Back to the complete issue
Wednesday, 22 January 2020

Egypt to negotiate long-term gas agreements as prices plunge

Plunging gas prices are forcing Egypt to change its gas-selling strategy: Egypt will reduce the amount of liquefied natural gas (LNG) it sells via short-term contracts and negotiate long-term agreements in response to plunging gas prices, Bloomberg quoted Oil Minister Tarek El Molla as saying. The government is currently in talks with international customers to sell gas at USD 5 per mn British thermal units under renewable 12-18-month contracts, El Molla said in an interview yesterday during the World Economic Forum in Davos.

Spot contracts to fall this year: Egypt offered 80 spot LNG tenders last year and this is set to fall further this year. “They’re not giving us the value that we want,” El Molla said. “We canceled several LNG tenders last year because the prices that we received don’t even match the cost of production … This year will be even more challenging if we continue seeing the drop in prices.”

Global gas prices hit 45-month low: Gas prices plunged 5.4% yesterday to hit lows not seen since March 2016.

Damietta LNG plant could restart within weeks: El Molla said that the Damietta LNG facility will reopen “in the coming few weeks” ending a six-year hiatus. This could enable Egypt to double its gas exports from 1 bcf/d currently by the end of the year. The plant will output 500 mncf/day then gradually increase to 700 mncf/day, he said. The Damietta plant has been the subject of a long-running legal dispute between the government and plant operator Union Fenosa Gas. The plant was thought to be on the cusp of opening several times last year but the failure to reach a settlement in the dispute resulted in delays.

EGAS cuts Zohr production by 600 mcf/d: The Egyptian Natural Gas Holding Company (EGAS) has cut gas production from the Zohr field by 600 mcf/d to 2.4 bcf/d, the local press quoted unnamed sources as saying. The sources claimed the decision was motivated by a decline in local consumption and high pipeline pressure.

Enterprise is a daily publication of Enterprise Ventures LLC, an Egyptian limited liability company (commercial register 83594), and a subsidiary of Inktank Communications. Summaries are intended for guidance only and are provided on an as-is basis; kindly refer to the source article in its original language prior to undertaking any action. Neither Enterprise Ventures nor its staff assume any responsibility or liability for the accuracy of the information contained in this publication, whether in the form of summaries or analysis. © 2022 Enterprise Ventures LLC.

Enterprise is available without charge thanks to the generous support of HSBC Egypt (tax ID: 204-901-715), the leading corporate and retail lender in Egypt; EFG Hermes (tax ID: 200-178-385), the leading financial services corporation in frontier emerging markets; SODIC (tax ID: 212-168-002), a leading Egyptian real estate developer; SomaBay (tax ID: 204-903-300), our Red Sea holiday partner; Infinity (tax ID: 474-939-359), the ultimate way to power cities, industries, and homes directly from nature right here in Egypt; CIRA (tax ID: 200-069-608), the leading providers of K-12 and higher level education in Egypt; Orascom Construction (tax ID: 229-988-806), the leading construction and engineering company building infrastructure in Egypt and abroad; Moharram & Partners (tax ID: 616-112-459), the leading public policy and government affairs partner; Palm Hills Developments (tax ID: 432-737-014), a leading developer of commercial and residential properties; Mashreq (tax ID: 204-898-862), the MENA region’s leading homegrown personal and digital bank; Industrial Development Group (IDG) (tax ID:266-965-253), the leading builder of industrial parks in Egypt; Hassan Allam Properties (tax ID:  553-096-567), one of Egypt’s most prominent and leading builders; and Saleh, Barsoum & Abdel Aziz (tax ID: 220-002-827), the leading audit, tax and accounting firm in Egypt.