LNG

Egypt said it expected to reopen the Damietta liquefied natural gas export plant east of the Port of Alexandria by the end of February 2021 after an eight-year closure caused by the Arab nation’s previous gas supply crunch.

“With Damietta back on stream with its 4.5 million tonnes per annum of output, Egyptian export volumes would total around 12.5 MTPA,” said the Petroleum and Mineral Resources  Ministry in a statement.

The move forward for Damietta comes after the resolution during the latter part of 2020 of a long-standing dispute between the shareholders over contracts because of the closure.

Naturgy, the Spain-based European utility, agreed to sell its stake in the Damietta plant and to rescind its Egyptian gas contracts on departing from the Unión Fenosa Gas (UFG) joint venture.

Naturgy’s UFG partners, Italian energy company Eni and the Egyptian Natural Gas Holding Company (Egas) reached the agreement under which Naturgy would receive a series of payments adding up to US$600 million.

The utility will also receive most of UFG’s assets outside of Egypt as well as being released from 3.5 billion cubic metres annual gas procurement contract to supply its gas-fired power stations in Spain, which was due to end 2029.

Settlement

Under the settlement deal, these Spanish interests would be taken over by Eni.

The LNG plant has been idle since November 2012 when Egypt suffered natural gas shortages.

In addition to Damietta LNG, Egypt has a second export plant, the Idku facility operated by Royal Dutch Shell, and which has been back in commercial operation since 2017.

As regards Damietta plant shareholdings, the Naturgy 80 percent in Damietta liquefaction was transferred with Eni receiving 50 percent and 30 percent going to EGAS.

The resulting shareholding of the Damietta holding company, Segas, sees Eni with 50 percent, EGAS holding 40 percent and Egyptian General Petroleum Corp. with 10 percent.

Eni will also take over the contract for the purchase of natural gas for the plant and will receive corresponding liquefaction rights.

Italian energy company Eni has signed a series of agreements with the government of Egypt and state-owned companies to prepare for the re-opening of the nation’s Damietta liquefaction plant by June 2020.

The two Egyptian liquefaction plants located near the port of Alexandra will remain low-cost options for East Mediterranean natural gas producers such as Egypt itself, Israel and the island of Cyprus looking to export LNG and to use the existing capacity for 12.7 million tonnes per annum.

Egypt is seeking to build up exports of LNG from their facilities at Idku and Damietta and future LNG production has been discussed at a three-day energy conference in Cairo held at the Egypt International Exhibition Centre.

The Idku LNG export plant first came on stream in 2005 and has capacity to export up to 7.2 million tonnes per annum from two liquefaction Trains. It has two storage tabs with a combined capacity of 280,000 cubic metres.

Idku has been on stream again since 2017 under the operatorship of Royal Dutch Shell, which acquired original operator BG Group.

The Damietta plant is still idle but the resolution of a legal dispute between the owners and the Egyptian government has now been resolved.

The facility has capacity of 5.5 MTPA of output and has two storage tanks each of 150,000 cubic metres capacity.

Damietta is owned by Union Fenosa Gas, a joint venture between Spain’s Gas Natural, now known as Naturgy, and Eni. They hold 80 percent of the shares and the remaining 20 percent belongs to Egyptian Natural Gas Holdings Co. (EGAS) and Egyptian General Petroleum Co.

The head of Shell in Egypt, Gasser Hanter, played down the idea of any remaining political obstacles to bringing feed-gas supplies to Egypt from countries such as Israel or Cyprus.

He pointed to Egypt's hosting of an East Mediterranean Gas Forum in January 2019 that brought together governmental representatives from the region and recent commercial agreements.

“I think we're in the normal project development stage. You just have to go through the project development process,” said Hanter.

In recent months Israel has agreed to send pipeline exports to Egypt, while Cyprus has reached a provisional deal for sending pipeline supplies from its Aphrodite gas field.

Hanter said the economics of Egypt's LNG export plants remained compelling.

“Partly, this was because the Egyptian plants had been built in a different commercial environment, and costs had since risen,” he said.

“If you want to build something similar to that today, you're looking at a large number of billions of dollars,” added Hanter.

Noble Energy, the US company with natural gas assets in the East Med offshore Israel, signed multiple infrastructure agreements in September 2018 to support delivery of natural gas from the Israeli Leviathan and Tamar fields to Egypt.

Noble said the accords were significant steps forward in supplying natural gas to regional customers through existing infrastructure.

The US company’s partners in the Tamar and Leviathan fields are subsidiaries of Israel’s Delek Group.

Noble operates the Leviathan and Tamar fields with just under a 40 percent holding. Tamar has been on stream since 2013 and supplies Israel and customers in Jordan, while the Leviathan field is scheduled to come on stream in 2019.

Noble said that its agreements would secure capacity to deliver natural gas to Egyptian company Dolphinus from the Leviathan field while also allowing for interruptible sales from Tamar into Egypt.

Noble said it was acquiring an effective 39 percent equity interest with Middle East partners in the Eastern Mediterranean Gas Company (EMG), which owns the EMG pipeline.

The EMG Pipeline is 90 kilometres in length and is located primarily offshore, connecting the Israel pipeline network from Ashkelon to the Egyptian pipeline network near El Arish.