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| ELNG in Idku. Egypt hopes its existing facilities can be used by other producers in the region. (BG Group) |
Egypt is looking to the UK as a model for its plans to become a regional energy hub, and bringing in trading companies will be vital to achieve this goal, according to Khaled Abu Bakr, executive chairman of the country’s largest gas distribution company, Taqa Arabia.
Abu Bakr told Interfax that North Sea success stories would be a good guide for the country, which has been producing gas to export around the world for decades but is now looking to become a more regional player.
With domestic gas and LNG imports being reprioritised for certain industries, including the power sector, the time is ripe for trading companies to enter Egypt’s gas market, which is slowly liberalising, and become the new middlemen between producers and customers.
Interfax: What will an Egyptian energy hub look like?
Khaled Abu Bakr: We’ve seen in the North Sea how each country, with its own production, cooperates to maximise utilisation to the best efficiency [using] the existing infrastructure. That’s a typical hub where common infrastructure can be used.
In our case, Egypt is [already a large gas producer], and already has existing gas production in the Mediterranean. [Its existing infrastructure] can help boost the discoveries in Egypt, Cyprus, Israel and, potentially, in Lebanon as well. Add to that the two stranded LNG facilities with the capacity of 20 billion cubic metres per year […] and lots of different producers of gas in the East Mediterranean [will be able to] capitalise on these existing facilities to dispatch gas to international markets.
Interfax: Is Egypt modelling itself on the North Sea situation?
KAB: Yes, we are impressed by the North Sea UK model, although [we are] not necessarily [aiming] to be a replica. We don’t want to reinvent the wheel, we’re looking for success stories that we can replicate to suit our economy and existing infrastructure.
Interfax: What areas is Egypt looking at to add value to its gas?
KAB: Over the last 40 years we have had lots of success stories, but we had some misses by spreading the utilisation of natural gas. At the time it was good for the economy, but we did not use it to the best efficiency. For example, it was good to boost industries such as cement and fertiliser, but [today] cement has another cheaper alternative, which is coal.
The government is prioritising which industry should use what fuel. The first priority is employment, the second will be the commodities that are ready for export and bring in foreign currency, and [the third is] industries that are making profit and paying taxes.
Interfax: What industries are most likely to be prioritised?
KAB: Some industries like fertiliser [must] use gas. Small and medium-sized industries are fine to use gas because they don’t use a big amount. In the coming three years the total power production in Egypt will increase by almost 45-50%, so that will be a mix of gas, coal and nuclear. Steel will have to use gas.
I think petrochemicals in general is very interesting, if you have gas available at the right price and collect the difference of the gas pricing on other benefits like taxes or exports.
Interfax: Where are gas imports from the two current FSRUs going now?
KAB: Mainly the FSRUs are directed to power generation and industry. Zohr will start production by 2017/2018 and will reach maximum by 2020, so until that time you have to close the gap. The priorities are the three power stations coming online that will need gas. The industrial sector has suffered during the last five years due to the different interruptions of security and fuel, and it is requested to come back to full power as it is a major element of our economy.
Interfax: Are the roadblocks to importing Israeli gas moving?
KAB: The Egyptian government has declared that they have no objections, but any import of gas from Israel must satisfy three elements, and one of them is [the East Mediterranean Gas (EMG) pipeline]. If the EMG situation is resolved that means any consumers in the local market can import from Israel.
So the trading and the dynamics of gas are becoming very flexible [as well] and that allows for lots of trading companies in the middle. I assume that producers on the East Mediterranean would love to deal more directly with the consumer or a trading company to ensure their payment, and the Egyptian government does not need to be involved in all the gas imports.
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