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Wed 25 Apr 2007 12:28 PM

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Egypt is the doorway to Europe

Currently the world's sixth largest LNG producer, Egypt is looking increasingly to its gas supplies as its oil wealth dries up.

Major recent gas discoveries and a large domestic market will position natural gas as the primary growth engine of Egypt's energy sector for the foreseeable future.

With a doubling of estimated reserves to 70 trillion cubic feet in the last five years alone, Egypt now produces more gas than oil. Private sector investment has been encouraged by the Egyptian government and state companies with the aim of boosting proven gas reserves to 30 trillion cubic feet (cf) by 2010. These have included both majors and independents, in offshore as well as onshore activities. In addition, the country's first liquefied natural gas (LNG) export terminal began operating in January 2005. The Suez Canal and Sumed pipeline are strategic routes for Persian Gulf oil shipments, making Egypt an important transit corridor.

"Egypt is almost unique in the area in having all the main utilisation approaches for natural gas at work in parallel - a large domestic market, given its population, use for value-added industrial feedstock, and also exports through both pipeline and LNG, enhanced by its proximity to European and Middle East markets," said Majid H. Jafar, business development director and board member of Dana Gas.

Meanwhile, Egyptian oil production has been declining for the past few years due to the lack of significant discoveries. Oil production, which peaked in 1996 at 922 000 barrels per day (bpd), fell to just over 700 000 bpd by the end of 2005. At the same time, oil consumption has increased around 150 000 bpd over the same period.

With the rising domestic demand for energy, natural gas is a reliable alternative, especially since reserves have been increasing since the introduction of gas exploration activities by the government. Alternative energy sources, such as nuclear power, are viewed as long term considerations, and come embroiled in political considerations.

In 2001, the Egyptian government formed Egyptian Natural Gas Holding Company (EGAS) to mediate the country's natural gas sector. It was part of a wider government effort to double natural gas exports by 2011. Most of this increase is intended to come from new natural gas discoveries offshore from the Nile Delta, in addition to smaller finds in the Western Desert.

"The outcome of recent years...affirms the fact that the strategy of the ministry, adopted at the beginning of the year 2000, has been realistically implemented, surpassing the expected targets," said Hamdi El-Banbi, Egypt's minister of petroleum.

Port Fuad, South Temsah, and Wakah are among the most important recent offshore field developments, with the Obeiyed field developing into an important natural gas area in the Western Desert.

Obeiyed and Khalda will play a main role in increasing Egypt's natural gas production in the near future, appealing to developers because of their low operating costs, compared to that of the Mediterranean. Production can easily be transported upstream, care of a vast network of pipelines and processing plants. Currently producing over 300 million cf per day, Obeiyed boasts probable natural gas reserves of around five trillion cf. Khalda is producing about 300 million cf per day.

Two new natural gas discoveries were made in the Khalda concession in 2003 by Apache, which subsequently signed an agreement with EGAS in 2004 for the development and sales of the output. Commercial quantities of natural gas have been shown at all of the offshore wells so far completed in the country, with reserves of around three trillion cf estimated to lie in the Western Mediterranean block. Commercial production of the Scarab/Saffron discoveries began producing in early 2003, and currently yields 700 million cf per day. Malaysia's Petronas bought the controlling stake in the fields from Edison in April 2003.

...Read the rest in the May edition of
Oil & Gas Middle East.

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