Egypt Sends Rare LNG Cargo in Midst of Newfound Buying Binge

  • Japan’s Tohoku Electric says it buys cargo loaded from Egypt
  • Egypt exports second LNG cargo this year after halt in 2015

One of the world’s newest liquefied natural gas importers is again shipping out the fuel.

Egypt, which last year began importing LNG to meet domestic demand while halting shipments from two multibillion-dollar facilities that produce the fuel, this month sent out its second shipment this year. The Provalys loaded at the Ikdu terminal on June 3-4 and is headed to Japan, according to shipping data compiled by Bloomberg.

Egypt was a net LNG exporter from 2005 until 2014, when declining output and power shortages forced it to divert gas being sent to liquefaction plants for domestic use. The country’s switch to an importer was one of the few bright spots for a global LNG market where rapid increases in supply are outpacing demand, causing prices to drop by more than 50 percent in the past two years.

"If Egypt could return to its previous position as a major exporter, and that’s a big and longer-term ‘if’, it would make a material difference to the world’s future supply-demand balance,” James Taverner, a Tokyo-based analyst for IHS Inc., said by e-mail. “The plant operators are keen to resume higher levels of LNG exports soon, but that looks some years away.” In the meantime, cargoes like this will be delivered occasionally, he said.

Destination Japan

French energy company Engie SA, which buys LNG from Idku’s Train 1, loaded the cargo onto the Provalys, spokeswoman Emilie Menard said by e-mail. The tanker is headed to Niigata, Japan, according to ship-tracking data. Tohoku Electric Power Co. is scheduled to receive a cargo carrying about 60,000 metric tons of LNG from Egypt at a terminal in Niigata prefecture in July under a short term contract, spokesman Fumihiro Hichiwa said by phone Friday. He declined to identify the seller.

Japan, the world’s biggest LNG buyer, last imported LNG from Egypt in 2014, according to data from the Finance Ministry.

Spot LNG prices in northeast Asia, the world’s biggest LNG consuming region that includes Japan, have recovered 30 percent since bottoming out at $4.05 per million British thermal units in April, according to assessments by World Gas Intelligence in New York. That’s buoying LNG trade with Asia as the Asian premium over the U.K. National Balancing Point, Europe’s most liquid market, widened to about $0.5 per million Btu after turning negative earlier this year, according to data from WGI and ICE Futures Europe.

The Provalys is the second tanker to load LNG from Egypt this year. The Solaris took a cargo March 27 and delivered it to India. There were no shipments from Egypt last year, compared with 0.3 million tons dispatched in 2014, which was a decline of 88 percent from the previous year, according to the International Group of Liquefied Natural Gas Importers. By contrast, LNG imports amounted to 2.6 million tons last year, according to the GIIGNL.

Domestic Production

Egyptians began to feel an energy crunch after the 2011 uprising against Hosni Mubarak, as investment in gas exploration dwindled and demand quickly outpaced supply. The country’s industries are using the fuel to generate power and as a raw material for fertilizers.

Discoveries of major fields in Egypt by Eni SpA and BP Plc over the past year mean the most populous Arab nation, with about 90 million people, will be able to rely more on its own output. Egypt has said it would keep all the gas from its “super giant” Zohr field, discovered last year, with production seen by the end of 2017.

Egyptian gas can reach Europe at reasonable prices while most of the fuel will be bound for the domestic market, Eni Chief Executive Officer Claudio Descalzi said Thursday at the St. Petersburg International Economic Forum.

Egypt’s LNG import demand is likely to jump in 2016 before falling from 2018 until it becomes self-sufficient again from 2022, Bloomberg New Energy Finance said last week in a report.

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