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Abu Dhabi, UAESunday 22 July 2018

Egypt may stop LNG tenders as it prepares for exports next year 

Imports of liquefied natural gas may stop in the fourth quarter

Tarek El-Molla, Egypt's oil minister is confident the country can no longer rely on imported LNG. Satish Kumar / The National
Tarek El-Molla, Egypt's oil minister is confident the country can no longer rely on imported LNG. Satish Kumar / The National

Egypt may have just issued its last LNG tender, setting the stage to resume exports next year.

Imports of liquefied natural gas may stop in the fourth quarter, allowing for exports to start early next year as Eni’s Zohr and other gas fields boost production in the country and help to draw more foreign investment, Egypt's petroleum and mineral resources minister Tarek El-Molla, said. The final LNG import tender was issued to cover third quarter domestic requirements, and the fourth quarter should be “imports-free,” he said.

“I don’t think there will be more tenders beyond this, I think this is it,” Mr El-Molla said on Saturday in an interview in Vienna. “Local production should cover our needs.”

Egypt has to import liquefied gas at high costs to meet its energy needs, with traders from Glencore to Trafigura Group winning tenders to supply the fuel in past years. However, Eni’s discovery of Zohr in August 2015 has the potential to satisfy much of the nation’s demand and may even transform the country into having a surplus of supplies.

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The giant Zohr field will increase gas production to 1.7 billion cubic feet a day by August from 1.2 billion cubic feet, the energy minister said. Egypt’s total output is 6 billion cubic feet a day, and that should increase to 6.5 billion by September, he said.

Once it has a sufficient surplus, Egypt will start compensating companies that have rights to operate the country’s LNG export terminals, including Royal Dutch Shell and Union Fenosa, Mr El-Molla said. Egypt expects to attract $10 billion both this year and next year in foreign investment in its oil and gas industry, he said.

“First thing we will do once we have a surplus, we will supply our partners with some of those quantities,” he said. “So many years have been passing without them getting the quantities they were supposed to receive so this is one of our priorities once we have a surplus.”

The country has also adopted a flexible gas-pricing formula to encourage investment and boost supply, Mr El-Molla said.

Egypt previously paid a fixed price of $2.65 per thousand cubic feet, and the price now is in the range of $3 to $5.88, he noted. A regulatory authority was set up about two months ago and is now working on setting up a tariff system for private companies to use the state’s gas infrastructure and to license them to trade gas, he said.