President Abdel Fatah al-Sisi gives a speech during the second day of Tale of a Homeland conference, January 18, 2018 - Press photo
CAIRO – 21 February 2018: A significant year is ahead with Egypt acquiring self-sufficiency in gas in 2018 and working towards becoming the Middle East’s energy hub.
Around 64 BCM of natural gas worth $15 billion from Israel’s Tamar and Leviathan reservoirs will be exported to the private Egyptian company Dolphinus over a decade, according to a Monday statement by Delek Drilling, one of the two companies leading gas projects in the reservoirs. Egypt has another agreement with Cyprus to transmit gas from Cypriot gas-filled Aphrodite to the Egyptian coast.
In light of the recent public interest in the deal, President Abdel Fatah al-Sisi spoke Wednesday, clarifying Egypt’s position and the government’s role in the deal.
Sisi started off his speech by explaining that he will address the issue in light of this public interest concerning the import of gas by a private company from Israel. Sisi said, “During the past couple of days, there has been much public attention on the subject of gas; this has made me very happy. It is important for me that Egyptians be happy with their country, keen on it and its interests, and looking out for its future.”
The President clarified that the import of gas is done through the private sector. Private companies will import gas in the framework of their own needs, and will liquefy and export them again; thus, the government is not involved in the deals, explained Sisi.
Sisi assertively said, “As a country, we have nothing to hide, but there are some things that I can say, while others I cannot.” As it stands, explained Sisi, Egypt's consumption of petroleum derivatives ranges between $800 million to $1.3 billion per month, meaning $12-13 billion annually. He continued, “If one buys gas worth $1.5 billion from Israel annually; that means $125 million per month.”
The two newly opened investors’ centers are located in 6th of October City in Giza governorate and Gamasa city in the northern Delta. Through these centers, investors will be able to finalize all related regulations without dealing directly with the Ministry of Investment.
Sisi urged to make the best use of gas in petrochemical industries, which in return will be added-value, instead of solely using it as a fuel, which brings the lowest revenue.
During his speech, Sisi also spoke about Egypt’s route to becoming a regional energy hub. “Every gas that comes from countries around us comes to us first. We then work on it, take money for this work, of course, and then we import it to other countries or keep it if it will still enter production phases.… There are many ways to make profit from gas…but the best way to do so is through importing it and adding value to it. The more that we develop our technologies in this field, the more we will gain, the more we will profit and the more returns we can get from their value-added approach. I do not like to give examples of countries; however, if we look at South Korea, we will see that it does this using its advanced technology; we will do the same.”
The president noted that Egypt’s path to becoming the Middle East’s energy hub is facilitated by the fact that Egypt has many facilities and infrastructural capabilities that other countries within the region lack. Dealing with raw natural gas is not easily found in the region, especially given the high quality that Egypt has. Egypt also has three options to becoming the regional energy hub, explained Sisi; namely, exporting gas through Turkey; exporting gas through the producing countries themselves, which are Cyprus, Egypt, Israel and Lebanon; or through Egypt.
Sisi then clarified why private companies have been allowed to import gas in this way, explaining that some of the investors, who use gas a lot in their work, believed that the country had harsh laws on the matter. As per the president’s speech, they thought that the state was imposing a heavy cost on them, saying, “If we were to import gas, we would be able to reduce the cost, but give us a chance.”
“So, we thought we would give them a chance. It’ll be a free market, and we let private companies import gas. As a country, of course, we will take fees in exchange for this easing. Investors will import raw gas and use Egypt’s network and infrastructure for purification, refining and treatment, and then this gas will be pumped through our network and we will take money in exchange. We have scored a key goal. Today, Egypt has climbed the first few steps in becoming the regional energy hub; this is what we have been dreaming about. We dreamt of becoming the regional energy hub; we are now on track. Being the regional energy hub has many positive aspects to it, of course.”
