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Sunday, 26 August 2018

Egypt could be processing natural gas from Cyprus by 2022

Natural gas from Cyprus’ Aphrodite field could begin flowing into Egypt by 2022, according to comments attributed to Cypriot Energy Minister Giorgos Lakkotrypis last week by the Cyprus Mail. The plan, however, is contingent on talks between the Cypriot government and a consortium made up of Noble Energy, Israel’s Delek, and Royal Dutch Shell, who are looking to renegotiate the financial terms of their contract for the field, according to Lakkotrypis. “The consortium wants to renegotiate because current, lower global oil prices don’t make viable a preliminary [agreement] to sell Aphrodite gas to a Shell-operated processing plant in Egypt,” the minister said, according to the Associated Press.

Background: Egypt and Cyprus had reached a preliminary agreement earlier this month to connect the Aphrodite field with liquefaction plants in Egypt via an underwater pipeline worth up to USD 1 bn. The move is part of Egypt’s strategy to become the natural gas export hub for the Eastern Mediterranean as it plans to re-export a portion of the LNG to Europe after satisfying local demand. Oil Minister Tarek El Molla had previously said that Egypt would reach natural gas self-sufficiency by January 2019 as it ramps up production from the Zohr gas field and other projects.

On a related note: Yale Global says that Egypt is “the most logical” gas export hub for the region despite some “pending issues.” Several factors play out in our favor, including existing refining and export infrastructure, location, and access to suppliers and buyers in the region. “Some of Egypt’s plans, however, may be too optimistic — from the quality of the gas in Zohr to the Mediterranean underground pipelines — and the nation is an immense market itself, compelling the government to fulfill local needs before considering exports.” The security situation in the Sinai Peninsula and Egypt’s local consumption needs also remain points of concern, and bringing our hub plans to fruition remains contingent on careful policy and more transparent local communication.

In other energy news: The Electricity Ministry plans to begin work on a power interconnection project with Nicosia in December, sources tell Al Mal. The project, which could see the two countries exchange up to 2 GW of power, is also expected to extend into Greece and will take about 36 months to complete, according to the sources. President Abdel Fattah El Sisi had met in June with executives from EuroAfrica Interconnector to discuss the USD 4 bn project after EuroAfrica finished feasibility studies. The interconnection project with Cyprus and Greece is part of a larger plan to link to power grids in Africa and Europe.

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