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Egypt's Potential Gas Surplus Could Feed Global LNG Glut

Updated on

The most populous Arab country has facilities to turn gas into super-chilled LNG, which can be exported by ship. 

Photographer: Dana Smillie/Bloomberg

Egypt faces a possible over-abundance of natural gas after two Israeli companies proposed a $15 billion supply deal, raising the prospect that the Arab nation may turn its surplus into liquefied natural gas and export it to a market currently glutted with LNG.

Egypt was already expecting to become self-sufficient in natural gas by the end of this year with the start of Eni SpA’s giant Zohr field, Oil Minister Tarek El-Molla said last month. Noble Energy Inc. and Delek Drilling-LP said Monday they plan to supply around 64 billion cubic meters of gas over 10 years to Egypt’s Dolphinus Holdings Ltd. from Israel’s Tamar and Leviathan reservoirs, in a $15 billion export arrangement.

Tarek el-Molla

Photographer: Yasser Al-Zayyat/AFP via Getty Images

The most populous Arab country has facilities to turn gas into super-chilled LNG, which can be exported by ship. The global LNG oversupply is unlikely to end before the mid-2020s, the International Energy Agency forecast in October.

“It is possible that gas imported under this agreement will be directed towards domestic consumption or to the LNG plants to be liquefied and re-exported,” El-Molla said on Egyptian CBC television. “We have LNG plants, we have capacity that is not being exploited, so why not have a third party bring good?”

The Israeli deal is scheduled to start gas supplies to Egypt in 2020. By 2023, Delek has said it expects Zohr output will just meet Egypt’s demand and only for a limited time. Egypt’s gas demand in 2016 was 46.1 million tons of oil equivalent, while its production was 37.64 million tons, according to BP Plc.

— With assistance by Lin Noueihed, and Yaacov Benmeleh

(Updates with Delek outlook in last paragraph.)
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