα καταδείξει όχι μόνο τις ανακτήσιμες ποσότητες, αλλά και αν μπορεί το κοίτασμα να είναι σχετικά σύντομα εκμεταλλεύσιμο.

Γράφει: Πέτρος Θεοχαρίδης



Link to source: http://www.philenews.com/el-gr/top-stories/885/215216

Monday, August 25, 2014

DEKA project begins production offshore Egypt - OFFSHORE MAGAZINE

Offshore staff
MILAN, Italy – Eni’s IEOC Production BV has started production from the DEKA (Denis-Karawan) project offshore Egypt in a joint-venture with BP Egypt.
The Denis South 6 subsea well is flowing 1.8 MMcm/d (63.56 MMcf/d) of natural gas and 800 b/d of condensate.
The entire project expects to see five subsea wells, installation of subsea production systems, and sealines to the El Gamil onshore gas plant. Peak production is expected in 1Q 2015 at 6.5 MMcm/d (230 MMcf/d).
Denise South 6 is the first development well in DEKA which is in the Temsah Concession Area offshore Nile Delta, Egypt, in 100 m (328 ft) water depth 65 km (40 mi) north of Port Said.
IEOC holds 50% working interest in the Temsah Concession and operates through its JV Petrobel (50% IEOC and 50% EGPC).
8/25/14

SOURCE

Egypt Key to the Development of East Med Gas | Natural Gas Europe



August 25th, 2014 




The partners in Israel’s largest offshore natural gas fields announced the signing of letters of intents to transport Israeli natural gas via Egypt’s unused export terminals. Noble Energy Israel’s Delek Group plan to deliver as much as 6.25 trillion cubic feet of gas from the Tamar and Leviathan offshore fields to LNG facilities in Egypt’s Damietta port and the coastal town of Idku. Final agreements are expected to be signed by the end of the year.

Egypt is in need for natural gas. The country is undergoing a severe energy crisis due to ongoing export obligations, a growing domestic consumption and a flat production. The closing of the deals between the Leviathan and Tamar partners on the one hand and the operators of the terminals in Egypt on the other would allow Israel the flexibility to reach export markets. Building a pipeline to Egypt would be a quick, low cost and efficient solution for Israel. Israel has been struggling to formalise an export strategy. The prospect of a floating LNG facility faded with the failure of the Israeli authorities and the Australian giant Woodside to reach an agreement. Israel has not formally expressed an intention to use Cyprus’ planned onshore LNG terminal and the likelihood of a Leviathan-Turkey pipeline decreased since Israel’s action on Gaza. Despite an amelioration of the diplomatic relations between Israel and Turkey since Netanyahu’s US-brokered apology to the Turks in 2013, the diplomatic ties remain tensed due to Israel’s stance on Gaza.

Sunday, August 24, 2014

Egyptian LNG from “Made in Israel” Natural Gas | Times of Israel


Tamir Druz - Of all the options that have been explored to facilitate the export of Israeli natural gas, the use of Egypt’s two existing LNG plants makes the most economic and strategic sense. Egypt has essentially run out of the natural gas needed to supply its substantial LNG processing capacity, as declining production and growing domestic demand has necessitated the diversion of its gas supplies to meet local needs.

By our calculations, Egypt was only able to make use of 23% of its 12.2 million tons per annum of combined processing capacity at its plants in Idku and Damietta last year. This was a drop from 42% utilization in 2012, and the future looks even worse, with Egypt’s Ministry of Petroleum predicting that local consumption will start to outstrip production by next year. BG Group was compelled to declare force majeure earlier this year when it could not meet European customer commitments due to insufficient output from its Egyptian operations, and Egypt’s tab with locally operating multinational energy companies has been ballooning as a result of its need to pay market prices for gas diversions in excess of its production sharing allotment.

The Egyptian export route makes a great deal of sense for Israel as well. Egyptian President Abdel Fattah el-Sisi’s government and its media could not have more clearly expressed their opposition to Hamas and its actions during the recent escalation of Gaza’s conflict with Israel. For an Arab country to effectively side with Israel in a war is unprecedented, especially the most populous Arab nation in the world, and the recognized leader of Sunni Muslim countries in the Middle East. Egypt should also be credited with the relative quiet that has existed along the Sinai border during the conflict. Egyptian military and intelligence cooperation has undoubtedly played a key role in preventing the opening of this additional front, in spite of Hamas’s efforts.

Egypt relies on natural gas to produce most of its electricity, demand for which has been growing at the very rapid rate of 10% per year. Egypt is also one of the world’s top consumers of compressed natural gas (CNG) for transportation, which fuels almost 200,000 of its vehicles. Energy costs and shortages were a primary driver of the “Arab Spring” protests that toppled Egyptian President Mubarak, among others, and Egypt’s government cannot afford to allow its energy situation to get out of control. Finding an alternative source of natural gas to feed its severely under-utilized LNG plants, which represent an investment of many billions of dollars, would allow it to meet its local energy needs, honor its production-sharing commitments to multinational producers, restart the significant public revenue flows from LNG production and reverse its fast-growing national debt.

