A timeline of gas deals
 
 
Courtesy: shutterstock.com
 

In early 2014, Egyptian officials publicly admitted that Egypt, once an exporter, was teetering on the edge of consuming more natural gas than it produces. By that time, ordinary Egyptians were all-too-aware that there was a problem. Gas shortages translated into electricity cuts. Blackouts, once a summertime phenomenon, became a year round occurrence.

In the year that followed, Egypt has seen a series of crises, a few controversies and some tangible steps toward resolving Egypt’s gas shortage.

January 27, 2014: BG declares force majeure

UK-based energy company BG Group announced that it was unable to fulfill export contracts because the Egyptian government was diverting virtually all of the company’s production into the domestic market.

February 27: Union Fenosa sues Egypt

Union Fenosa, the Spanish-Italian consortium that operates the Damietta export facility filed a lawsuit against Egypt at the World Bank’s International Center for Settlement of Investment Disputes. Like BG, the company claimed that it was unable to export gas because of diversions by the Egyptian government.

April 2: Cabinet approves coal imports

One key side effect of the natural gas shortage was to add weight to arguments in favor of overturning a ban on coal. Lobbying efforts were led by cement producers, who said they needed access to a replacement fuel, since the government was failing to provide them with gas. Despite strong opposition from civil society and the Environment Ministry, the cabinet eventually voted in favor of imports. Although a law regulating coal use has not yet been finalized, cement companies have already begun testing the fuel, and the planning process has begun for coal-fired power stations.

May 5: Gas deal with Israel

Israeli Delek Group and US-based Noble energy, the operators of Israel’s Tamar natural gas field, announced that they had signed a letter of intent to pipe fuel from Tamar to Union Fenosa’s liquefaction plant in Damietta, located on Egypt’s Mediterranean coast. Although the agreement was non-binding and subject to government approval, news of the deal caused a scandal — in part because until April 2012, Egypt exported gas to Israel, a highly controversial deal.

June 27: Another gas deal with Israel

In a deal mirroring the agreement with Union Fenosa, the Noble Energy and Delek Group signed a letter of intent with BG to ship gas from the Leviathan gas field to BG’s export facility in Idku.

July : Gas subsidies cut

July saw two rounds of fuel subsidy cuts. First, on July 4, the government slashed subsidies on car fuel, sending prices up overnight. Natural gas, which powers many taxis, saw the highest price jump, rising 175 percent to reach LE1.10 per cubic meter. The following day, the government raised natural gas prices for industry, with increases ranging from 30 to 75 percent.

August: UAE loans US$9 billion to buy fuel

The United Arab Emirates agreed to loan Egypt around US$9 billion to finance the purchase of petroleum products. At the time, Egypt’s debts to energy companies were estimated to stand at around $6 billion. 

September: Union Fenosa reportedly offers to drop lawsuit

Appearing to confirm widely circulated rumors, anonymous sources tell Reuters that Union Fenosa is willing to drop its multi-billion dollar lawsuit against Egypt if the government paves the way for a deal to process gas from Israel in the company’s Damietta facility.

October: Egypt starts paying off its debts

Egypt’s government paid off US$1.4 billion in energy arrears in October. This was followed by two payouts in December amounting to a $3.6 billion payout in December and January payments of $350 million to BG group and $60 million to Dana Gas.

October 19: Yet another Israeli Gas Deal

The operators of Israel’s Tamar Gas field announce they signed a non-binding letter of intent to supply Egypt with 250,000 million BTUs per day for a period of seven years. The gas would be shipped from Ashkelon in Israel to Arish in Egypt, via an undersea pipeline owned by the Eastern Mediterranean Gas company that was originally built to ship gas from Egypt to Israel. 

November 3: Egypt rents an import terminal

After two years of delays and failed negotiations, Egypt finally signed a contract to rent a floating terminal that will allow the company to buy liquid natural gas. Once the terminal is in place, which is expected to happen in March, Egypt will finally be able to import liquified natural gas shipped from anywhere in the world. 

November 29: EGPC takes out US$1.5 billion bank loan

Egypt’s state-owned gas company secured $1.5 billion to pay off its gas and oil debts, through a syndicated loan from the National Bank of Egypt, HSBC and the National Bank of Abu Dhabi.

December 23: Israel declares Delek-Noble a cartel

Israeli anti-trust authorities announce that Delek Group and Noble Energy — the companies planning to export Israeli gas — control too large a share of Israel’s offshore gas fields. A final decision on the case has been delayed until March, but the legal problems have called into question the future of the companies’ deals to export from Israel to Egypt and other countries. However, according to unconfirmed reports, Noble Energy has continued negotiations with Egypt’s government.

December 29: Gas Deal with Algeria

Egypt and Algeria’s Sonatrach sign a contract to supply Egypt with 6 LNG shipments between April and September 2015. This is Egypt’s first deal to import liquified gas via the newly secured floating terminal.

January 2015: Egypt signs a spate of exploration deals

During the month, Egypt signs at least 15 gas exploration deals and amends two more. Agreements are made for both on and offshore prospecting with companies including BP, Petroceltic, Shell, Transglobe, Dana Gas, Edison and IEOCC. According to the Ministry of Petroleum, by the end of January, Egypt had signed 53 new agreements to drill 228 oil and gas exploration wells since November 2013, with minimum investments of about $2.9 billion and about $431.8 million signature bonuses, to drill 228 wells.

January 25: Egypt awards US$2.2 billion in import deals

After calling for bids in December to supply 75 shipments of LNG, Egypt awarded tenders to four international firms. In the following weeks, contracts were signed with Dutch trading house Trafigura to supply 33 shipments over the next two years; with Hong Kong–based Noble Clean Fuels (not to be confused with Noble Energy, which operates in Israel) to supply seven cargoes; and with Swiss-based Vitol to supply nine shipments. A deal with UK-based BP to supply 21 shipments is still in final negotiations.

February 16: Making plans with Cyrus

Egypt and Cyprus sign a memorandum of understanding to cooperate in the oil and gas sector, including launching feasibility studies to pipe gas from Cyprus’ Aphrodite field to Egypt. The deal comes after a series of meetings in which Egypt and Cyprus agree to expedite exports of gas from Cyprus to Egypt. Not only does this deal ease Egypt’s access to Cyprus’ as-yet-untapped gas reserves, it also annoys Turkey, which opposes Cypriot exploration of offshore resources.

February 25: Ministry to liberalize gas sector

As part of a plan to liberalize Egypt’s gas sector, the Oil Ministry announces it is establishing a new unit in state gas firm EGAS, charged with overseeing the sale and distribution of natural gas by private firms. Gas importers will be permitted to use the gas for their own purposes or to re-sell it to other companies, paying a tariff to transport gas via the national grid. The ministry also said it plans to allow any party within Egypt to import gas from anywhere in the world, providing it does not affect Egypt’s national security — possibly signaling that the government will not object to imports from Israel.

March 6: BP finalizes West Nile Delta Deal

UK-based BP signed a final agreement in a massive US$12 billion gas project that is expected to produce up to 1.2 billion cubic feet of gas per day, equivalent to 25 percent of Egypt’s current total production. Gas will be produced from two offshore blocks, with reserves estimated at 5 trillion cubic feet of gas and 55 million barrels of condensates. An initial agreement was signed in July 2010 with the project expected to come online in late 2014, but was delayed after the 2011 revolution. BP has not issued a timeline for the project, but in July 2014, when negotiations resumed, Egypt’s Oil Ministry predicted the project would begin producing gas in 2017.

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Isabel Esterman