OUR VISION Egypt Oil & Gas Research & Analysis division is aiming to provide petroleum industry stakeholders with different types of information covering the latest updates in the promising sector. The reports are based on industry facts and figures - from reputable, reliable and official sources only. The R&A will transform this raw data into valuable original research and analysis.
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EGYPT OIL & GAS RESEARCH & ANALYSIS
THE TEAM Research and Analysis Manager
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Research Analysts
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Rana Al Kady
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EMGF: Paving the Way towards a New Age of Energy Dependence and Cooperation
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ABOUT THIS REPORT The East Mediterranean region has a significant strategic importance as it is rich in natural gas. This has been strengthened with the establishment of the East Mediterranean Gas Forum (EMGF), led by Egypt, Cyprus, and Greece. Accordingly, Egypt Oil & Gas’ Research & Analysis Division provides an intensive analysis of the natural gas sectors in the seven members of the forum. The report will enable our clients to have a complete picture of the region’s natural gas resources, in order for them to take the advantage of the possible investment opportunities in the market.
THIS REPORT WAS WRITTEN BY AMINA HUSSIEN, REHAM GAMAL, and TASNEEM MADI
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EGYPT OIL & GAS RESEARCH & ANALYSIS
TABLE OF CONTENTS ABOUT THIS REPORT LIST OF ABBREVIATIONS INTRODUCTION EAST MEDITERRANEAN GAS FORUM IN BRIEF EAST MEDITERRANEAN GAS FORUM COUNTRIES’ PROFILE 1. EGYPT 2. CYPRUS 3. ITALY 4. GREECE 5. JORDAN 6. Palestine 7. ISRAEL
EAST MEDITERRANEAN LNG INFRASTRUCTURE 1. LNG Exporting Facilities 2. LNG Importing Facilities
EAST MEDITERRANEAN NATURAL GAS PIPELINES 1. The East-Med Gas Pipeline 2. Israel-Cyprus-Turkey Pipeline 3. Israel-Cyprus-Egypt Pipeline 4. Arab Gas Pipeline 5. Israel-Jordan Pipelines 6. Greek Pipelines Poseidon Pipeline IGB Pipeline
CONCLUSION REFERENCES APPENDICES
4 8 10 14 18 18 26 29 32 34 36 37 42 42 43 48 49 49 50 50 50 51 51 51 52 54 58
EMGF: Paving the Way towards a New Age of Energy Dependence and Cooperation
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ACKNOWLEDGMENT Egypt Oil & Gas would like to thank ENERGEAN OIL & GAS COMPANY for their cooperation and support in providing this report with valuable data. Accordingly, the Research and Analysis team simplified and broke the provided data down into small multiple graphs and charts to facilitate a better understanding of the East Mediterranean gas market.
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EGYPT OIL & GAS RESEARCH & ANALYSIS
EMGF: Paving the Way towards a New Age of Energy Dependence and Cooperation
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LIST OF ABBREVIATIONS ADC Aqaba Development Corporation AGP Arab Gas Pipeline ARERA The Italian Regulatory Authority for Energy, Networks and the Environment B/d Barrel per Day BAPETCO Badr El Din Petroleum Company Bcf Billion Cubic Feet Bcf/d Billion Cubic Feet per Day Bcf/y Billion Cubic Feet per Year CESEC South-east European Gas Connectivity CFP Compagnie française des pétroles DESFA National Natural Gas System Operator E&P Exploration and Production EEZ Exclusive Economic Zone EGPC Egyptian General Petroleum Corporation EIA Energy Information Administration ELNG Egyptian Liquefied Natural Gas Company EMGF East Mediterranean Gas Forum EMGP East-Med Gas Pipeline ENTSOG European Network Transportation System Operators of Gas EPAs Gas Distribution Companies EU European Union FY Fiscal Year GBS Gravity Based Structure GMRA the Gas Market Regulatory Authority IEA International Energy Agency IEOC International Egyptian Oil Company
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EGYPT OIL & GAS RESEARCH & ANALYSIS
INGL Israel Natural Gas Lines JOSCO Jordan Oil Shale Company Kboe/d Thousand barrel of oil equivalent per day LNG Liquified Natural Gas LoI letter of intent Mcf/d Million Cubic Feet per Day MEMR Ministry of Energy and Mineral Resources Mmbbl Million Barrel Mmboe Million Barrel of Oil Equivalent Mmscf/d Million Standard Cubic Feet per Day MoP Ministry of Petroleum and Mineral Resources MoU Memorandum of Understanding NEPCO Jordanian National Electric Power Company NRA Natural Resources Administration PCI Project of Common Interest PENRA The Palestinian Energy and Natural Resources Authority PhPC Pharaonic Petroleum Company REB Ras El Barr SEE South-east Europe SEGAS Spanish Egyptian Gas Company SIS State Information Service TAP Trans Adriatic Pipeline Tcf Trillion Cubic Feet TYNDP Ten Years of Development Plan UFG Union Fenosa Gas WDDM West Delta Deep Marine WND West Nile Delta
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INTRODUCTION Nowadays, the importance of natural gas is increasing with time, due to recent developments in global politics and the international economy through exports and imports. The East Mediterranean region is of great strategic importance due to its rich natural resources, especially in natural gas and crude oil. The region has been attracting surrounding countries to explore, discover and produce more of its resources. Egypt acquired a leading position among the countries in the region, as it has contributed with the largest amount of natural gas production of around 70.5% of the region’s total production, between 2015 and 2016, according to the International Energy Agency (IEA). Thanks to the steps Egypt has taken towards increasing Exploration and Production (E&P) activities, Egypt has successfully regained its position as a natural gas exporter in 2018 since the 2000s. The country is ranked on the top of the 20 natural gas producers in the world, according to World By Map Data. The IEA further explained that the region’s exports recorded an average of nearly 7.056 billion cubic feet (bcf ), while the average imports recorded 476.3 bcf in 2016. It is important to note that the industrial and residential sectors are the main sectors that depend on natural gas consumption within the region.