Many commentators correctly pointed out that the nascent Egyptian-Israeli alliance has been promoted by a shared interest in countering the Muslim Brotherhood and its Gazan affiliate, Hamas. Some have also alluded to a shared desire to stop Iran from fulfilling its nuclear ambitions. But the two nations’ joint interests extent well beyond security. It is now clear that negotiations on a gas export deal are well underway and may be concluded by the end of this year.
If they succeed, Israel’s natural gas industry will be able to convert its gas into globally exportable LNG without having to make the enormous investment required for LNG processing facilities. The cost of an undersea pipeline to Egypt will be substantially lower by comparison, and time to market would also be a fraction of that required for the construction of new LNG facilities. This option would not only generate a much higher expected return on investment, but would also considerably reduce security and environmental costs and risks for Israel.

Furthermore, this energy partnership between Egypt and Israel would fundamentally align the energy futures and interests of the two countries, in a unique and unprecedented manner. This would represent the first case, to our knowledge, of an LNG industry in a given country being supplied largely by natural gas feedstock imported from another country. Israel is known for its innovation in areas such as high-tech and medicine, and it is only natural that the Start-Up Nation has helped find a novel and inventive solution within the LNG industry as well. And in this case, it may even provide an opportunity to forge a stronger alliance with Israel’s most important neighbor.

Tamir Druz is the Director of Capra Energy Group


Egypt looks to secure LNG production and supply | Daily News Egypt


Egypt looks to secure LNG production and supply

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With its significant reserves of liquefied natural gas (LNG), Egypt has been a key exporter for regional consumers over the past decade but with growing domestic consumption and a number of fiscal constraints, the country has been looking to secure additional supplies by expanding LNG capacity.
In May the Egyptian government signed a letter of intent with the Norwegian shipping company Höegh LNG for the use of a floating storage regasification unit (FSRU), to be located on the port of Ain Sokhna for a period of five years. FRSUs regasify liquefied natural gas, a key step for expanding Egypt’s capacity to process imports.
It had also lined up LNG shipments from Algeria’s Sonatrach, Russia’s Gazprom, and France’s EDF.
By mid-July, however, the deal with Höegh had stalled, according to Reuters, prompting Egypt to reopen talks with the US-based FSRU operator Excelerate Energy.  Experts say it will take about six months after a deal has been struck for the facility to come onstream, which will likely mean further gas shortages this year.

LNG in the spotlight
Hydrocarbons currently account for 91% of Egypt’s power generation, the bulk of which comes from natural gas. Egypt has sizable gas reserves, with 2tn cubic metres as of end-2012, according to BP’s 2014 Statistical Review of World Energy. But a large proportion of annual production has been channelled towards the export market, which in recent years has brought in much-needed revenues.
However, with local natural gas production down and the country unable to meet demand, Egypt has been increasingly in need of resources for domestic consumption. Currently, limited supplies for local generation have resulted in load shedding, with blackouts in some areas lasting up to several hours per day.
As a result, gas output is being shifted away from the export market. According to BP, Egypt’s LNG exports amounted to 3.7bn cubic metres in 2013, down nearly 62% from 9.7bn cubic metres in 2010. Natural gas that was originally meant to feed the country’s two LNG export facilities is now being redirected to the local market.
However, this has created additional complications, leaving facility operators unable to fulfil their LNG delivery commitments. Unión Fenosa Gas (UFG) – a partnership between Italy’s Eni and the Spanish energy company Unión Fenosa, which operates the LNG facility located in Damietta – filed an international arbitration claim against Egypt last year following the cutoff of their natural gas supply.

Upstream potential
There has, however, been encouraging news in the upstream segment that may help increase production and allow the supply of natural gas to both LNG facilities and the local market. Both UFG and UK-listed BG Group have been in talks with companies operating out of the recently discovered Israeli Tamar and Leviathan offshore gas fields.
UFG signed a nonbinding letter of intent in May with US-based Noble Energy, the operator of the Tamar gas field, to feed its Damietta LNG facility.  In June, BG signed a similar agreement with the partners operating the Leviathan field.  Both these agreements will need approval from the Egyptian government, which according to local press reports, has said it will consider under certain conditions – namely that a portion of gas be directed towards the local market  and that UFG drop their arbitration claim.

