EGAS, Chevron to Transport East Mediterranean Gas Via Egypt

June 23, 2022


The Egyptian Natural Gas Holding Company (EGAS) and oil and gas giant Chevron Corporation on June 20 signed a memorandum of understanding (MoU) to transport, import, liquefy and export East Mediterranean gas from offshore fields through Egypt, Egypt’s Petroleum and Mineral Resources Ministry said in a statement. 

If an agreement is finalized, gas can be available for use in Egypt’s local market or converted to liquefied natural gas (LNG) and exported, the ministry said in a statement. Egypt’s Minister of Petroleum Tarek El Molla stressed that the Eastern Mediterranean region is collaborating to develop its natural gas reserves, and decarbonize the sector in light of COP27.

In numbers

Egypt’s natural gas and LNG export revenues soared by 98% to nearly $3.9 billion in the first third of 2022, Reuters reported on May 31, citing data from the ministry. Gas export revenues also increased more than eightfold to $3.959 billion in 2021 compared to $456 million in 2020. 

Analyst and Director of Research at Naeem Holdings Allen Sandeep said that through this agreement, the intake of gas from the Eastern Mediterranean Gas (EMG) pipeline could go up from the initial 450 million cubic feet (mcf) per day to 650 -700 mcf per day.

The EMG line began operations in 2008 to transport Egyptian gas to Israel but shut down in 2012 as Egypt’s gas production fell following the Arab Spring the previous year. In 2019, the pipeline, which has a design capacity of around 675 mcf per day, was reconfigured to allow Israeli gas inflows to Egypt.

With the influx of Chevron’s gas, Egypt’s two liquefaction plants in Damietta and Idku will be operating at maximum capacity, Sandeep added. “They still have room for another 300 to 400 mcf per day, which will be covered by increased intake from the [EMG pipeline].”

Egypt’s total exports of natural gas amounted to 2.5 billion cubic meters by the end of 2020, acquiring about 1.3% of the total Arab countries’ exports of natural gas, according to the Organization of Arab Petroleum Exporting Countries (OAPEC) report for 2021.

Over the last seven years, the oil and gas industry has seen an unprecedented surge in output. In 2019, El Molla announced that Egypt produced approximately 7.2 billion cubic feet (bcf) per day, up from about 4 bcf per day in 2015.

The additional output allowed the country to reach self-sufficiency in September 2018. The surplus – around 1 bcf per day – is now exported.

According to Sandeep, the EMG pipeline, the Arab gas pipeline, and Egypt’s domestic export potential will bring cumulative natural gas export earnings to more than $10 billion once the pipelines and liquefaction plants are operating at optimum capacity.

Earlier in June, El Molla and Israel’s Minister of Energy Karine Elharrar signed an agreement on natural gas delivery to the European Union (EU).

 “With this EU-Egypt-Israel agreement, we will work on the stable delivery of natural gas to the EU from the East Med region,” Ursula von der Leyen, president of the EU Commission said at the time. “This will contribute to our EU energy security, and we are building infrastructure fit for renewables – the energy of the future.”

Chevron in Egypt

The Mediterranean Sea accounts for 62% of Egypt’s natural gas output, followed by the Nile Delta (19%) and the Western Desert (18%). In partnership with Tharwa Petroleum Company, Chevron operates the offshore sites North Sidi Barrani and North El Dabaa in the Western Mediterranean and Nargis in the Eastern Mediterranean.

After acquiring Noble Energy in 2020, the American energy company acquired 27% of the offshore Western Mediterranean concessions North Marina and North Cleopatra.

Chevron bought a 40% stake in a massive natural gas field in the Mediterranean two years ago. The company aims to develop its production of high-quality oils to secure domestic and African needs and find alternative gas monetization prospects in the region, like floating LNG (FLNG) technology, the company said in a media statement in June. FLNG uses ships or offshore platforms to transform natural gas into a liquid to be delivered using tankers. 

The company plans to drill its first exploratory well in Egypt’s water borders in the Eastern Mediterranean region in September.