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EGYPT OIL & GAS RESEARCH & ANALYSIS
EMGF: Paving the Way towards a New Age of Energy Dependence and Cooperation
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EAST
MEDITERRANEAN GAS FORUM IN BRIEF
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East Mediterranean Gas Forum in brief
The East Mediterranean Gas Forum (EMGF) was established following the recent significant natural gas discoveries in the East Mediterranean region, which have a great impact on the energy and economic development through regional cooperation and potential region’s resources. New expansion of discoveries and their optimal utilization positively affects energy security, where such discoveries, cooperation and promoting regional stability, will reduce energy security risks and counterterrorism. Egypt, Cyprus, Greece, Jordan, Palestine, Israel, and Italy are the founders of EMGF. The average natural gas production from the referred seven countries in the region recorded nearly 262.6 bcf in 2016, increasing from 270.5 bcf in 2015, according to the IEA’s data.
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The first meeting of the EMGF took place in Cairo, Egypt in the 14th of January 2019. The forum allows other countries, regional or international organizations, observers, as well as the private sector to join and participate in its regulatory bodies as part of the permanent natural gas industry advisory group. The second ministerial meeting of EMGF was also held in Cairo, Egypt between the 24th and 25th July 2019. The seven countries’ energy ministers approved the idea of setting rules and procedures to achieve the goal of enhancing regional cooperation in the energy sector, and to also make the best use of available resources. In doing so, this approval paves the way for a more sustainable regional natural gas market. By holding the forum in Egypt, the EMGF supports Egypt’s position as a
EGYPT OIL & GAS RESEARCH & ANALYSIS
leading center for natural gas trade and the region’s to facilitate the exploitation of future natural gas energy hub. discoveries. With this, the East Mediterranean is Moreover, the main purpose of the forum preparing to transform into an international hub. The is to accelerate the economic exploitation of next EMGF ministerial meeting will be held in Cairo, existing natural gas reserves, benefit from existing Egypt during the second half of January 2020. infrastructure, and encourage the private sector
THE EAST MEDITERRANEAN GAS FORUM (EMGF) CRETE Crete
The First Ministerial Meeting
Cairo 03
January 2019
October 2018 The Agreement on Establishing the EMGF
The Next Ministerial Meeting January 2020
July 2019
Cairo
The Second Ministerial Meeting
Cairo
Source: MoP
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EAST
MEDITERRANEAN GAS FORUM COUNTRIES’ PROFILES www.egyptoil-gas.com
East Mediterranean Gas Forum Countries’ Profile
1. EGYPT The discovery of Abu Madi field in the Nile Delta area marked the first natural gas discovery in Egyptian history. The field was discovered by Petrobel in 1967 and four wells were put on stream in 1977. Two years after this discovery, Abu Qir field was announced as the first natural gas discovery in the Mediterranean Sea. Abu Qir field was discovered by the American Phillips Petroleum Company, according to Hamdy El Banby’s book entitled “The Egyptian Crude Oil: Past Experience and Future Insights”. Since then, natural gas became a main source of energy in Egypt as it represented 54.2% of the country’s energy mix in 2018, according to BP’s Annual Statistical Review of 2019.
The first natural gas field discovered in Egypt
The first natural gas discovery in the Mediterranean
Discovered in 1969
Abu Qir Field
Source: EGPC
Discovered by Phillips Petroleum Company
Discovered in 1967
Abu Madi Field
Discovered by Petrobel
54.2%
Natural Gas Came on stream in 1977
Egypt’s Energy Mix in 2018
Source : EGPC
Source: BP Statistical Review, 2019
Egypt is one of the most significant natural gas markets in the East Mediterranean region, as it has Zohr field, which is the largest natural gas field in the region with conservative estimated reserves of 30 trillion cubic feet (tcf ). A natural gas market in Egypt provides it with many advantages, such as Egypt’s geographic location, natural gas infrastructure, and constant potential for new discoveries. In fact, Egypt strongly competes with other regional players, including Cyprus and Turkey, to be the main regional natural gas hub.
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Along with this comes the modernization project of the Ministry of Petroleum and Mineral Resources (MoP), which sets a clear path for Egypt to influence its position in the global market as a regional energy hub. The recently discovered natural gas fields are expected to increase the potential for exports and thus, improve the utilization rate of the liquefaction infrastructure. Alternatively, Egypt can consider the quicker option of liquefying and exporting natural gas supplies from other potential natural
EGYPT OIL & GAS RESEARCH & ANALYSIS
gas producers in the region like Israel and Cyprus. This saves the cost and time of production process from the Egyptian natural gas fields. Over the past few years, Egypt heavily depended on natural gas imports to meet the increasing domestic demand. This energy dependence started to ease up since the discovery of the giant natural gas field Zohr in 2015. The discovery of Zohr, in particular, has increased the chances for a quick change in the country’s natural gas reserves and production map, as it holds the largest natural gas reserves in the Mediterranean, estimated at 30 tcf, according to Eni the Italian operator. The fifth, sixth and seventh production units were brought online in Q1 2019, which increased the field’s production by 3.8 times to record 398.98 bcf during H1 2019.
EGYPT’S MAJOR NATURAL GAS DEVELOPMENT PROJECTS Nooros Field
Source: MoP
Atoll Field
The WND Development Project
The Burullus Phase 9B project
2%
Gulf of Suez
22%
Western Desert
22%
Nile Delta
Egypt’s Natural Gas Production in 2018
54%
Mediterranean Sea
Sources: EGAS
In addition, the MoP announced in a press release that the field’s production capacity reached 2.7 billion cubic feet per day (bcf/d) in 2019. The giant field, Zohr, is not the only significant field discovery in the recent years, as there were several development projects that aimed at supporting the MoP’s strategy to increase production. These projects include the West Nile Delta (WND) development project, Atoll field, the Burullus Phase 9B project in the West Delta Deep Marine (WDDM) concession, and Nooros.
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East Mediterranean Gas Forum Countries’ Profile
Natural Gas Statistics in FY 2018/19 Natural gas production increased by 21% in FY 2018/19.
Seven Development Projects Added to Production Added Production Condensates 2,155 bbl/d
Investments $10.6 billion
Natural Gas 1.3 bcf/d
The highest production level of 7.2 bcf/d in September 2018.
Seismic Surveys Lunching a new bid round in the Mediterranean Sea’s concessions in FY 2019/20.
