(Reuters) - Egypt began importing gas from Israel’s largest offshore gas field, Leviathan, on Wednesday, a step Cairo hopes will help it become a regional energy hub.
Rapid growth in Egypt’s natural gas supplies, boosted by the discovery of the Mediterranean’s largest field, turned it from a net importer to exporter in late 2018.
Egypt’s Dolphinus Holdings signed deals with partners in Israeli gas fields to buy an estimated $19.5 billion of gas.
Partners in Israeli fields Leviathan and Tamar will supply Egypt with 85.3 billion cubic metres (bcm) of gas over 15 years.
Texas-based Noble Energy, Israel’s Delek Drilling and Ratio Oil own Leviathan. Noble, Delek Drilling, Isramco and Tamar Petroleum are leading partners in the Tamar field.
It is unclear how much of the gas imported from Israel will be re-exported.
Egypt hopes its infrastructure and location will help it become a link for energy trading between the Middle East, Africa and Europe.
Crucially, Egypt has two liquefied natural gas (LNG) plants that have been idled or running at less than their potential capacity and can be used for exports.
The bulk of Egypt’s gas exports is liquefied natural gas (LNG) sent from its Idku liquefaction terminal, run by Egyptian LNG, a joint venture between the state-owned Egyptian General Petroleum Corporation and EGAS, as well as Royal Dutch Shell, Petronas and Engie.
It has two operational LNG trains, each with a capacity of 3.6 million tonnes, according to Egyptian LNG’s website. The site has room for an additional four trains.
Egypt has a second gas liquefaction plant at Damietta that has been idle since February 2013 after gas production slipped and the government diverted gas exports to the domestic market.
It has also been at the center of a dispute between Egypt and Italian-Spanish company Union Fenosa Gas (UFG), which has a majority stake.
Damietta has an annual capacity of up to 5 million tonnes and can store 130,000 tonnes of LNG, government websites show.
Egypt exported the equivalent of 172.8 billion cubic feet (bcf) LNG in the 2018/19 fiscal year ending in June, according to EGAS’s annual report. Egypt also exported 53 bcf to Jordan by pipeline and imported 51.6 bcf of LNG in the same period.
Egypt also has a network of gas pipelines, the most significant of which is the Arab Gas Pipeline which extends across northern Sinai via Al-Arish to Jordan and on to Syria and Lebanon. Egypt currently only exports gas to Jordan through it.
The Arab Gas Pipeline connects to Israel via the underwater Arish-Ashkelon pipeline, which Egypt once used to export gas to Israel. Israeli gas from the 22 trillion cubic feet (tcf) offshore Leviathan and later the smaller Tamar field will flow to Egypt via that pipeline.
The Arish-Ashkelon pipeline is owned by the East Mediterranean Gas Company (EMG). Noble and Delek partnered with Egypt’s East Gas Company in a venture called EMED to buy a 39% stake in EMG to facilitate the export deal.
Egypt also has the Sumed pipeline, which carries oil from a terminal at Ain Sokhna on the Red Sea to the Sidi Kerir terminal on the Mediterranean.
The 2015 discovery of the giant Zohr field by Italy’s Eni was a turning point, unlocking interest in Egypt’s energy market. Zohr, located in the Shorouk concession, holds an estimated 30 tcf of natural gas.
Egypt produced 2.52 tcf of gas in 2018/19, the Egyptian Natural Gas Holding Company (EGAS) said in its annual report.
The company made 15 gas discoveries in the year and seven gas development projects were came on stream at a cost of $10.6 billion. Fifty-six wells came on stream during the year.
Some 58% of Egypt’s gas production comes from the Mediterranean, 20% from the Western Desert, 20% from the Nile Delta region and 2% from the Gulf of Suez and Sinai peninsula, according to EGAS.
Cairo’s plans to become an energy hub faces some risks.
In November Turkey, a political rival of Egypt’s, signed an agreement on maritime boundaries in the Mediterranean with Libya’s internationally recognised government. The accord is seen primarily as a move to control hydrocarbon drilling rights.
Greece said in December that it, Cyprus and Israel will go ahead with developing a pipeline channelling natural gas from the eastern Mediterranean directly to Europe, potentially undercutting Egypt’s hub goals.
Militancy is also a threat. Egypt has been battling an Islamist insurgency concentrated in North Sinai, through which many gas pipelines run, since 2011.
Compliled by Yousef Saba; Editing by Aidan Lewis and David Evans
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