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Tuesday, 23 March 2021

Damietta LNG plant ships first cargo to Europe

The first Europe-bound LNG shipment from the Damietta liquefaction plant arrived in Belgium on Sunday — almost a month after the facility restarted operations and sent out trial shipments of gas following an eight-year hiatus, according to S&P Global. The cargo, which made its way out of the Damietta Port almost a week earlier, will be sold directly to customers in Europe.

Expect to see two more LNG shipments to be loaded and shipped out of the Idku and Damietta plants by early next month, S&P said. The shipments will be offered on an FOB basis and valued at nearly USD 5.80-5.95/mmbtu.

And Europe will likely overtake Asia as the dominant market for our shipments, as European gas prices are becoming “increasingly competitive versus Asian spot LNG prices.” Egypt has so far shipped 26 LNG cargoes since the beginning of the year, with 18 of those exported to Asian markets, according to the report. The Idku facility also accounted for the bulk of those cargoes.

But there is skepticism on whether we can keep up the momentum: S&P remains uncertain if Egypt’s LNG production will remain high during this summer. There’s optimism that exports will be sustained if Egypt’s spot LNG prices remain above breakeven costs of around USD 5.00-5.50 / mmbtu. “Should spot LNG prices sink below the breakeven price [like last summer] Egypt may again be minded to temporarily curtail supplies,” S&P writes.

Background: The Damietta LNG facility — a pivotal component of our regional natural gas hub ambitions — restarted production last month, following an agreement between the government, state-owned EGAS, plant operator Spanish Egyptian Gas Company (Segas), and Union Fenosa Gas (UGS), the JV between Naturgy and Eni to settle an eight-year ownership dispute. The reopening of the plant removes a major roadblock to Egypt’s plans to export LNG to Europe, and will allow us to maximize the potential of Israeli natural gas imports. Egypt and Israel have agreed to build to connect Israel’s offshore Leviathan gas field to the Damietta and Idku liquefaction plants, Israel’s Energy Minister Yuval Steinitz previously said. Leviathan’s offshore gas field came online in 2019 and supplies Egypt and Jordan.

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