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Bright prospects for natural gas
Published in Al-Ahram Weekly on 02 - 10 - 2003

Natural gas projects in Egypt are experiencing a boom. Sherine Nasr reports
The past few years have seen a rapid growth in natural gas production in Egypt. A natural gas grid some 4700 kilometres long has been constructed in the country since the early 1990s, more fields have been discovered and further reserves proven. As a result of this expansion, Egypt is now among the leading 10 countries in the world regarding the scale of natural gas operations.
These ongoing activities have encouraged more international companies to enter Egypt. "At present, there are some 50 companies working in the gas and oil sector in Egypt and investing two billion dollars annually," said Mohamed Ibrahim Tawila, chairman of Egypt Gas (EGAS) during the second Mediterranean Gas Congress, organised by MEED (the Middle East Economic Digest) in Cairo last week.
Egyptian natural gas production began in 1975, in the western desert field of Abu Madi. Two years later, the field of Abu Qir on the northern coast was opened.
It was not until the early 1990s that foreign oil companies began to really enter the picture, funding exploration for natural gas in Egypt. A series of natural gas reserves were quickly discovered in the Nile Delta, offshore from the Nile Delta and in the Western Desert. In 1997, plans to develop the giant Hapi gas field at Ras Al-Barr in the Nile Delta region were announced at an estimated cost of $248 million. In September 2000, the field came on stream and has reached an output of 280 million cubic feet per day.
Recent studies have calculated that about 84 per cent of the natural gas reserves worldwide are concentrated in the Middle East, with Egypt possessing some 60 trillion cubic feet of proven gas reserves yet to be tapped.
In 2001, EGAS was established by governmental decree as the authority responsible for all the gas-related operations, including exploration, implementation of gas projects and transportation.
"Natural gas is the fastest growing form of energy to be put in use in different local fields," said Hany Soliman, vice chairman for operation in EGAS.
At present, the average daily gas production has reached 3.4 billion standard cubic feet. Natural gas provides 90 per cent coverage of the total demand of the power generation sector which consumes up to 61 per cent of the total produced natural gas in Egypt. "Many of the power generating stations have turned to this environment-friendly form of energy, thus saving the earth from large amounts of harmful carbon dioxide," commented Soliman.
Fertilisers come second on the list with almost 11 per cent consumption of the total natural gas production, while industry uses up to nine per cent. "The amount is expected to increase as many factories in the new industrial zones are converting to natural gas," said Soliman.
More gas is now available to the petrochemical sector, which represents another up and coming sector in Egypt. A massive petrochemical complex, affiliated with the Sidi Krir Petroleum Company, has commenced operations and now has a daily output of 5000 tonnes of ethane and 1900 tonnes of propane, and is aiming for a daily production capacity of 3500 tonnes of butane by 2008.
Availability of gas to residential customers has been concomitantly expanding. Currently, 47,000 vehicles have been converted to natural gas. These are being serviced nationwide by 35 conversion centres and 73 fuelling stations.
"The current daily gas consumption is around 2.6 billion cubic feet, representing about 45 per cent of the primary energy consumption in the country," said Soliman.
This year, Egypt began exporting natural gas, completing a pipeline which reaches from Al-Arish on the Mediterranean coast to Aqaba in Jordan. The second phase is to construct a 370km transmission pipeline from Aqaba to Rebah by 2005.
"The pipeline will further extend to Syria, Lebanon, Cyprus and Europe," said Soliman.
Meantime, the largest Liquefied Natural Gas (LNG) hubs are now under construction in Idku and Demietta in the Nile Valley. "The eyes of the world have been very much on the LNG market in Egypt," said Stuart Fysh, the country manager of British Gas (BG) in Egypt. "By the completion of the two LNG hubs in 2007, Egypt will be the sixth largest LNG exporter worldwide," Fysh added.
The first LNG export agreement was signed in 2001 and later endorsed by the People's Assembly in 2002. A consortium of BG, Edison (later acquired by Petronas), Gas de France, the Egyptian General Petroleum Corporation (EGPC) and EGAS took the responsibility of establishing the West Delta Deep Marine hub at Idku, near Alexandria, described by experts as "one of the most significant LNG export hubs on the Mediterranean".
The $1.7 billion Idku hub is being established with a design capacity of 3.6 million tonnes per year. It will start exporting by 2005 and long-term sales and purchase agreements have been signed for the next 20 years.
The second hub in Demietta is a joint project of EGAS and Union Fenosa, with a design capacity of 7.5 billion cubic metres per year to start exporting to Spain and other Mediterranean countries by the end of 2004.
"We have invested $800 million this year on the site, a pledge for a one billion dollar fund has been made, and many international banks have shown interest in taking part in the project," said John Earl, CEO of the Egyptian LNG project.
Both projects will expand their capability in the future, once more gas reserves and purchase agreements are secured.
"It is quite obvious that Egypt is in a comfortable position with regards its natural gas options," commented Fysh who added that Egypt has already extracted much of the "easy gas" and that, "deep horizons have not been touched yet".
However, it is still crucial for Egypt to strike the right balance between its growing local demand for natural gas, its medium-term obligations and long-term export plans to best utilise this prospering industry.

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