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Undersea gas fires Egypt’s regional energy dreams

By AFP - Nov 18,2018 - Last updated at Nov 18,2018

Egyptian President Abdel Fattah Sisi (left), Greek Prime Minister Alexis Tsipras (centre) and Cypriot President Nicos Anastasiades shake hands at a summit in Crete, on October 10 (Reuters file photo)

CAIRO — Egypt is looking to use its vast, newly tapped undersea gas reserves to establish itself as a key energy exporter and revive its economy.

Encouraged by the discovery of huge natural gas fields in the Mediterranean, Cairo has in recent months signed gas deals with Israel as well as Cyprus and Greece.

Former oil minister Osama Kamal said Egypt has a “plan to become a regional energy hub”.

In the past year, gas has started flowing from four major fields off Egypt’s Mediterranean coast, including the vast Zohr field, inaugurated by Egypt’s President Abdel Fattah Al Sisi.

Discovered in 2015 by Italian energy giant Eni, Zohr is the biggest gas field so far found in Egyptian waters.

The immediate upshot has been that since September, the Arab world’s most populous country has been able to halt imports of liquified natural gas, which last year cost it some $220 million (190 million euros) per month.

Coming after a financial crisis that pushed Cairo in 2016 to take a $12 billion loan from the International Monetary Fund, the gas has been a lifeline.

Egypt’s budget deficit, which hit a record 103 per cent of gross domestic product in the financial year 2016-17, has since fallen to 93 per cent.

Gas production has now hit 184 million cubic metres a day.

Having met its own needs, Cairo is looking to kickstart exports and extend its regional influence.

It has signed deals to import gas from neighbouring countries for liquefaction at installations on its Mediterranean coast, ready for reexport to Europe.

 

 Israel, Cyprus deals 

 

In September, Egypt signed a deal with Cyprus to build a pipeline to pump Cypriot gas hundreds of kilometres to Egypt for processing before being exported to Europe.

Then in February, Egypt, the only Arab state apart from Jordan to have a peace deal with Israel, inked an agreement to import gas from Israel’s Tamar and Leviathan reservoirs.

A US-Israeli consortium leading the development of Israel’s offshore gas reserves in September announced it would buy part of a disused pipeline connecting the coastal city of Ashkelon with the northern Sinai Peninsula.

That would bypass a land pipeline across the Sinai that was repeatedly targeted by militants in 2011 and 2012.

The $15-billion deal will see some 64 billion cubic metres of gas pumped in from Israel fields over 10 years.

Ezzat Abdel Aziz, former president of the Egyptian Atomic Energy Agency, said the projects were “of vital importance for Egypt” and would have direct returns for the Egyptian economy.

They “confirm the strategic importance of Egypt and allow it to take advantage of its location between producing countries in the east and consuming countries of the West”, he said.

Petro-processing dollars 

 

The Egyptian state is also hoping to rake in billions of dollars in revenues from petro-chemicals. 

Its regional energy ambitions are “not limited to the natural gas sector, but also involve major projects in the petroleum and petrochemical sectors”, said former oil minister Kamal.

Minister of Petroleum and Mineral Resources Tarek El Molla recently announced a deal to expand the Midor refinery in the Egyptian capital to boost its output by some 60 per cent.

On top of that, the new Mostorod refinery in northern Cairo is set to produce 4.4 million tonnes of petroleum products a year after it comes online by next May, according to Ahmed Heikal, president of Egyptian investment firm Citadel Capital.

That alone will save the state $2 billion a year on petrochemical imports, which last year cost it some $5.2 billion.

Egypt is also investing in a processing plant on the Red Sea that could produce some four million tonnes of petro-products a year — as well as creating 3,000 jobs in a country where unemployment is rife.

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