Although Egypt has only focussed on developing its natural gas resources for five years, it is expected to already be the world's sixth largest exporter. Sherine Abdel-Razek reports The current petroleum minister, Sameh Fahmi, has always put developing Egypt's natural gas resources with the aim of exporting high on his agenda. Since he came to office in 1999, he has hardly given a speech without mentioning gas exports. New gas discoveries and a growing foreign interest in the sector combined with a decline in crude oil production were the main factors behind the shift in Egypt's energy strategy. According to Business Monitor International (BMI), Egypt may be able to put off becoming a net oil importer until 2008, but a rising level of crude imports appears inevitable beyond this point. BMI forecasts suggest that the gas supply could reach 57bcm in 2008 which, with demand of an estimated 45bcm, provides export potential of 12bcm. Egypt's oil production is forecast to fall 17.6 per cent by 2008, as gas output rises 54.1 per cent. A string of important gas discoveries has been made over the past three years, both offshore and in the Western Desert. The government twice increased its natural gas reserves estimate during the course of 2004, most recently to proven reserves of 62 trillion cubic feet (tcf) and probable reserves of 120 trillion tcf. As a result, over 50 foreign companies are now active in the Egyptian upstream sector, including Petronas of Malaysia, which paid $2.5 billion to Edison of Italy for a stake in the Delta Gas scheme last year. Egypt is making use of its new gas finds for export and domestic power generation, and according to the US Department of Energy, natural gas is likely to be the primary engine of Egypt's energy sector for the foreseeable future. The state-owned Egyptian Natural Gas Holding Company (EGAS) has drawn up a 20-year gas development plan which requires investment in excess of $1.2 billion a year over the first five years. At the core of the plan is developing Egypt's gas exporting potentials. It was only in July 2003 that Egypt started to export gas through the Arab grid linking Egypt to Jordan, which is being extended to Syria, Lebanon and perhaps even Turkey. This was followed early this month with Egypt's first-ever Liquified Natural Gas (LNG) export shipment departing from the northern port of Damietta. Market experts see the LNG to be having the strongest potentials in the gas sector and that is why around LE3 billion was invested in two LNG projects at Damietta and Idku. The Damietta facility in the Delta is being developed by Union Fenosa of Spain to supply power markets in Spain and elsewhere in Europe. The Idku plant near Alexandria is being developed by the Egyptian LNG (ELNG) consortium of British Gas (BG) Egypt, Petronas, EGAS and the Egyptian General Petroleum Corporation (EGPC). A report by The Economist Intelligence Unit notes that the Damietta facility, with a capacity of five million tonnes per year (tpy), is the world's largest. Meanwhile, Fahmi said in an interview with the state-controlled Al-Ahram newspaper in late January that Egypt's second LNG plant, at Idku, will come on stream ahead of schedule. The 3.6 million tpy capacity is now expected to commence operations in March. Europe comes on the top of the targeted markets list. Proximity is one factor, as is the EU's increasing demand for gas as a result of a move away from coal and oil. Also, member states in Eastern and Central Europe are phasing out their coal-fired plants for environmental reasons. At the same time, the gas reserves of the North Sea, which had been Europe's main source, are on the slide. Another important if more controversial destination is Israel. It was reported in Israeli newspapers last month that Israel has agreed in principle to import natural gas from Egypt, though the Egyptian government has remained tight-lipped about such a deal. Reports said that a memorandum of understanding was signed between representatives of both sides to implement a draft agreement signed last year. According to the draft, the state-run Israel Electric Corporation (IEC) is to buy natural gas from Egypt in a 15-year deal worth $2.5 billion. The deal would be managed by IEC and Eastern Mediterranean Gas; a joint Israeli-Egyptian venture. For their part, Egyptian officials have denied the Israeli reports. While Egypt has substantial reserves and the potential market is huge, the factor of fierce competition from other regional players is a concern. Algeria has long supplied natural gas and LNG to Western Europe, Qatar has recently became a major supplier of LNG, and Libya is about to join in the game. At the same time, gas sector liberalisation is encouraging trade in gas across the entire region, so that Algerian gas sold to Italy or Spain could soon be sold to any other members of the EU. According to the Egyptian Cabinet Information and Decision Support Centre, the value of Egypt's petroleum exports including gas was at $4.17 billion in the fiscal year 2003-2004. The report estimated the total local and foreign investments in the Egyptian oil sector at $34.5 billion at the end of 2004.