Sisi noted that the new law recently passed by the parliament guarantees Egypt’s benefit from the gas, either by manufacturing or exporting it to other countries. “I want people to know, to be certain and sure, that we have allowed for this new law, this easing in the system, as well as many other facilitations, in order for the country [Egypt] to become the regional energy hub. All the gas from the region will come to us first.”
The president finished his important speech with a hope that his words clarified the situation for people who may have been concerned. “I hope that my words today have explained the point to all that we are doing. With this action [gas import easing law], and with God’s blessing, of course, Egypt has a huge win in many fields and sectors. This gas was going to be imported and exported anyway. If not through us [Egypt], it would go through somewhere else. You do not know the cost that the private companies that bought the gas paid, but no one in the private sector loses.”
Sisi proudly ended on a note of gratitude and appreciation towards the Egyptian people. “Your attention to the subject is appreciated, respected and cherished by me. I ask of you to continue to keep your eyes on your country and continue to be scared for it, pushing it to be better,” he said.
Agreements signed by private companies to import gas from Middle Eastern countries strengthens Egypt against Turkish ambitions to control the sector in the region, a sector that Egypt has continuously pioneered, an energy expert told Egypt Today on Monday.
Likewise, Medhat Youssef, former head of the Egyptian General Petroleum Corporation, pointed out that Cairo has won the competition with Ankara over the sources of gas in the eastern Mediterranean. Egypt also continues to consolidate its alliance with Greece, Cyprus and the region at large, explained Youssef.
Such deals accelerate Egypt’s plan to be transformed into a regional energy hub. Meanwhile, the government is not committed in the short or long terms per the agreement, as Dolphinus will import the gas to use in privately-owned factories or to liquefy and re-export, according to Youssef.
In the Mediterranean, the Egyptian-Cypriot alliance is the strongest of its kind in the region, because the two countries have large gas reservoirs, and it is also friendly with the European Union, which wants to secure its needs for gas away from Russian domination, Youssef emphasized.
The location of Egypt on the map, its infrastructure and recent gas discoveries make the country “pivotal” in connecting the Cypriot and Greek gas with the Egyptian liquefaction plants, he said.
When a gas pipeline is established between Cyprus and Greece from one side to Egypt on the other side, Egypt will be the sole center for the disposal of eastern Mediterranean gas to Europe or any other place in the world via the Egyptian liquefaction stations, the petroleum expert added.
Agreeing with Youssef, Yossi Abu, CEO of Delek Drilling, said, “The export deals establish Egypt’s status as a regional energy center, which allows the supply of gas both to the Egyptian domestic market and for export.” Abu added, “Concurrently with the implementation of the transactions, we are continuing to promote additional agreements.”
From a political perspective, the agreement is expected to strengthen bilateral relations. “This is the first time since the signing of peace treaties in the Middle East that such significant deals between the countries have been signed,” Israeli Minister of Energy Yuval Steinitz said in a statement.
On February 13, the Egyptian cabinet issued the executive statute of a law issued in September 2017 to regulate the gas market, allowing private companies to operate in the field. The new law regulates the activities of the gas market and will help attract the private sector to invest in storing and selling natural gas directly to consumers.
Egypt is also set to become the biggest exporter in the region with the Zohr gas field and other fields in the Egyptian Mediterranean and Delta.
Egypt is expected to stop importing liquefied gas by June 2018, after the production of its giant Zohr gas field began by the end of 2017. Zohr contains about 850 billion cubic meters (30 trillion cubic feet) of gas. In addition to Zohr, Egypt accomplished three other gas production projects, which are Torres and Libra, Atoll, and Norse.
These four projects added 1.6 billion cubic feet of gas per day, raising Egypt’s daily production to 5.5 billion cubic feet a day. The new discoveries are expected to turn Egypt into a net exporter of natural gas, as the country is expected to halt gas imports by mid 2018.
Mohamed Abdel Azim, deputy chairman of the Egyptian Natural Gas Holding Company (EGAS) for production and fields’ development, said earlier that Egypt’s natural gas production will reach some 6 billion cubic feet a day by the end of fiscal year 2017/18.