British energy company BG Group is in talks with BP to link their two gas developments off Egypt's coast, as part of BG's drive to breathe life into its gas-starved export plant, sources familiar with the matter said. The future of BG's Idku liquefied natural gas (LNG) plant near Alexandria has been in doubt in recent years due to falling production and rising demand in the local Egyptian market which has led to the suspension of exports from the plant. BG is in advanced talks with Israel to import gas supplies into Egypt and this week began similar discussions with Cyprus aimed at restoring output. Finding new sources of gas to supply the plant has become a top priority for BG, which issued a profit warning earlier this year due to production cutbacks in Egypt, accounting for around one fifth of its global gas production. The company has recently engaged in talks to connect infrastructure at its West Delta Deep Marine (WDDM) gas field to BP's nearby North Alexandria licence, that would then be channeled into the LNG export plant. Under the plan, BP would route around 350 million cubic feet (mcf) of gas a day from two undeveloped fields called Libra and Taurus into BG's under-used WDDM offshore pipeline network, the sources told Reuters. From there, the gas would be piped down into the Idku plant for liquefaction and export by ship to Asia and South America, likely boosting revenues for the energy major. The pricing terms being discussed were not clear, although BP has a deal dating from 2010 to sell gas from North Alexandria to the Egyptian government with a floor price of $3 per million British thermal units (mmBtu) and a ceiling of $4.10/mmBtu, consultants Wood Mackenzie said. BG hopes the deal would allow it to boost LNG production from Idku in 2015-2016. A BP spokesman declined to comment, but a source at the company said Egypt's state-run gas company EGAS was involved in discussions. BG recently upgraded its subsea pipeline as part of a $1.5 billion investment in the West Delta Deep Marine field, allowing it to "manage the production from additional wells simultaneously and provide the capacity for future potential developments," according to a company statement. Production at BP's massive offshore Mediterranean finds was due to start at the end of 2014, and expected to add some 1 billion cubic feet per day to total output. Delays mean exports are now not expected before 2016. DIVERSIFICATION The talks form just one strand of BG's strategy to turn around its once-prized Egyptian operations and lift a major weight suppressing its share price. In June, BG signed a preliminary agreement with the partners in Israel's giant Leviathan natural gas field to export gas to Idku. In the deal under discussion, Leviathan -- off Israel's Mediterranean coast -- would supply 7 billion cubic metres (bcm) annually for 15 years via an underwater pipeline. BG also held talks this week with Cyprus Hydrocarbons (CHC) to import gas from Cyprus. Egypt is facing its worst energy crisis in decades, with declining gas production and high consumption that has turned the country from an energy exporter to a net importer in the past three years. For two years, Egypt has sought to complete a floating LNG import terminal to allow it to purchase LNG from abroad. http://english.ahram.org.eg/News/113800.aspx
