Egypt's reserves spur Eastern Med pipeline
- Map shows currntly contracted concessions in the Mediterranean offshore Egypt's Nile Delta. [19,628 bytes]
- Egypt's gas export options currently look to be a new LNG regasification terminal in Izmir, western Turkey, or an on/offshore pipeline to eastern Turkey across the eastern Mediterranean. There is also potential for a branch line into Jordan and Syria, but available gas quantities may be insufficient to justify both lines, according to Amoco. [10,515 bytes]
However, contracts must be firmed up soon in order to sustain the current exploration effort, warned speakers at last month's Algeria, Libya, and Egypt Oil and Gas Summit in London, organized by IBC UK Conferences. Otherwise, Egypt faces increased competition from other long-distance gas suppliers such as Russia, Turkmenistan, Iran, and possibly Libya, as the grip of US sanctions there wanes.
According to Michael Shelton, Commercial Manager of British Gas International in Egypt, the "virtual explosion" in gas exploration off and onshore Egypt in recent years was triggered by a new clause introduced by the government in 1998 that improved Egyptian gas production sharing contract (PSC) terms. The result has been a 20 Tcf increase in Egypt's proven reserves over the past four years.
Most of these added reserves are in the Mediterranean off the Nile Delta, where the principal operators Amoco, BG, and IEOC (Agip) have achieved a combined drilling success rate of over 95%. Amoco's Vice President for the Eastern Mediterranean, Art McHaffie, said the Nile Delta had hosted 20 gas discoveries in 1996, while 89% of all wells drilled there last year were deemed commercial. "That's a high rate by any standards," he commented.
World class basinThe view of all the protagonists is that the Nile Delta is a world class basin, he added, with potential to hike Egypt's currently estimated reserves base of 36 Tcf up to 65 Tcf. Shelton attributed the successes offshore to state-of-the-art 3D seismic imaging of Pliocene-age formations in which gas reservoirs can be identified from direct hydrocarbon indicators. Meantime, exploration in the Mediterranean continues to move into deeper waters, he added, with BG recently making three substantial gas discoveries in its West Delta Deep Marine concession. One of these tested 90 MMcf/d, one of the highest flow rates ever recorded in Egypt. Plans are underway to fast-track a development.
Among Egypt's main players, Shelton claimed, IEOC leads the way with 14 Tcf of reserves, followed by Amoco (8 Tcf), national oil corporation EGPC (4 Tcf), and BG and others holding 10 Tcf. Between them, they supply a local market consuming on average 1.6 Bcf/d, much of this feeding power plants or other industrial users such as cement, fertilizer, and sugar plants.
"At current rates of production, Egypt has a 62 year reserves-to-production ratio," Shelton added. Forecasters predict national needs will grow by up to 75% over the next five years as demand for electricity increases, caused mainly by existing power plants switching from fuel oil to gas. And by 2010, that demand could more than double. However, even these predictions could fall short as the national gas grid system extends further south and east into Egypt.
Gas grid expandsCurrently, the grid comprises over 3,000 km of high pressure gas transmission and distribution pipelines, but is being upgraded and reinforced by national gas company Gasco to meet future export requirements of neighboring countries, as well as tying in remoter areas of Egypt. The plan is to have up to 6,000 km of HP pipelines in place by 2017, capable of transporting up to 5 Bcm/year.
Upper Egypt's needs are being met by an extension of the grid system from south of Kuriamat to Beni Suef, followed by three phases reaching as far south as Aswan. These projects will help BG and EGPC fast-track development of the West Delta Deep Marine reserves, Shelton commented.
But with wider markets emerging north of Egypt, pressures will mount on producers to monetize their discovered reserves more quickly. EGPC itself is committed to exporting 25% of its gas output over the next few years, McHaffie said, to provide extra foreign revenue as Egyptian oil production declines. The year 2005 seems to be the target date for having the new export infrastructure in place, as all countries in the southern and eastern Mediterranean, apart from Turkey, appear to have enough contracted or indigenous supplies up to that point.
Two new studies Amoco has been engaged in concern a proposed LNG regasification project in Turkey (using supplies from Egypt), and a pipeline connecting the northern Egyptian fields to eastern Turkey via an on/offshore route, also crossing Israel and Lebanon.
Eastern Med growthThe LNG terminal would be sited in the Izmir/Aliaga region, to be built and managed by Turkish state oil and gas company BOTAS and the LNG supplier. Amoco was one of six to submit a tender for the terminal, with the award expected shortly. The plant would be sized to handle 4-6 Bcm/year, but that would not be enough to satisfy Turkey's long-term needs, which could grow to 12.1 Bcm by 2010, according to Shelton.
Over the eastern Mediterranean as a whole, he put total growth at 32.5 Bcm by 2010.
- Israel: For security reasons, Israel is an obvious potential buyer of Egyptian gas, said Shelton, although negotiations on gas exports between the two countries have stalled following the breakdown in the Palestine/Israel peace talks of 1996. If an arrangement could be secured, Israel could take up to 7 Bcm/year of Egyptian gas by 2010.
- Jordan: Much of Jordan's needs currently are met by oil imported from Iraq, but the country's stated aim is to have gas fill 40% of its energy needs by 2010. That means all Jordanian power, cement, potash, and fertilizer plants switching to gas-fired power. Little potential is seen for gas in the domestic sector.
- Lebanon: Like Israel, Lebanon has no indigenous gas. Its market potential is forecast to grow from 1.5 Bcm in 2005 to 2.3 Bcm in 2010.
Amoco is also reportedly tying up an agreement with Jordan's government to build and operate a Jordanian gas grid system filled with supplies from Egypt. The gas would be piped from a point on Egypt's grid at Ain Musa on the east of the Gulf of Suez to Taba on the Gulf of Aqaba, and from there subsea to Jordan. Another line would later be constructed northwards towards Amman. The plan is to deliver first gas in 2000 at a rate of 110 MMcf/d, rising to 350 MMcf/d. Amoco expects to supply gas from its Nile Delta Ha'py and Baltim fields into Egypt's grid next year, followed by supplies from Temsah in 2000.
Shelton also foresaw opportunities for Nile Delta gas in other parts of southern Europe such as the Balkans and Iberia, in particular Spain, where demand is expected to rise by 18 Bcm over a 15-year period. Egypt would have to compete with established suppliers to Spain such as Algeria, Nigeria, and Trinidad, but with Algerian supplies considered vulnerable, Spain may wish to diversify for security reasons.
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