November 21, 2024 [Reuters]- Egypt is in talks with U.S. and other foreign companies to purchase long-term volumes of liquefied natural gas (LNG) as it seeks to cut its reliance on more costly spot market purchases to meet power demand, three sources said.
The most populous Arab country has returned to being a of natural gas, buying dozens of cargoes this year and abandoning plans to become a supplier to Europe amid a steep decline in domestic gas output.
Egypt’s domestic supplies fell to a seven-year low in September, according to data from the Joint Organizations Data Initiative, mainly due to declining production from Zohr gas field and higher power consumption.
Domestic gas output is expected to drop by a further 22.5% by the end of 2028, data from consultancy Energy Aspects found. Meanwhile, analysts expect the country’s power consumption to increase by 39% over the next decade.
“The ministry (of Petroleum) is seeking three or four years of supply to hedge from sudden price increases. It is also seeking to include a flexibility clause as the government hopes it could maybe find gas sooner or doesn’t need that much gas,” the first industry source said.
Cairo is in talks mainly with U.S. companies and portfolio players who have U.S. offtake, given their flexibility compared with other producers, the other two trading sources said.
Egypt is preparing the infrastructure for gas imports in Ain Sokhna and Alexandria, the first source said. Data analytics firm Kpler reported last month that Egypt was expected to install a second floating storage regasification unit (FSRU) early next year.
Since early November, four LNG cargoes diverted from Egypt to Europe, Kpler’s ship tracking data showed.
Petroleum Minister Karim Badawi said on Monday that gas production saw a 200 million feet increase by October 2024. He also hopes that 420 million feet per day will be added by the beginning of 2025 from two of the country’s main concessions; Zohr and Raven.
In addition to potential production increases, the first source said that lower than expected temperatures contributed to reducing energy consumption as well as loss in grid transmission.
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