Seasonality takes centre stage in Egyptian gas market

LONDON/HOUSTON/SINGAPORE, 12 January 2017 — Egypt's gas market is poised to undergo profound changes in the next five years, and these could have an impact on the global liquefied natural gas (LNG) market, seeing Egypt position itself as a prominent seasonal player, research from global natural resources consultancy Wood Mackenzie shows.

After five years of falling gas production and switching from a net exporter to a net importer, Egypt's fortunes look set to change. As a number of major offshore gas developments come on stream in the next few years, including BP's West Nile Delta and Atoll fields and Eni's massive Zohr find, the North African country will add a cumulative 41 billion cubic metres a year of gas production by 2022. These new volumes will push the country's gas market back to surplus.

According to Wood Mackenzie's analysis, this surplus will, however, be seasonal. Indeed, better gas availability will boost domestic consumption in the power sector, peaking in the summer months, while utilisation rates at gas-intensive industries will recover. Overall, this will exacerbate Egypt's domestic gas demand seasonality. In the medium-term, LNG imports may still be critical to balance the market in the summer, while Egypt could export surplus volumes during the winter, taking advantage of northern hemisphere winter LNG prices.

This reversal in fortune has been driven by impressive exploration results and higher gas prices. The Petroleum Ministry's pragmatic approach to pricing has secured more than US$28 billion in investment in the Egyptian upstream sector since 2015, at a time when other regions saw inward investment fall. And with a number of high-impact wells planned this year, coupled with Egypt's large untapped potential, a second gas boom could be on its way.

Additional exploration success would further strengthen Egypt's ambition to become a regional gas hub, importing and exporting gas and LNG simultaneously.