West Mediterranean
Nile Delta
22,000 km2
2D & 3D Surveys
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Seven New Exploration Agreements
Natural Gas Discoveries Mediterranean Sea
Approval by 232 km
Investments EGP 3.9 billion
Western Desert
Exploratory Wells 4
5 10
6 bcf/d of Natural Gas Consumed
National Gas Grid Expansions
Electricity 63%
Industry Petrochemicals Residential & Transportation 22% 10% 5%
Natural Gas Delivered to Added Length
Q4 2019
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Total Investments
$712 million
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Projects under Construction 23
Residential Units 1.23 million
Industrial Facilities 40
Commercial Units 1,841
Vehicles
32,300
EGYPT OIL & GAS RESEARCH & ANALYSIS
ZOHR DEVELOPMENTS 800 MMscf/d,equivalent to150,000 boe/d
Third Production Unit (T-2)
First Production Unit Apr. 2018
Dec. 2017
Sixth & Seventh Production Units
1.2 bcf/d
1.1 bcf/d , equivalent to 200,000 boe/d
May 2018
Q1 2019
Sep. 2018
2 bcf/d
Second Production Unit (T-1)
Fifth Production Unit (T-4)
Source: Eni & MoP
ZOHR FIELD UPDATES IN 2019 Production capacity increased to 2.7 bcf/d, four months earlier than the planned due date
Production increased 3.6 times, reaching 11.3 bcm in H1 2019
The second pipeline was completed with 30 inches diameter and 215 km length
Producing wells increased to 12
The potential production is estimated to reach 3.2 bcf/d by the end of 2019
Source: Eni, Rosnft & MoP
ZOHR FIELD PRODUCTION SHARING 39% Egypt
40% 21%
40%
Cost Recovery
Pre-Cost Recovery
Eni & Partners
Egypt
60%
Post-Cost Recovery
Eni & Partners
Source: MoP
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East Mediterranean Gas Forum Countries’ Profile
AUTHORITIES AND REGULATORY SYSTEM IN EGYPT The Egyptian General Petroleum Corporation and The Egyptian Natural Gas Holding Co. The Egyptian General Petroleum Corporation (EGPC) is one of the MoP’s economic authorities, which was established in 1956 under the name “The General Petroleum Authority” (GPA). EGPC was established under the Law no. 135 of 1956. The Corporation has the objective of satisfying the petroleum products’ domestic demand, which is maintained by enhancing exploration activities and maximizing crude oil production. Additionally, EGPC aims at maximizing the revenues coming from exporting hydrocarbons. EGPC has 12 affiliated companies that are concerned with upstream, midstream, and downstream activities. In addition, the Corporation has 41 Joint Ventures (JVs) and 87 investment Law companies. The Egyptian Natural Gas Holding Company (EGAS) was established in August 2001 by a decree issued by the minister of petroleum then, in accordance with the provisions of the Public Enterprise Sector Law No. 203 (1991). EGAS was created with the aim of organizing and managing natural gas developments in Egypt. EGPC - the owner of EGAS - has gradually transferred natural gas activities management to EGAS, including those in domestic gas transportation, LNG exports, and more recently upstream gas exploration. EGAS is the main owner of Egypt’s domestic natural gas pipeline grid. The Egyptian natural gas market was first governed by EGPC, before becoming under EGAS supervision.
All natural gas activities, before 2017, were covered by Law No. 217 of 1980. Under this Law, EGAS was responsible for all operations relating to transportation and domestic supply of natural gas to different sectors. Private companies were allowed to construct and operate gas pipelines as well; however, carrying out these activities depended on EGAS’s approval and monitoring. In May 2015, EGAS and EGPC announced the decision to allow private companies to use state-owned national gas grid to import, transfer, and distribute natural gas to the local market, which was enshrined in the Gas Market Law No. 196 in July 2017. At the same time, it was announced that the market would be fully liberalized by 2022. In February 2018, the Law was followed by the promulgation of the executive regulation to implement the Law. The Gas Market Regulatory Authority The new Gas Market Law is composed of 53 articles, each of which is divided into five sections. The second section refers to the establishment of an independent regulatory body, called the Gas Market Regulatory Authority (GMRA). The GMRA, which held its first meeting in February 2018, was established by the Law to regulate, follow up, and control all activities related to the natural gas market in Egypt. According to the Gas Market Law, the authority’s responsibilities include ensuring that natural gas infrastructure remains functional, and maintaining a competitive market, free of monopolistic practices. The authority will set the market mechanism for the importing, re-gasification, transportation, distribution, and storage of natural gas, as well as setting its own financial resources and revenue streams.
MINISTRY OF PETROLEUM AND MINERAL RESOURCES Egyptian General Petroleum Corporation (EGPC)
Egyptian Petrochemical Holding Company (ECHEM) Source: EGAS
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Egyptian Natural Gas Holding Company (EGAS)
Egyptian Mineral Resources Authority
Ganoub El- Wadi Petroleum Holding Company (Ganope)
EGYPT OIL & GAS RESEARCH & ANALYSIS
OPERATING COMPANIES IN EGYPT Egypt is considered to be a country with a bright future in terms of natural gas E&P activities, which gives an incentive for the international market players to invest in the Egyptian natural gas upstream activities.
discoveries achieved in the Western Desert including two oil discoveries and one natural gas discovery in Faghour Basin; in addition to the production from the development leases. In 2017, the Italian company operated within 25,375 km2 of developed and undeveloped areas.
The Italian Eni has been operating in Egypt since 1954 through its subsidiary, the International Egyptian Oil Company (IEOC). Eni discovered Zohr in 2015, which turned out to be one of the company’s major discoveries in the region, as in 2016, Eni discovered the Nooros East-1 in the Nile Delta, which has reserves of 24.3 bcf and in 2019 the company announced another discovery of 59.3 bcf in Nour-1 filed in the Nile Delta.
Hydrocarbon production reached 300,00 boe/d in 2018.
Operating since 1954.
Eni in Egypt
3rd
Egypt is Eni’s third largest country in terms of total portfolio by value with 13%, in 2018 Eni has recently been granted two exploration blocks by EGPC and EGAS. The first block named South East Siwa, in which Eni has 100% stake is located in the Western Desert close to South West Meleiha Concession. The second block is West Sherbean, in which Eni has a share of 50%, is located onshore Nile Delta near Nooros field.
South East Siwa (100% stake)
Operated in 25,375 km2 of developed and undeveloped areas, in 2017.
Operating through its subsidiary IEOC.
