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Global gas: Egyptian demand growth maintains imports

6 Nov 2017, 1.37 pm GMT

Global gas: Egyptian demand growth maintains imports

London, 26 October (Argus) — Egyptian gas demand growth this year has resulted in strong LNG imports persisting despite production picking up.

Production had been in steady decline before rising towards the end of last year, data from gas association Jodi show. Production was 123mn m³/d in January, the latest data available, up from 115mn m³/d in 2016.

And the West Nile Delta (WND) project started in May with output of close to 20mn m³/d, higher than initially expected.

But production had declined by almost 11pc/yr in the three fiscal years up to 2015-16, the latest available data from Egypt's statistics agency show.

Aggregate output could be around 130mn m³/d in early 2018, based on a similar decline of existing fields and WND output of 20mn m³/d. This is before including the Zohr and Atoll fields, which are expected to start this year.

The commissioning of WND and only a small decrease in LNG imports suggests a substantial increase in demand, or a decline in output from other fields.

Egypt's aggregate demand would have been over 160mn m³/d in June-September, given the increase in production driven by WND and based on LNG imports each month judging by vessel size.

Demand was 140mn m³/d in 2016 with a high of 153mn m³/d in September, Jodi data show.

Power sector drives demand

Egypt had plenty of scope for consumption to rise, which has resulted in LNG imports remaining strong despite the increase in production.

Electricity generation climbed to 510 GWh/d in 2015-16 from 480 GWh/d in 2014-15, partly driven by the number of customers connected to the grid rising to 32.4mn from 31.4mn. A similar increase in power demand could add 60 GWh/d to gas consumption each year, assuming it was met by gas-fired plants operating at 50pc efficiency.

But gas and power consumption could have risen in 2017 considerably more than in previous years. There have been difficulties meeting power demand in recent years because of fuel shortages. This could have stymied gas and electricity demand growth, which could accelerate with new power plants and gas production coming on stream.

The 1.95GW South Halwan gas-fired plant has started testing, while other new capacity is coming on line including three new 4.8GW turbines.

Displacing fuel oil

Gas consumption could also increase by displacing fuel oil from the generation mix. Egypt's state-owned Egyptian Electricity Holding (EEHC) has a policy of maximising gas use in thermal power generation.

But gas accounted for just 72.1pc of the total fuel consumption in power generation in 2015-16, which was down from 73.6pc a year earlier.

The decline in gas production in recent years has resulted in more co-firing with fuel oil, especially during periods of high demand.

Gas displacing fuel oil from the generation mix may have contributed to the step up in consumption this year, preventing any substantial reduction in LNG imports despite higher production.

Thermal generation was 467 GWh/d in 2015-16, while fuel oil could have accounted for about 130 GWh/d, assuming gas had a 72.1pc share of thermal generation as well as fuel consumption.

Gas may have had a higher share of generation as fuel oil plants have a typically lower efficiency.

But displacing about 130 GWh/d of fuel oil generation could boost gas consumption by over 250 GWh/d, depending on the efficiencies of new plants.

Zohr to curb LNG imports

Egyptian gas consumption could be over 180mn m³/d by the end of the 2017-18 fiscal year. This takes demand just short of 150mn m³/d from the middle of 2016 and includes an increase of 120 GWh/d from power demand growth over two years and 250 GWh/d from fuel oil being pushed out of the mix.

Supply has appeared to climb above 160mn m³/d following the start of WND. Consumption topping 180mn m³/d next year could result in some of the new production from Zohr and Atoll being burned domestically before Egypt halts its LNG imports.

Zohr production is expected to rise quickly to 28.3mn m³/d, while Atoll offtake is planned at 8.5mn m³/d.

This could take aggregate production just below 170mn m³/d by the middle of 2018, given the 130mn m³/d from existing fields including WND.

Egypt could still need some LNG imports in the middle of 2018, particularly if hot weather boosts power demand, depending on how much fuel oil has been displaced.

It could take the second phase of WND for Egypt to become "self-sufficient" in gas as planned. Giza and Fayoum — the first two fields of WND phase 2 — will add 11.3mn m³/d and will be followed by the 10mn m³/d Raven.

WND phase 2 is scheduled to start up at the end of 2018, coinciding with Egypt's timeline for ending its import dependency.


Egyptian gas production with new fields mn m³/d

Electricity demand is rising GWh/d

Egyptian LNG imports mn m³ of LNG

LNG imports partly offset declining production mn m³/d gas

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