By Paul Day and Oleg Vukmanovic
MADRID/LONDON Feb 7 The Damietta liquefied
natural gas facility in Egypt is not operating due to a lack of
feed gas as the country diverts export supplies to its domestic
market, operator Union Fenosa Gas (UFG) said on Thursday
UFG, a stakeholder company shared equally between Gas
Natural of Spain and Eni SpA of Italy, said
the plant was idle because Egypt was restricting supplies.
"We expect the plant to come back on stream ... but it
depends on the Egyptian authorities to resume the supply to
Damietta," the company said on Thursday.
A UFG spokesman, asked by Reuters whether the company was
considering selling out of the project, denied that it was.
One analyst said the plant was unlikely to restart this
"The deficit of gas means restoration of Damietta LNG
production in 2013 is unlikely in our view," Arctic Securities
LNG analyst Erik Stavseth said.
Egypt has two LNG plants, Damietta and Idku, for converting
gas into liquid so it can be exported by ship, and a gas export
But the government has decided to keep gas for the domestic
market, which faced fuel shortages and power cuts in the summer.
The country faces simmering political unrest, with
opposition protests and calls for the overthrow of President
Rising energy demand combined with falling output from
domestic gas fields saw Egyptian LNG exports in 2012 decline to
4.7 million tonnes, compared with a combined export capacity at
Damietta and Idku of 12.2 million tonnes.
The loss of more Egyptian export capacity threatens another
year of constrained LNG supplies globally, potentially pushing
spot prices towards record highs this year.
One major contributing factor to high LNG prices is the
continuous plant outages driven by maintenance and reduced gas
supplies to export terminals. Egypt accounted for a significant
part of the overall global decline in LNG output.
Output from Egypt's other LNG plant at Idku also dropped
this year, operator BG Group said in its annual financial
results this week.
Unlike Damietta, gas supplies to Idku have not been
completely cut off, but the plant is struggling to secure feed
gas from BG's offshore gas field, which is not expected to see
an increase in output before 2014, BG said.
Approximately 60 percent of Egyptian LNG exports in 2012
headed for Asia.
(Writing by Sonya Dowsett; Editing by Anthony Barker)