Eni has granted 2 exploration blocks, in 2019
Source: Eni
West Sherbean (50% stake)
THE SALE OF ENI'S SHARES IN ZOHR BP
Roseneft
10
30
Source: Eni
Mubadala 10
Shares Sold (%)
Shares Sold (%)
Shares Sold (%)
375
1250
934
Amount Paid ($ million)
Amount Paid ($ million)
Amount Paid ($ million)
Nov 2016
Oct 2017
Jul 2019
In July 2019, Eni announced, in a statement, the achievement of a new natural gas discovery in the new El Qar’a onshore exploration lease. Consequently, Shell, is one of the most active companies operating in the Egyptian upstream sector since the start of its activities in Egypt in 1911 through operations in Gemsa and Hurghada fields. The company managed upstream activities through its JV with BP named, Anglo Egyptian Oil Company.
In 1911, Shell started operating in Gemsa and Hurghada fields Source: Eni & MoP Source: Shell
Eni’s hydrocarbon production in Egypt increased by 23% to reach 300,000 barrels of oil equivalent per day (boe/d) in 2018 instead of 230,000 boe/d in 2017. This was mainly due to the
Most of the company’s operations in Egypt are located in the Western Desert. In fact, Shell has stakes in 19 crude oil and
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East Mediterranean Gas Forum Countries’ Profile
natural gas producing development leases in Badr El Din, El Obaiyed area, and four other exploration concessions. Since 2000, Shell has continued in its crude oil and natural gas exploration activities as well as investing in active ventures. The company now has many successful JVs and other interests in Egypt.
40%
38%
Rashid Petroleum Company S.A.E
Idku Natural Gas Liquefaction Company
50%
100%
Obaiyed Petroleum Company
Shell Egypt Trading
West Sitra Petroleum Company
Shell Lubricants Egypt
Sitra Petroleum Company
Tiba Petroleum Company
Burullus Gas Company S.A.E.
Alam El Shawish Petroleum Company
26%
25%
20%
The Egyptian LNG Company S.A.E.
36%
BP in Egypt
Since operating, produced about 40% of Egypt’s crude oil production
Source: BP
SHELL’S STAKES IN OPERATING COMPANIES IN EGYPT
The Egyptian Operating Company for Natural Gas Liquefaction Projects S.A.E.
BP has a long successful history in Egypt that has lasted for more than 55 years. It has produced about 40% of Egypt’s entire crude oil production and supported the development of the country’s natural gas market. In 2018, Egypt came in the first rank in Africa concerning BP’s net production of natural. The production recorded 878 mcf/d, followed by that in Algeria which recorded 183 mcf/d, stated by BP in Annual Report and Form-2018. Currently producing 60% of Egypt’s natural gas demand
Bapetco
El Behera Natural Gas Liquefaction Company S.A.E.
In 2009, the company participated in a bid round in the North Damietta offshore concession in an assembly with BP and Petronas with equivalent shares. In Addition, the company held a 33.3% share in the North Tinah offshore concession.
In 2008, BP and the Pharaonic Petroleum Company (PhPC) established, in the Ras El Barr concession, the second successful JV, through which BP is producing close to 60% of Egypt’s total natural gas consumption. The PhPC has developed the production within Atoll field, which was discovered by BP in 2015. Atoll field is a significant discovery, with a reservoir of 1.5 tcf ,located in North Damietta within the East Nile Delta, according to BP’s website.
Source: Shell
In 2001, Shell joined new natural gas distribution business through holding 18% share in NATGAS, a company that transports gas directly across many areas across Egypt, either for industrial or domestic consumption. In 2003, Burullus Gas Company was formed as a JV among Shell (25%), EGPC (50%), and Petronas (25%) to develop the WDDM concession. The concession provides natural gas to both the domestic market and Idku LNG plant, in which Shell has 35.5% and 38% interest in trains one and two, respectively. Furthermore, Burullus Phase 9B project in the WDDM concession was developed and added to the production map in 2018 where its initial production recorded 40 million standard cubic feet per day (mmscf/d), from two wells, out of total production of 400 mmscf/d. Initial production recorded 40 mmscf/d from 2 wells.
9B PHASE PROJECT IN 2018
Production of condensates will reach total of 3,000 b/d for the project. Source: MoP
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Investment cost of more than $740 million.
Started operating in 2017, in North Damietta deepwater. Initial production reached 350 mmscf/d of natural gas and 9,000 b/d of condensates.
Atoll Field
Production expected to reach 400 mmscf/d in October 2019.
Source: MoP
In 2017, BP acquired a 10% stake in the Shorouk Concession, in which Zohr field is located. Moreover, BP started its major project WND to be its first direct development and operation in the country. The WND project is one of the largest resources of gas and condensates through the development of its five fields. The project’s peak annual average production from Taurus and Libra Fields, in 2017, reached 459 bcf/d, net for BP. On the other hand, the peak annual average production of Zohr recorded 230 bcf/d, net for BP. The second stage of WND, within Giza and Fayoum fields, currently produces about 400 mmscf/d and is expected to significantly increase reaching approximately 700 mmscf/d of natural gas. The third stage of the project will develop in the Raven field with an expected initial production of 350 mmscf/d of natural gas by late 2019.
EGYPT OIL & GAS RESEARCH & ANALYSIS
The company then entered exploration activities in Egypt for the first time after winning a natural gas concession in the two bid rounds carried out by EGAS. The awarded concession was the North East Amereya Offshore Concession.
WEST NILE DELTA PROJECT
17.25% WND Stakes
82.75%
EGAS rewarded ExxonMobil a natural gas concession named the North East Amereya Offshore, in 2019 1st stage Taurus and Libra Fields’ average production in 2017 reached 459 bcf/d, net to BP.
2nd stage Giza and Fayoum Fields’ current production is about 400 mmscf/d of natural gas, expected to increase to about 700 mmscf/d.
3rd stage Raven Field is expected to initially produce 350 mmscf/d of natural gas by late 2019.
Source: BP
By reaching the full potential of the project, combined production from all three stages is expected to reach 1.4 bcf/d representing 20% of Egypt’s current natural gas production, which will feed the national gas grid. It is worth mentioning that BP, as an operator, has a stake of 82.75% in the development of this project while the remaining 17.25% stake belongs to Wintershall Dea. The decision to implement the project in three stages accelerates the delivery of the natural gas production. In March 2017, BP discovered a natural gas field in the East Nile Delta within North Damietta offshore concession “Qattameya Shallow”.
