Egypt, Africa’s third largest economy may have just issued its last LNG import tender as it sets the stage to enter the lucrative gas export market on back of aggressive incentives and huge foreign investment in its energy sector as Nigeria fails to pull its weight.
Egypt is reaping from brilliant investment incentives, better foreign exchange environment, improving inflationary regime and an impressive contract cycle that ensures that projects get from drawing board to launch in a short time unlike in Nigeria where years of failed policies and a succession of arrogant senior government officials have led to unmitigated fall in investment into its once alluring energy sector.
When it comes to attracting foreign direct investment, Egypt is leading the way as it expects to rake in over $10 billion annually this year and next year in actual and not pledged foreign investment in its oil and gas industry.
Unlike Nigeria, Egypt is dismantling notable barriers to investment while also adopting a flexible gas-pricing formula to encourage investment and boost supply and allowing it to move from a fixed price of $2.65 per thousand cubic feet to a price range of $3 to $5.88. Nigeria, however, is moving in the opposite direction, seeking virtually all the time to take more out of an existing cake instead of growing a bigger cake.
Imports of liquefied natural gas is planned to end in Egypt in the fourth quarter, allowing for exports to start early next year as Eni SpA’s Zohr and other gas fields boost production in the country and help to draw more foreign investment, Petroleum and Mineral Resources Minister Tarek El-Molla said.
The final LNG import tender was issued to cover third quarter domestic requirements, and the fourth quarter should be “imports-free,” he said.
“I don’t think there will be more tenders beyond this, I think this is it,” El-Molla said Saturday in an interview in Vienna.“Local production should cover our needs.”
Egypt has had to import liquefied gas at high costs to meet its energy needs, with traders from Glencore Plc to Trafigura Group Pte Ltd. winning tenders to supply the fuel in past years.
However, Eni’s discovery of Zohr in August 2015 has the potential to transform the country into having a surplus of supplies and it is exemplary that a discovery that happened only 2015 is being turned into actual gas supplies in less than three years.
Energy sector analysis in Nigeria say this feat cannot happen in less than ten years in Africa’s largest economy and leading oil producer.
The giant Zohr field will increase gas production to 1.7 billion cubic feet a day by August from 1.2 billion cubic feet, the energy minister said.
Egypt’s total output currently stands at 6 billion cubic feet a day, and that should increase to 6.5 billion by September, he said.
Once it has a sufficient surplus, Egypt will start compensating companies that have rights to operate the country’s LNG export terminals, including Royal Dutch Shell Plc and Union Fenosa SA, El-Molla said.
“First thing we will do once we have a surplus, we will supply our partners with some of those quantities,” he said.
“So many years have been passing without them getting the quantities they were supposed to receive so this is one of our priorities once we have a surplus.”
A regulatory authority was set up about two months ago and is now working on setting up a tariff system for private companies to use the state’s gas infrastructure and to license them to trade gas, the minister said.
