The deepwater Zohr gas discovery in Egypt is of major significance to the Eastern Mediterranean region. As the largest gas find in the Mediterranean Sea, Zohr has the potential to supply much of Egypt’s increasing domestic gas demand and will likely have an impact on regional gas commercialization plans, according to new analysis from IHS.
Eni’s announcement in late August describing deepwater discovery well, Zohr 1X NFW, put initial potential reserves at an estimated 30 trillion cu ft of natural gas, or 5.5 billion BOE. IHS Energy analysis estimates that the find has significant technical, commercial and strategic implications for the gas market in Egypt, the region and the industry, where Egypt’s access to monetization infrastructure will likely put it ahead of rivals if commercial terms are right.
“Egypt has fast-growing domestic demand and decreasing production at the same time, so the Zohr discovery represents a major source of relief in the context of increasing gas imports,” said Mohamed Zine, Regional Director for Africa at IHS Energy.
Egypt used to be an exporter of gas, but the country has been facing increasing energy deficits over the last four years.
Before the Arab Spring in 2011, the country had to run its existing LNG export plants below capacity due to lack of gas production. The existing plants in Idku and Damietta have export capacity of almost 13 million metric tons annually, while Egypt also has export pipelines in place to Jordan and Israel. However, as a result of the demand and production imbalance, all of the gas originally slated for exports has been diverted to supply the domestic market, with the Jordan pipeline now used to reverse gas flows to Egypt from Jordan’s LNG import facilities.
“While there are hopes that Egypt’s exports may be revived at some stage, the immediate focus for Zohr will be on the domestic market,” Mr Zine said.
Moreover, the imbalance for domestic needs is such that Egypt needs more big discoveries to have a significant impact on the regional gas market, or make headway with ongoing negotiations to host regional gas discoveries for export through its facilities.
The Zohr development will also depend largely on the gas price offered by the Egyptian government. Gas prices have been increasing, with Eni recently obtaining prices of $5.88/MMbtu. In addition, liberalization of the Egyptian energy sector may allow higher-priced gas to be sold directly to industrial buyers rather than to state-owned companies, a point that is likely to encourage further exploration and may yet help Egypt toward newly framed ambitions to act as a regional gas hub.