Source: ExxonMobil
Among the seven East Mediterranean countries, Egypt can be considered to be one of the first countries that Total has operated in; where Total’s activities involve marketing for petroleum products and other related services such as refining.. Moreover, in the last few years, the company started its activities in E&P. In Egypt, Total was mainly concerned with the downstream sector as opposed to the upstream sector. By 2017, the number of service stations for Total in Egypt reached 240 service stations. Total acquired a 25% interest in North El Hammad Offshore Block 7 in West Baltim and a 5% interest in Train-1 of Idku liquefaction plant. Prior to acquiring Edison’s assets, Energean Oil & Gas has been working in Egypt since 2010. However, while the company has conducted several seismic surveys in the Gulf of Suez and Upper Egypt, it has yet to make a discovery.
As for ExxonMobil, its operations in Egypt date back to 1902, as part of ExxonMobil Corporation, when kerosene was the company’s primary product.
ExxonMobil started operating in Egypt in 1902 Source: ExxonMobil
In 1939, one of the affiliates of Standard Oil Company of New Jersey, Exxon’s predecessor, started crude oil exploration process in Egypt. In 1946, it successfully discovered the Ras Matamra crude oil field in Sinai. ExxonMobil Egypt S.A.E. was created, in 2000, when a merger took place between Esso Standard Near East and Mobil Oil Egypt.
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East Mediterranean Gas Forum Countries’ Profile
2. CYPRUS Cyprus mainly depends on crude oil whereas most of its electricity is generated by oil-fired power plants. For Instance, its consumption from petroleum products in 2016 represented about 93% of the gross inland energy consumption . Hence, the country greatly relies on crude oil imports to meet its energy needs, according to the Eurostat trade data: 2016.
in Cyprus Exclusive Economic Zone (EEZ) along with its favorable geographical location, the natural gas sector in the island has been taking huge steps toward creating attractive opportunities for foreign investments. The discovery of Aphrodite natural gas field offshore Cyprus astonished the neighbouring countries which have largely overlooked the potential of this area. The field was discovered in December 2011 by Noble Energy within EEZ Block 12. It is 30 km Northwest Israel’s Leviathan field covering an area of 120 km2. The field’s maximum thickness of the reservoir is 320 meter with estimated reserves of 4.5 tcf of natural gas, according to Delek Drilling Company’s website.
Cyprus is politically and territorially divided between the Greek Cypriot area and Turkish Cypriot area of Northern Cyprus. Therefore, Cyprus has the potential of exporting natural gas to neighboring countries and other East Mediterranean countries from drilling of Aphrodite field. Following the discovery of vast natural gas reserves
February 2007
The first licensing round in 11 exploration blocks within the EEZ where Blocks 3 & 13 are excluded. Block 12 35% Noble Energy
35% Noble Energy
Blocks 2, 3 & 9 Eni Cyprus Limited
March 2017
Sources: Ministry of Energy, Commerce and Industry in Cyprus.
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35% Noble Energy
2nd
The second licensing round, for Blocks 1 to 11 & 13.
February 2012
OFFSHORE LICENSING ROUNDS IN CYPRUS
1st
Blocks 10 & 11
KOGAS Cyprus Limited
Total E&P
3rd
The third licensing round, for Blocks 6, 8 & 10.
February 2016
Block 6 ENI Cyprus Limited
Total E&P
Block 8 Capricorn Oil
Block 10
Delek Drilling
ENI Cyprus Limited
ENI Cyprus Limited
Block 6
Block 8 50% Total E&P
4th
ENI Cyprus Limited
Block 10 50% Qatar Petroleum
Total E&P Exxon Mobil
Qatar Petroleum
Three blocks, within EEZ, were awarded, as a part of the third licensing round 50% ENI Cyprus Limited
Cyprus B.V.
50% ExxonMobil
Statoil
EGYPT OIL & GAS RESEARCH & ANALYSIS
AUTHORITIES AND REGULATORY SYSTEM IN CYPRUS
NATURAL GAS FIELDS IN CYPRUS Discovering Company
Estimated Reserves (tsf)
Aphrodite 2011
Block 12 Noble Energy
2018
Calypso Eni
Block 10 Exxon mobile
Glafcos 5–8
4.5
Block 6 6–8
The regulation of the Gas Market Law in Cyprus was first introduced in 2004 and amended by Laws 103(I)/2006, 199(I)/2007, and 219(I)/2012. The current Law on Regulating the Natural Gas Market (2012) has set the rules and procedures for the transportation, distribution, supply and storage of the natural gas traded between Cyprus and other countries. In addition, it defines the rules regarding the operations and functioning of the natural gas sector, the market’s access, and networks’ exploitation. Additionally, the Law defines the duties and responsibilities of CERA. Cyprus Energy Regulatory Authority (CERA)
2019
In 2003, Cyprus Energy Regulatory Authority (CERA) was established in accordance with the Natural Gas Market Law Regulation to be mainly responsible for promoting the development of the natural gas market as well as ensuring safety, quality, and efficiency in natural gas supply.
Sources: Delek Drilling.
The Aphrodite natural gas field is considered a source that lowers domestic energy costs and substantial export revenues. However, production has been delayed for two reasons: (i) stakeholders such as Noble Energy, Israel’s Delek Drilling, and Royal Dutch Shell renegotiated a production-sharing agreement with the government, and (ii) a limited amount of natural gas resources was found in the island’s offshore area, as explained on Delek Drilling Company’s website. In 2018, a new natural gas discovery was found by Eni in Block 6, and was named Calypso. Calypso was found to have reserves that were estimated to have between six to eight tcf. In early 2019, ExxonMobil discovered Glafcos-1 in Block 10, a natural gas field with estimated reserves of five to eight tcf; this field is similar in size to the Aphrodite and Calypso fields. It is worth mentioning that Glafcos was the second of a twowell drilling program in Block 10. The first well, Delphine-1, did not provide enough commercial quantities of hydrocarbons, according to Cyprus Profile’s website. Between 2024 and 2025, Cyprus expects an initial production of natural gas from Aphrodite field with an estimated amount of about 800 million cubic feet per day (mcf/d) in the first production phase, as stated in a paper “The Importance of East Mediterranean Gas for EU Energy Security: The Role of Cyprus, Israel and Egypt”, by Theodoros Tsakiris. Cyprus has expressed interest in becoming a natural gas exporter, where the long-term domestic demand is fairly small. Accordingly, the majority of natural gas production will be exported to foreign markets. Although the country appears to be surrounded by fields with significant reserves, Cyprus neither produces nor consumes natural gas; hence, it has no existing reserves as of 2017, as reported by the Energy Information Administration’s (EIA) 2017 data.