Reducing the subsidy bill
The need to address local energy demand does create additional challenges for the state’s balance sheet. LNG exports have helped to strengthen the current accounts and boost export revenues, but these have fallen as output is redirected towards domestic consumption.
Although domestic energy subsidies have been rolled back in recent years, they continue to represent a significant burden on the state’s balance sheets, which means the combination of dropping exports and rising consumption finds the state facing reduced revenues and higher subsidy expenditures.
Indeed, fuel subsidies have skyrocketed from roughly EGP 53bn ($9.6bn) in fiscal year 2008/09 to EGP 130bn ($18.14bn) budgeted in the most recent fiscal period. In an effort to reign in subsidies, the government overhauled energy prices across the board in July. This included price increases of as much as 75% for industrial consumers and an up to 175% increase on natural gas car fuel. Reductions in the subsidy bill in fiscal year 2014/15 are expected to save the government EGP 40bn ($5.58bn), according to a statement made by Finance Minister Hany Kadry Dimian in late June.


Link to source: http://www.dailynewsegypt.com/2014/08/24/egypt-looks-secure-lng-production-supply/

Talks aim at agreement of LNG terminal | Cyprus Mail

 4 Comments

Talks aim at agreement of LNG terminal

Talks aim at agreement of LNG terminal
By Elias Hazou

A STANDING government team of technocrats and officials is to begin negotiations with the ENI-KOGAS consortium and with France’s Total with the aim of concluding LNG project agreements.

The team was given the green light to launch talks by the Cabinet on Friday. The talks will be geared at reaching an agreement for the construction and operation of an onshore liquefied natural gas (LNG) terminal at Vasilikos, a ministry statement said on Saturday.

ENI and KOGAS hold prospecting concessions on offshore blocks 2, 3 and 9 of the Cyprus Economic Exclusive Zone. ENI are the operators of the three blocks with an 80 per cent participating interest; KOGAS is a partner with a 20 per cent participating interest. Total E&P Cyprus have concessions on blocks 10 and 11.

The Memorandum of Understanding (MoU) with ENI-KOGAS is “aimed at investigating areas of cooperation related to Cyprus’ potential gas resources valorisation, with priority to the onshore LNG option,” according to an official statement at the time.

It’s understood the MoUs with ENI-KOGAS and with Total are not restricted to a land-based LNG facility, but allow for exploring other options such as floating LNG.

In contrast, the parallel negotiations with Noble Energy and Delek – with a concession on Block 12 – are focused only on onshore LNG.

The decision to start talks with ENI-KOGAS comes just as the joint venture is readying to drill their first well. It will likely take place in September at a well dubbed ‘Onasagoras’ in Block 9. The consortium’s drilling schedule is expected to span 12 to 18 months, during which they are contractually obliged to carry out at least four drills.

The drilling platform is expected to arrive offshore Cyprus in September from Mozambique. The rig is owned by Saipem, an Italian oil services group and a subsidiary of ENI.

Energy minister Giorgos Lakkotrypis on Saturday responded to criticism leveled earlier at him by the Cyprus Mail, which had suggested the minister was jumping the gun when talking up the prospects of sales of Cypriot natural gas to Egypt.

On his return from Egypt this week, Lakkotrypis said Cyprus would be able to have ‘specific talks’ with Egypt at the end of this year, upon completion of the first exploratory drilling by ENI-KOGAS. The Mail commented that, judging by the time it took Noble Energy to complete their own drilling phase in Block 12, it could take ENI years before they had an accurate picture of the quantity of gas that could be sold to Egypt.

“The comparison is false, as the contracts concluded with Noble and with ENI-KOGAS are quite different,” the minister told the Mail.

Also, ENI’s drilling rig would stay in Cypriot waters for 12 to 18 consecutive months, allowing the joint venture greater flexibility.

“This allows for back-to-back drilling, and the rig’s continuous presence means that an exploratory drill could be immediately followed by an appraisal drill at the same well, if the company so chooses,” he explained.

Moreover, the minister said his mission to Egypt had been to “explore” the possibility of selling gas to Egypt at some time in the future. Asked about the earliest date this was hypothetically possible, Lakkotrypis cited 2018 in the event the Cypriot gas were piped to Egypt, later if other solutions are chosen.

“We have not yet discussed with the Egyptians specific ways of supplying them with natural gas,” he added.

Meantime LNG talks with US outfit Noble appear to have stalled, with media reports suggesting the Americans have got cold feet about the onshore plant and are leaning toward less capital-intensive solutions, such as FLNG or even Compressed Natural Gas.

So far the proven natural gas reserves in Noble’s Block 12 are insufficient to make profitable an investment into an onshore LNG plant.

Additional gas discoveries by ENI-KOGAS and by Total may change that. But there is still a long way to go: a final LNG project agreement is followed by a Front-End Engineering Design (FEED, an engineering design approach used to control project expenses and thoroughly plan a project before a fix bid quote is submitted. The next step – and the crucial one – is a final investment decision by the companies.

Link to source: http://cyprus-mail.com/2014/08/24/talks-aim-at-agreement-of-lng-terminal/