(Oil Price) – Egypt is currently in talks with U.S. and other foreign companies to purchase long-term volumes of liquefied natural gas (LNG) instead of relying on the more costly spot market, according to an exclusive Reuters report, as the country’s gas production continues to decline.
“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,” an industry source has told Reuters.
Two years ago, Egypt, the European Union, and Israel signed a memorandum of understanding (MoU) to boost natural gas exports to Europe, with the framework hailed as the first to allow Israel to export “significant” amounts of gas to Europe. Over the past two years, Egypt has become a significant supplier of LNG to Europe. Since 2022, the North African nation has shipped 84 cargoes of LNG to the Netherlands, Spain, the UK, Croatia, Greece, Italy, Poland and France.
According to Egypt’s Petroleum Minister Tarek El Molla, Egypt’s two liquefaction plants have plenty of spare capacity with the LNG plants operating at less than full capacity, “They are there prepared for the time when we make the decision to increase their capacity to double or triple,” he told Reuters. Unfortunately, rising domestic demand as well as infrastructure constraints limit Egypt’s ability to quickly ramp up output.
Egypt has been juggling with competing interests, trying to supply more gas to its domestic market but also attempting to increase exports in a bid to ease an acute dollar shortage. Further, how much gas Egypt can actually supply to Europe depends to a large extent on how much Israeli gas is delivered by pipeline to liquefaction plants on Egypt’s Mediterranean coast before being shipped to Europe. Indeed, officials have conceded that any significant expansion in export capacity will take time with existing plants needing modifications while new production chains might need to be constructed.
By Alex Kimani for Oilprice.com