CERA’s Main Objectives, Powers and Responsibilities:
• Monitoring the issues of the security of supply, especially • • • • • •
the balance of supply/ demand in the market as well as the level of competition in the market. Setting technical rules determining the minimum standards of technical design of LNG connections from the network of installations to storage installations, until reaching the direct pipes of natural gas. Promoting the development of regional markets within the community so that they operate competitively to achieve security of supply. Boosting the elevations of restrictions on natural gas trading among member states, including developing proper cross-border transmission capacities to meet demand and enhance the national markets’ integration. Ensuring the implementation of the measures within Regulation 994/2010 of the European Parliament and the Council concerning measures to safeguard security of gas supply. Assessing administrative fines in the case of a breach of any provision of the Law. Preparing and implementing long-term plans for supply and transportation capacity of natural gas to satisfy the demand of the system for natural gas, with the diversification of sources.
Natural Gas Public Corporation - DEFA In November 2007, the Natural Gas Public Corporation (DEFA) was founded as private legal entity working in line with the Government of Cyprus as its sole shareholders, following a decision of the Council of Ministers.
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In July 2019, DEFA announced the successful completion of the first step of the tender procedure for the Cyprus LNG Import Terminal that includes the required infrastructure for importing LNG into Cyprus. The 80 km terminal will initially consist of three pipelines connecting the Gas Import Hub with the three existing downstream Power Stations in Vasilikos, Dhekelia, and Moni.
DEFA’S MAJOR ROLES
Securing sufficient natural gas supplies for the island, at the lowest competitive prices.
Covering the needs for electricity power generation (Phase “A”), supplying industries and households.
Vasilikos Power Station
Moni Power Station
0.6 km pipeline
12 km pipeline
Developing major natural gas network infrastructure.
Consequently, since 1972, BP has been working in Cyprus through its subsidiary, BP East Mediterranean. However, BP’s main activities are concerned with downstream-related pursuits, as well as with marketing and selling of fuel and lubricants to the East Mediterranean and North African customers. Subsequently, Eni started operating in Cyprus in the 1960s, when Agip Cyprus Co. for distributing petroleum products was established in 1963. Nowadays, the Italian company is engaged in upstream activities through Eni Cyprus Limited since 2013. Eni is operating with six licenses located in the Cypriot EEZ, specifically in Blocks 2, 3, 6, 8, 9, and 11. In February 2018, Calypso-1, a new natural gas discovery was announced in Block 6, in which Eni has 50% interest. Eni considers Calypso-1 to be a promising discovery; it also confirms the expansion of the “Zohr like” output in the Cypriot EEZ. ExxonMobil has been operating in Cyprus for more than 65 years, where its activities were mainly concentrated in providing fuels and lubricants under the Esso and Mobil brands. However, in March 2017, the company signed an E&P contract with the Cypriot government to start offshore exploration drilling in Block 10 in partnership with Qatar Petroleum International. It is important to note that while ExxonMobil holds 60% interest in the block, Qatar Petroleum International holds 40% interest. In November 2018, ExxonMobil commenced drilling operations in its Delphine-1 to produce natural gas. In February 2019, the company announced achieving a natural gas offshore discovery within Glafcos-1 well.
Dhekelia Power Station 65 km pipeline
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Source: The Natural Gas Public Corporation MODERN
OPERATING COMPANIES IN CYPRUS
ExxonMobil BUSINESS I Nin F OCyprus G R A P HI C
Shell has a significant presence in Cyprus. It has been operating within the country since 2016, after its purchasing of BG. The company holds 35% in Aphrodite gas field.
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Delek Drilling has been operating in Cyprus since the discovery of Aphrodite in 2011 by possessing a 30% interest in the field. Besides, the company took a license to operate in Block 8 during the licensing round in February 2016. Noble Energy was the first operator in Cyprus to discover natural gas resources offshore in the Levant Basin, working in cooperation with the Government of Cyprus to complete the development plan of Aphrodite. Noble Energy holds an interest of 35% in the field. Moreover, the company received an International Investment Award by the Cyprus International Promotion Agency (an award to honor international investors, people and companies in Cyprus that have contributed to the development of the island) in both 2012 and 2015.
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Source: ExxonMobil
Similarly, Total is mainly active in Cyprus in E&P activities as well as marketing of petroleum products, in addition to engaging in refining activities. The company operates in the deep offshore exploration Block 11, with a 100% interest, and Blocks 6 &10.
EGYPT OIL & GAS RESEARCH & ANALYSIS
3. ITALY Italy is one of the largest three natural gas markets in Europe along with the UK and Germany. The natural gas represents a significant share of 38.5% of the country’s energy mix. However, the country has relatively insignificant limited proven reserves, as they reached approximately 1.6 tcf at the end of 2018, according to BP’s Annual Statistical Review of 2019.
NATURAL GAS EXPLORATION DEVELOPMENTS IN ITALY Pre 1860
Growth & Maturity
38.5%
Natural Gas
Italy’s Energy Mix in 2018
Pre-Industrial
18601944
19442007
Source: BP Statistical Review, 2019
Slow Down
The natural gas exploration history in Italy is divided into four periods. The discovery of the Ozzano in 1860 distinguished the pre-industrial from the industrial periods. In 1944, the discovery of Caviaga marked the growth and maturity period of the Italian natural gas E&P activities, which extended to 2007; this period was, accordingly, named the “golden age of the Italian E&P”. However, in 2007, the natural gas activities started to slow down. In fact, the level of exploratory wells declined to less than ten wells annually which also caused a historic decline in the upstream investments, according to a paper published by Search and Discovery, in 2018.
Golden Era
2007 to date
the Italian domestic natural gas production was 0.18 tcf, which satisfied only around 7.5% of the domestic demand, which recorded 2.4 tcf in the same year. Accordingly, the rest was met through imports either in form of LNG or through pipelines. Hence, Italy imported 282.4 bcf of LNG, in addition to 1.9 tcf of natural gas pipeline imports, BP reported in its Annual Statistical Review of 2019.
