The Future of Natural Gas in the Mediterranean

Experts confirm that Egypt possesses 223 trillion cubic feet of natural gas in the Mediterranean; more investments needed to acquire them.

Since the dawn of history, the Mediterranean Sea has had a great impact on the history of the countries overlooking it. The Mediterranean has facilitated trade, industry and transport between these countries in the past, and is expected to provide  enormous oil and gas resources in the future, resources which as it stands will be sufficient for  more than the coming forty years.

According to several studies, the Mediterranean Sea’s deepwater areas hold enormous oil and gas wealth, which will be highly beneficial to Egypt’s future in meeting the country’s natural gas needs.

The first massive natural gas discovery in the Mediterranean was made in 1967, when the natural gas field known as Abu Madi was discovered in the central Delta region, a discovery which ushered the beginning of major natural gas exploration in Egypt. It was followed by the discovery of  the Abu Qir field in 1969, and the Abu El Gharadiq field in Western Desert in 1971.  These early  encouraging results led to the expansion of exploration in the Delta, the Western Desert and the Mediterranean.

Experts and industry leaders recognize the enormous potential that lies in Egypt’s Mediterranean Sea reservoirs. Eng. Shamel Hamdy deputy chairman of Trident Petroleum for Operations and Projects, stated that the future of gas in Egypt is concentrated in the deepwater areas, adding that exploration activities in the Mediterranean are expensive and require a new perspective from the government in dealing with companies engaged in such activities.

“It is also very important that the government offer more deepwater areas for investors in order to discover more natural gas reserves, contributing to energy-saving in Egypt.” Eng. Hamdy said.

Nader Zaki, BP Egypt’s Vice President said “the deepwater area is promising and contains a lot of reserves. Moreover, international companies are interested in the current bid round proposed by EGAS.”

He also stressed the importance of finding a new formula for agreements between the government and international companies exploring for gas. He claimed that the production sharing model is not necessarily the ideal model, because what is most important is guaranteeing profits for both parties.

In this context comes the agreement of North Alexandria. In response to criticisms directed against the agreement, Zaki said: “The agreement would provide the opportunity for Egypt to import petroleum products costing $50 million per day, with a gross amount of $4 billion annually, which is a huge amount that would have been allocated to import alternative products.” 

Seeing as how oil prices are globally on the rise, reaching $100 per barrel, the government would be facing many importation problems, in addition to the necessity of providing incentives to companies in order to increase their production.

Geol. Mostafa El Bahr, Vice Chairman for Agreements and Exploration at the Egyptian Holding Company for Gas (EGAS), said that the coming period will require an intensification of gas exploration activity, in order to boost Egypt’s reserves. He pointed out that the amount of exported gas currently ranges from 20% to 25%, most of it being exported by the foreign partner, which is why EGAS gives priority to the local market.

In his speech during the seminar “Future of Gas in Egypt” organized by the Sadat Academy for Administrative Sciences in mid-May, Geol. El Bahr said that the Ministry of Petroleum and EGAS are reviewing all exportation agreements in order to increase the income of the Egyptian side. He revealed that the reason behind the termination of the commercial contract with the East Mediterranean Gas Company which provides Israel with Egyptian gas was owing to the company’s violation of the financial conditions agreed upon with EGAS and the Egyptian General Petroleum Corporation, and not due to an intransigent attitude from the Egyptian government.

Touching upon the cost of production in the deepwater and the problems faced by companies operating in the Mediterranean, he explained that seismic scans in the Mediterranean usually face a technical problem due to layers of salt impeding data processing. He claimed that on this basis, new technologies are constantly neing pursued in order to overcome such problems.

As for the future of gas exploration in the Mediterranean’s deepwater, Eng. Mohamed Shoeib, Chairman of EGAS, revealed that the June 2012 bid round offered 13 exploration blocks in the Mediterranean, from a total of 15. Furthermore, He disclosed Egypt’s natural gas production to be an estimated 6 billion cubic feet, with an average of 800 million cubic feet of gas per day.

Speaking about the role of the government in proposing new exploration blocks for the current year via the bid round, Shoeib said that gas prices have not been specified so far, but have been left to be determined post-discovery. This is because a fair price would depend on several factors, including the place of exploration, size of the discovery, and the equipment utilized in the drilling operation. He also added that in order to overcome the problem of delayed dues of the foreign partner, the contractor can either sell his share to the local market or export it abroad.

In conclusion, Egypt should recognize the full potential of its natural gas resources, much of which lies in the deepwater areas of the Mediterranean. If it does so, Egypt will be on its way to becoming a leading supplier of natural gas throughout the Mediterranean region.

By Ahmed Farahat


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