WoodMac Expects Zohr to Provide Egypt Some Breathing Space as it Liberalises the Gas Sector

Eni's giant discovery will transform Egypt's gas outlook, Wood Mackenzie said earlier this week in a report.

“For Egypt, Zohr's importance is enormous. Following a decade of little exploration success and a slowdown in investment, the country began importing LNG in April to meet growing domestic demand,” Wood Mackenzie said Tuesday.

Eni recently announced a giant discovery at its Zohr prospect in offshore Egypt which could hold 30 trillion cubic feet (tcf) of lean gas.

WoodMac expects Egypt’s LNG imports to reach close to 6 mmtpa next year. However, an additional 2.5-3 bcf/d of gas from Zohr - over 60% of Egypt's current indigenous supply - will negate the need for long-term imports, with the country entering a period of energy self-sufficiency, the consultancy said.

A moratorium on exports from new discoveries has long been in place and WoodMac expect all Zohr gas to supply the domestic market. However, depending on the future policies of the state-owned Egyptian Natural Gas Holding Company (EGAS), it may free up upstream producers with cancelled gas sales agreements to resume exports via the 1.6 bcf/d of idle LNG export capacity, the WoodMac report said.

Longer term, WoodMac expects Zohr to provide the government some breathing space as it liberalises the gas sector. But, in the short-term, it could delay the development of costlier, high pressure developments and reduce pricing that operators might otherwise have secured from EGAS, WoodMac added.

Nevertheless, Egypt's upstream sector is continuing to enjoy a renaissance in 2015 and Zohr looks set to be the crown in a remarkable transformation of fortunes, the report said.