A helping hand for the EU

Ahmed Kotb , Wednesday 22 Jun 2022

A recent agreement with the European Union will see Egyptian and Israeli gas exports covering part of Europe’s needs, writes Ahmed Kotb

A helping hand for the EU
Zohr field enhanced Egypt s export capacitiy.

 

Egypt, Israel, and the European Union last week signed a memorandum of understanding (MoU) to export Israeli liquefied natural gas to Europe via Egypt.

The signing of the MoU took place on the sidelines of the seventh ministerial meeting of the East Mediterranean Gas Forum in Cairo, with the participation of Minister of Petroleum Tarek Al-Molla, President of the European Commision Ursula von der Leyen, Israeli Minister of Energy Karine Elharrar, and EU Commissioner for Energy and Climate Kadri Simson.

Europe has been seeking to meet part of its gas needs through supplies from the Eastern Mediterranean as part of a plan to compensate for part of its Russian gas imports.

The gas export deal is a commitment to share natural gas with Europe and help it diversify its energy sources. It will last for three years with an automatic two-year extension, according to the Israeli Energy Ministry.

“This is a historic agreement between Egypt, Israel, and the European Union,” said Von der Leyen, noting that the MoU represented an opportunity for energy security and regional cooperation.

Under the export agreement, the EU will encourage European companies to participate in exploration bids in Israel and Egypt. It could help to fund the development of energy infrastructure in the two countries and work with Egypt and Israel to reduce methane emissions, she said.

 Simson praised the infrastructure for the gas industry that Egypt enjoys, saying it would contribute positively to strengthening and supporting cooperation between Egypt and the EU in various natural gas activities.

She also praised the advanced technologies in use in the Zohr Field, the largest natural gas field in the country, and Egypt’s ability to operate one of the most important discoveries made in the Eastern Mediterranean region.

The agreement came in the light of Europe’s efforts to secure its energy needs at a time when Russia has already begun to reduce gas supplies to Germany by 40 per cent and to pump 100 million cubic metres of gas per day instead of the previous 160 million cubic metres through the Nord Stream pipeline.

This has raised the fears of the European countries and prompted them to work on diversifying energy sources and finding alternatives to Russian gas.

Al-Molla said that Egypt’s agreement to export gas to Europe was permanent. He explained that Egypt exports about 500 million cubic feet of gas per day to Europe in the summer, while this quantity exceeds one billion cubic feet in the winter.

But Egypt alone might not be able to meet all of Europe’s needs for natural gas, which depends on Russian gas for about 40 per cent of its needs at present, he said.

According to a statement by the Russian company Gazprom, Russia exported 185.1 billion cubic metres of gas last year, with Germany, Italy, and Turkey consuming the majority of the Russian gas exports.

Russia exported about 155 billion cubic metres of gas to the EU countries in 2021, of which 140 billion cubic metres represented pipeline deliveries, with the average monthly supply amounting to about 11.6 billion cubic metres of gas.

Egypt is seeking to become a regional energy hub by exporting its surplus natural gas production as well as the surplus gas production of neighbouring countries to Europe through two liquefaction stations located on the Mediterranean in Idku and Damietta.

“The agreement reflects the strong European desire to benefit from Egypt’s logistical capabilities and its important geographic location to fill the expected void in the energy exported to the European countries, specifically natural gas,” said Ramadan Abul-Ela, a professor of petroleum engineering at Suez University, adding that Egypt’s role in the natural gas agreement with Israel and the EU was pivotal.

“Without the Egyptian infrastructure, liquefaction plants, and deep-water pipelines, the agreement cannot be implemented,” he said.

Abul-Ela said that the implementation of the agreement would start after the completion of the needed infrastructure and the connection of pipelines between the Israeli fields and the Zohr Field. Either Egypt would buy gas from Israel and then sell it, or it would take gas transit and liquefaction fees, he said.

Egypt has become a major player in the global gas market and has maintained its production and export levels of natural gas despite the Covid-19 pandemic and its repercussions, Abul-Ela noted.

According to the Ministry of Petroleum and Mineral Resources, the volume of Egypt’s gas production in 2020-21 reached 66.2 billion cubic metres. Consumption reached 62.9 billion cubic metres, while the surplus was 3.3 billion cubic metres.

The ministry stated that 30 gas field development projects were implemented from July 2014 to September 2021, with a total investment of about LE514 billion.

During 2020, Egypt signed 22 agreements to search for oil and gas with international companies with a minimum investment of about $1.6 billion and a total signing grant of $139 million to drill 74 wells.

Maritime boundary demarcation agreements have contributed to the expansion of exploring for natural gas fields, including an agreement signed between Egypt and Cyprus in September 2014.

A maritime boundary demarcation agreement with Saudi Arabia was signed in April 2016, allowing the start of oil and gas exploration for the first time in the area. An agreement with Greece was also signed in August 2020.

On Tuesday, Egypt, Lebanon, and Syria signed an agreement to transport 650 million cubic metres of gas annually from Egypt to Lebanon via Syria.

According to the agreement, the gas will be pumped through a pipeline to the Deir Ammar power station in northern Lebanon, where it will add about 450 Megawatts to the grid, equivalent to about four additional hours of electricity per day.

Among the factors that have contributed to Egypt’s transformation into an exporter of liquefied natural gas, the total production capacity of the liquefaction plants in Idku and Damietta has reached 12 million tons annually, in addition to the return of the Damietta plant to exports after an eight-year hiatus.

Egypt exported the first shipment of liquefied natural gas from the plant in March 2021, which led to an increase in liquefied gas exports by 123.3 per cent to reach 6.7 million tons in 2021 compared to three million in 2013.

Egypt succeeded in achieving self-sufficiency in natural gas in September 2018, and then returned to exporting natural and liquefied gas. 2018-19 recorded the production of 66.1 billion cubic metres of gas, consumption of 61.8 billion cubic metres, and a surplus of 4.3 billion cubic metres.

Egypt initiated the idea of inaugurating the East Mediterranean Gas Forum during the Crete Summit meeting held between the leaders of Egypt, Cyprus, and Greece in October 2018. The forum’s charter was signed in September 2020 and entered into force in March 2021.

The forum includes seven members: Egypt, Greece, Cyprus, Palestine, Israel, Jordan, and Italy. France later joined them, and the US, EU, and World Bank joined as observers. The forum is an umbrella group for cooperation and regional integration to exploit the abundant gas resources of the Eastern Mediterranean for the maximum benefit of the countries of the region.

A version of this article appears in print in the 23 June, 2022 edition of Al-Ahram Weekly.

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