OMC 2017: Zohr Exports Depend on Regional Cooperation

EGYPT’S DOMESTIC NEEDS COME FIRST, EXPORTS DEPEND ON IMPROVED MARKET AND REGIONAL AGREEMENTS

March 31, 2017
by SW

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Egyptian Minister of Petroleum Tarek El Molla (left) and Cypriot Minister of Energy Yiorgos Lakkotrypis (right) at the OMC 2017 in Ravenna, Italy [Photo: Lorenzo Holt]
Future exports of natural gas from the Egyptian-owned Zohr field in the eastern Mediterranean will depend on regional cooperation and a stronger market, Egypt’s Minister of Petroleum said at the Offshore Mediterranean Conference (OMC) in Ravenna, Italy on March 29, 2017.

Most of the field’s capacity will be consumed domestically with the aim of achieving energy self-sufficiency in the country by 2018, Egyptian Minister of Petroleum Tarek El Molla said at an OMC panel discussion, but the possibility of exports will depend on an improved natural gas market and the cooperation between regional countries.

“It’s going to be a peacemaker,” El Molla said, speaking of the Zohr field, “[Oil production companies] need countries in agreement, complementing each other and not competing with different projects.”

The Zohr field, discovered in 2015 off the northern coast of Egypt by Italian energy company Eni, is the largest natural gas deposit yet discovered in the Mediterranean. Containing approximately the equivalent of 5.5 billion barrels of oil, it is the most recent discovery in a cluster of fields found in Israeli, Lebanese and Cypriot waters since 2009. The field almost doubles Egypt’s gas reserves.

The discovery of the Zohr field was a boon to the Sisi government in Egypt which had been reliant on fossil fuel imports and had been seeking reliable energy sources to stay civil unrest. However, the field also attracted interest as a new source of energy exports for Europe.

It’s important for the EU not only to have a diversification of supply sources but also of routes,” Cyprus’ Minister of Energy Yiorgos Lakkotrypis said during the discussion.

In 2014, Europe relied on Russia for 37.5% of it’s natural gas imports, according to Eurostat.

“The EU has a big role to play in the Med. It’s not easy but we have no other option,” Lakkotrypis said.

However, the feasibility of exports from the Zohr field to Europe is hampered by growing Egyptian and regional demand, low gas prices, global oversupply, and regional territorial disputes.

The global gas market might not improve until 2025, discussion panel host and chairman of Centrex Italia Massimo Nicolazzi said, making the construction of costly export infrastructure risky.

The exploitation of existing infrastructure is the most cost-effective way to export the gas, El Molla said, specifically referring to two unused liquefied natural gas (LNG) terminals on Egypt’s coast.

“Regime change led to the LNG facilities going idle,” El Molla said. “They were built with expansion in mind, however, and adding two trains and expanding them is cheaper than building a new LNG facility in a neighboring country.”

The other main option — a pipeline from the Zohr field to Turkey — would likely have to unite nearby Lebanese, Israeli and Cypriot fields and traverse Cypriot and Turkish waters. Given the political volatility of the region and Cyprus’ ongoing dispute with Turkey, a pipeline seems unlikely to be built soon.

“We will go nowhere without cooperation,” said Lakkotrypis, “I wish the Med were more like the North Sea.”