Undersea gas brings Egypt closer to becoming a regional energy hub

Undersea gas brings Egypt closer to becoming a regional energy hub

Undersea gas brings Egypt closer to becoming a regional energy hub

/ Oil & Gas / Tuesday, 20 November 2018 07:53

Egypt is looking to use its vast, newly tapped undersea gas reserves to establish itself as a key energy exporter and revive its flagging economy.

Encouraged by the discovery of huge natural gas fields in the Mediterranean, Cairo has in recent months signed gas deals with neighboring Cyprus and Greece. Former oil minister Osama Kamal said Egypt has a “plan to become a regional energy hub”.

In the past year, gas has started flowing from four major fields off Egypt's Mediterranean coast, including the vast Zohr field, inaugurated with great ceremony by President Abdel Fattah Al-Sisi. Discovered in 2015 by Italian energy giant Eni, Zohr is the biggest gas field so far found in Egyptian waters.

The immediate upshot has been that since September, the Arab world's most populous country has been able to halt imports of liquified natural gas, which last year cost it some $220 million (190 million euros) per month.

Coming after a financial crisis that pushed Cairo in 2016 to take a $12 billion loan from the International Monetary Fund, the gas has been a lifeline. Egypt's budget deficit, which hit 10.9% of GDP in the financial year 2016-17, has since fallen to 9.8%.

Gas production has now hit 184 million cubic meters a day. Having met its own needs, Cairo is looking to kickstart exports and extend its regional influence. It has signed deals to import gas from neighboring countries for liquefaction at installations on its Mediterranean coast, ready for re-export to Europe.

In September, Egypt signed a deal with Cyprus to build a pipeline to pump Cypriot gas hundreds of kilometers to Egypt for processing before being exported to Europe. That came amid tensions between Egypt and Turkey - which has supported the Muslim Brotherhood, seen by Cairo as a terrorist organization, and has troops in breakaway Northern Cyprus.

Egypt’s regional energy ambitions are “not limited to the natural gas sector, but also involve major projects in the petroleum and petrochemical sectors,” said former oil minister Kamal.

Minister of Petroleum and Mineral Resources Tarek El Molla recently announced a deal to expand the Midor refinery in the Egyptian capital to boost its output by some 60%. On top of that, the new Mostorod refinery in northern Cairo is set to produce 4.4 million tons of petroleum products a year after it comes online by next May, according to Ahmed Heikal, president of Egyptian investment firm Citadel Capital. That alone will save the state $2 billion a year on petrochemical imports, which last year cost it some $5.2 billion.

Egypt is also investing in a processing plant on the Red Sea that could produce some four million tons of petro-products a year - as well as creating 3 000 jobs in a country where unemployment is rife.

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