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Natural gas find fuels Egypt’s needs

Fady Labib

06 Oct 2015 1:00 pm

 

It was an exciting find. Almost a month ago, Italian energy giant Eni S.p.A. announced the discovery of Zohr, the largest ever offshore natural gas field in the Mediterranean, located in the Shorouk block. The new gas field ranks among the largest worldwide; it currently ranks 20th, and according to Eni it is the fourth largest discovery in the last 10 years. According to Egyptian energy experts, it should work to meet a large portion of Egypt’s energy needs for many decades to come.

The International Monetary Fund (IMF) declared in a statement that the recently discovered natural gas field inside Egypt’s territorial waters in the Mediterranean is expected to improve the energy situation in Egypt and boost the country’s economy.

Eni was awarded the licence to operate the offshore Mediterranean concession as a result of rounds of bidding held in 2013 by the Egyptian Natural Gas Holding Co. (EGAS). The agreement was signed in January 2014 between Eni, EGAS and the Ministry of Petroleum.

 

Huge reserves

Eni, which has been operating in Egypt since 1954, labelled the new gas find “supergiant” as it contains gas reserves estimated at 30 trillion cubic feet, which is equivalent to 5.5 billion barrels of oil, and covers an area of 100 square kilometres. The gas prospect is located between a depth of 1450 and 4131 metres and passes through a 2000-foot-thick hydrocarbon reservoir (equivalent to 630 metres) of rock formations dating back to the Miocene and Cretaceous periods. The drilling has so far reached the higher level of rock formations and future drilling aims to reach the lower level. Eni plans to resume the drilling operations by the beginning of next year by drilling three wells to ensure “a fast track development of the discovery that will utilise at best the offshore and onshore infrastructures.”

Prime Minister Sherif Ismail, who was Minister of Petroleum when the discovery was made, said that a new company would be established as a subsidiary of the Belayim Petroleum Company (PETROBEL) which is a joint venture between the Egyptian General Petroleum Corporation (EGPC) and IEOC Production B.V., a subsidiary of Eni. The new company is to keep its accounts independent from the mother company with respect to production, expenditures and payback and might be named after the new find; that is Shorouk Petroleum or something of the sort.

So far, Mr Ismail said, estimates have not been fully assessed of the investments made by the Italian company for the development of the new gas find in the Mediterranean’s Shorouk block, where it is the sole licensed operator. Many details concerning the operation and production of the new gas find are still to be discussed with the Italian partner.

 

Huge energy gap

The excavator which drilled the discovery well in 60 days is now undergoing maintenance and will resume operation in December to drill the wells needed for production. Mr Ismail said Eni will present its final development plan to be discussed with EGAS in order to determine issues such as the number of required pipelines to be constructed and the number of wells to be drilled. In addition, the operational capacity of al-Gameel natural gas processing plant in Port Said must be assessed to determine whether it will be able to meet the expected rise in natural gas production.  The daily production is expected to reach 2.5 to 3 billion cubic feet of natural gas, compared with its current daily production of 1 billion cubic feet.

Ibrahim Saleh, former head of EGPC, told Watani that the discovery of the new natural gas field Shorouk/Zohr was a huge addition to Egypt’s mineral wealth. Even though the new find was very promising, Mr Saleh said that it was still too early to talk about the real magnitude and potential of the new natural gas field. The media and some officials went as far as describing it as the largest gas field in the world, which is actually an overstatement. The find is considered highly important and could produce enough natural gas to meet Egypt’s energy needs for the coming 20 or 30 years, but Egypt’s energy gap is enormous and may consume whatever production this field would yield.

During the past few years, the energy gap has been so big that many factories have closed down because they lacked the energy supply needed for production.

 

More to follow

Mr Saleh said that it must also be taken into account that the production of natural gas from the new field required an extensive production plan where offshore production platforms must be built and pipelines constructed to transport the natural gas from the sea to the processing plants onshore and then to the distribution networks. All this means that the new gas field will not be operational before three or four years.

Mr Saleh said that the discovery of Shorouk/Zohr gas field was an indication that other discoveries would probably follow in the same area, and was an incentive for other companies operating in the Mediterranean to work hard on making new finds.

He explained that the find was located inside Egypt’s territorial waters and was therefore considered fully secured against any international claims. He said that the area adjacent to the Shorouk block on the east belonged to Israel while the adjacent area on the north belonged to Cyprus.

As for the current energy situation in Egypt, Mr Saleh said that Egypt currently imports petroleum, diesel and oil. The country also imports about 25 to 30 per cent of its needs from the Algerian company SONATRACH, and before that imported it from Russia and Qatar. Although Egypt is now an importer of LNG (Liquefied natural gas), the only gasification plants available are carried on board two ships docked in Ain al-Sukhna port. This is because Egypt was an exporter of LNG during the 2000s but in 2010 had to halt natural gas production in the Mediterranean because of issues concerning the provisions of international maritime law regarding the exploitation of natural resources on the seabed. The crisis was resolved in 2014 and Egypt went back to gas exploration.

 

Export opportunity

The new natural gas find is of prime importance because it will redraw the map of energy distribution in the Mediterranean, says geological expert and former head of the Egyptian General Survey Authority Ahmed Abdel-Halim. He expects that future gas finds will allow Egypt to regain its role as natural gas exporter to neighbouring consumers such as Europe and Turkey. Natural gas exports will constitute a good source of foreign currency, especially in that drilling companies cannot sell their share of the product unless they are granted permission from the Egyptian State, Mr Abdel-Halim says.

According to Abdallah Ghorab, former Minister of Petroleum, the cost of extracting natural gas from the Shorouk block will be quite high and production from the field should not be expected any time soon. However, Mr Ghorab believes that the new find and others that will follow will turn Egypt into a key distributor of natural gas in the region because the two main competitors, Israel and Cyprus, lack the necessary infrastructure. Most energy sources are available in Egypt, he says; they simply need to be managed efficiently to achieve optimal usage. For instance, natural gas is considered the most economical means of electricity generation, which consumes 70 to 75 per cent of natural gas production. The remaining amount of natural gas is not enough to meet the full needs of the industry sector and is mainly used for export-oriented industries.

 

 

Natural gas find fuels Egypt’s needs 2

 

Watani International

6 October 2015

 

 

 

 

 

 

 


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