Until 2014, the Italian LNG facilities accounted for 11% of Italy’s total natural gas imports. However, in 2015, Italy’s LNG imports increased by approximately 32% to record 151.8 bcf. Furthermore, the LNG imports increased again by 32% in 2017, making Italy’s LNG imports represent 15% of the European Union’s (EU) total LNG imports that year. The increase in demand is mainly derived by the increase in electricity demand along with the progressive increase in the use of natural gas in transport sector. Moreover, the production level annually satisfies around 10% of the total domestic demand, for example, in 2018,
Italy imported 15% of the EU’s LNG imports in 2017 Source: DEFSA
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NATURAL GAS STATISTICS IN ITALY
The Letta Decree started the reorganization process of the Italian market of natural gas. The Decree has mainly promoted the market competition by regulating the times and methods of entering the market. The Letta Decree aims at offering the public services with better quality at more competitive prices. Additionally, the Marzano Law is meant to define the duties of the State in the natural gas sector.
2018
This step totally revolutionized the Italian natural gas market from being a market fully concentrated in the hands of the state to an open competitive market in terms of production, supply, and sales.
1.6 tcf proven reserves
Natural gas demand recorded 2.4 tcf Natural gas production reached 0.18 tcf, securing 7.2% of the domestic demand
Source: BP Statistical Review, 2019
AUTHORITIES AND REGULATORY SYSTEM IN ITALY The general principles governing the Italian energy sector were set by the Royal Decree No. 1443 of 1927. However, in the 1990s a new energy plan was implemented through Law No. 9 of 1991. Since then Italy has carried out an ongoing extensive process to liberalize the market as stated in a paper published by the EU in 2018 entitled “Legislative and Regulatory Framework for Power-to-Gas in Germany, Italy and Switzerland.” Additionally, in Italy, the natural gas reserves are owned by state. However, exploration and exploitation activities are performed by private companies under a concession regime. Nevertheless, the Italian energy policy is based on state’s direct intervention to ensure the security of energy supply to the public. Nonetheless, in the 1990s, the European Parliament and the Council of the EU issued different directives aiming to liberalize the natural gas market in the union. Most importantly, directive No. 98/30/EC was implemented; this directive defines the regulatory framework that the EU members are obligated to follow, as it is an EU legislative that is binding on the EU members to whom it is addressed. Article no. 1 of the Directive states that it “rays down the rules relating to the organization and function of the natural gas sector including LNG, access to market, the operation of systems, and the criteria & procedures applicable to the granting of authorizations for transmission, distribution, supply, and storage of natural gas,’’ according to the publication office of the EU’s website. The directive was carried out in Italy by issuing legislative decree No. 164 of 2000, the so-called “Letta Decree” along with the legislative decree No. 239 of 2004 (Marzano Law).
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The above-mentioned paper further explained that the liberalization of natural gas markets in the EU was further pursued, as a new directive called “Sector Gas Directive” 2003/55/EC was adopted in H1 2003; this integrates much of directive no. 98/30/EC. In relation to this, many of the new decree provisions were implemented in strictly in Italy. The Italian Regulatory Authority for Energy, Networks and the Environment In 1995, Law No. 481 was issued to establish the Italian Regulatory Authority for Energy, Networks and the Environment (ARERA). The authority is an independent body, that was first limited to electricity and natural gas activities. The ARERA aimed mainly at protecting the public’s interests in having a free market that provides quality services and products at competitive prices. The Authority’s area of scope was further extended by means of some regulatory interventions, according to the ARERA website. Currently, the ARERA sets the methodologies to calculate the network tariffs, promulgates resolutions on issues in the natural gas sector, and advises and reports to the Italian government and parliament.
OPERATING COMPANIES IN ITALY Despite its shrinking natural gas exploration activities, Italy is the country of origin of one of the industry’s giants, Eni.
ENI IN ITALY
Petroleum production in Italy reached 134 kboe/d, in 2017.
Source: Eni
Operating on a total area of 20,332 km2
Has 112 concession contracts
EGYPT OIL & GAS RESEARCH & ANALYSIS
Eni was established in 1953, in Italy. The company is currently operating in all industry’s segments in the country, including upstream, natural gas & LNG marketing and power, refining and chemicals, and renewable energy sources. In 2017, Eni’s petroleum production in Italy reached 134 thousand barrels of oil equivalent per day (kboe/d). The company’s activities in Italy are located in the Adriatic and Ionian Seas, the Central Southern Apennines, mainland and offshore Sicily, and the Po Valley. It operates on a total area of 20,332 km2, of which 16,380 km2 are net to Eni’s interest. Moreover, it has 112 concession contracts, of which 62 are operated offshore, in addition to 22 exploration licenses. The Adriatic and Ionian Seas fields account for 48% of the company’s production in Italy. The main operated fields in these areas are Barbara, Cervia/Arianna, Annamaria, Luna, Angela, Hera Lacinia, and Bonaccia, and the production is mainly of natural gas.
As Russian natural gas is one of Italy’s main sources, Rosneft along with Eni have signed an agreement on exploratory work in the Black Sea and Barents Sea shelf in June 2013. The agreement was extended in 2017 in order to As the Russian natural gas is one of Italy’s main sources, Rosneft along with Eni have signed an agreement on exploratory work in the Black Sea and Barents Sea shelf in June 2013. The agreement was extended in 2017 in order to continue exploiting the resources in the Barents and the Black Seas. Besides Eni, Italy has another important IOC performing in its upstream activities since 1972. Shell has been representing one of the main groups in the petroleum sector within the country. Its activities are divided between upstream and downstream activities. The upstream activities are held by Shell Italia E&P, the first foreign company with an interest in Italy’s upstream sector through exploration, development, and production of both onshore and offshore liquid and gaseous hydrocarbons.
48%
4%
Adriatic and Ionian Seas
Others
10% Sicily
Eni’s Production in Italy by Area
Investment cost of more than $740 38%million.
Since 1972, Shell has been representing one of the main oil and gas groups in Italy, where its upstream activities are held by Shell Italia E&P
Central Southern Apennines
Source: Eni
Concerning the Central Southern Apennines, Eni has an interest of 60.77% in the Val d’Agri concession. It operates in Monte Alpi, Monte Enoc, and Cerro Falcone fields, which represent 38% of the company’s domestic production. In Sicily, Eni operates in 15 concessions which are divided into 12 onshore concessions and three offshore concessions. The operations in Gela, Tresauro, Giaurone, Fiumetto, Prezioso, and Bronte fields contribute 10% of Eni’s production in Italy.
Eni Operates in 15 concessions in Sicily, divided into 12 onshore & 3 offshore
Source: Shell
On the other hand, Shell Energy Italia Srl is operating in the downstream sector via supplying natural gas to the Italian market. The French Total has been operating in Italy for 60 years in E&P, refining & petrochemicals, and marketing of petroleum products and related services. Total is an operator in Teana (with 80% shares), Aliano (with 60% shares), Fosso Valdienna (with 83.4% shares), Tempa Moliano (with 83.4% shares), and Serra San Bernardo (with 13.77% shares). The company has 15 service stations in Italy serving long-haul truckers. Total’s activities in Italy include that of solar and other renewable energies, refining and chemicals, marketing services and oil and gas E&P activities.
Source: Eni
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4. GREECE 4. Despite the fact that Greece has a medium-sized economy with a natural gas consumption of only 14% in 2018, Greece has the potential of becoming an energy hub for natural gas as it has a unique position in Southeast Europe. On the other hand, crude oil consumption is represents about 56% of the country’s energy mix, as stated by BP’s Annual Statistical Review of 2019. 30%
Others
NATURAL GAS FIELDS IN GREECE
South Kavala
Epanomi
14%
Natural Gas
1972
56%
Crude Oil
Greece’s Energy Mix in 2018
Year of Discovery
1988
Year of Discovery
Source: BP Statistical Review, 2019
Prinos, Prinos North, West Katakolon, and Epsilon are considered Greece’s major crude oil fields. However, there are two main natural gas fields: South Kavala, and Epanomi fields. Also, Ioannina, Katakolo, and Aitoloakarnania fields all produce both crude oil and natural gas, as stated by Energean Oil and Gas Company’s website. Oil and gas exploration in Greece started in 1969, when the country was granted hydrocarbon exploration concession rights to foreign companies in the Gulf of Kavala. The first well drilling in the region came online at “East Thassos-1” in 1971. Then in 1972, the natural gas reservoir South Kavala was discovered. In 1972, South Kavala is a significant natural gas field that was discovered and developed by Energean Oil and Gas. The field is located in the Gulf of Kavala, 11 km south of Prinos field, covering an area of 5 km2, with an estimated remaining natural gas reserves of about 2.6 bcf. In 1988, the Epanomi gas field was discovered by Epanomi-1 (EP-1) well. In 1989, Epanomi-2 (EP-2) well gave 19 mcf/d of natural gas in its production test. The field is located in Thessaloniki area, with estimated reserves of 17.6 bcf of natural gas, as explained in “Hydrocarbon gas accumulations in Greece and their origin” paper, by Rigakis, N., Roussos, N., Kamberis, E., and Proedrou, P. 2001.
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2.6 bcf
Estimated Reserves
17.6 bcf
Estimated Reserves
Source: “Hydrocarbon Gas Accumulations in Greece and Their Origin”, by Rigakis, N., Roussos, N., Kamberis, E., and Proedrou, P.
Generally, natural gas production in Greece is limited. In 2017, the production recorded only 0.3 tcf against a domestic consumption of 174 tcf. Accordingly, the country greatly depended on imports to meet its domestic need of natural gas. Besides, the country’s natural gas proved reserves were almost zero. Hence, its natural gas total imports reached 120 tcf, covering about 70% of the domestic need for that year, as reported by the EIA’s 2017 data and BP’s Annual Statistical Review of 2018.
In 2017, Greece’s natural gas production recorded 0.3 tcf against a domestic consumption of 174 tcf Source: BP Statistical Review, 2019
EGYPT OIL & GAS RESEARCH & ANALYSIS
Gas Distribution Companies (EPAs)
Greek natural gas imports reached 120 tcf, covering, 70% of the domestic demand, in 2017 Source: BP Statistical Review, 2019
AUTHORITIES AND REGULATORY SYSTEM IN GREECE
EPA Attikis SA, EPA Thessaloniki SA and EPA Thessaly SA represent the three gas distributing companies in Greece, named EPAs, which were established in 2000-2001 by the provisions of Law 2364/1995. The companies operate under a 30-year concession agreement, which gives them an exclusive right for the distribution and supply of natural gas to noneligible customers who consume less than 10 million cubic meter per year, according to the RAE’s website. Furthermore, Law 4001/2011 was later amended by Law 4336/2015 in 2015, promoting the reform and liberalization of the natural gas market in Greece through the removal of the monopoly power of these three regional distribution companies.
OPERATING COMPANIES IN GREECE
Greece was characterized as being an emerging natural gas market as it had a late start in comparison to the rest of Europe, as natural gas was first introduced to Greece’s energy mix in 1996. According to the basic gas Law 2364/95, DEPA S.A., a major state-owned company, was granted exclusive rights for natural gas imports, transportation and supply to large consumers and companies. Then, the Regulatory Authority for Energy of the Hellenic Republic (RAE) was established by Law 2773/99 as an independent administrative Authority regulating the Greek energy sector, and recommending appropriate restructuring of the natural gas market. With the effort of speeding up of the liberalization of the electricity market (70% of natural gas consumption), Law 3428/2005 was introduced to liberalize the natural gas market as well. Under this Law, the operator of the National Natural Gas System (NNGS) was established and the procedures of moving the staff from DEPA S.A. to the operator were implemented. Replacing Law 3428/2005, Law 4001/2011 started regulating electricity and natural gas operations, as well as the production and transmission networks of hydrocarbons and other arrangements in the Greek energy market. National Natural Gas Operator and National Natural Gas System (DESFA and NNGS) Aligning Greek Laws with the European Directive 03/55/EK, the National Gas System Operator (DESFA) S.A. was founded as a subsidiary for DEPA S.A. to promote the natural gas market liberalization. On the other hand, NNGS is a transmission system that transports natural gas from the Greek-Bulgarian and the Greek-Turkish borders to customers in mainland Greece. The operation, maintenance, exploitation and development of the NNGS are recognized by the DESFA under the provisions of the “National Natural Gas Operation Code”, as amended by RAE’s Decision No. 1096/2011, DESFA mainly develops NNGS and its interconnections to best serve its customers with safety, reliability and adequacy, as explained in the RAE’s website.
In Greece, Energean holds a 100% operating interest of Prinos and South Kavala development concessions within the Prinos Basin offshore Northern Greece in the Gulf of Kavala. The average production of Prinos and South Kavala in 2018 recorded 4,053 barrels per day (bbl/d). Currently, Energean has crude oil reserves of 70 million barrels (mmbbl) and 13.5 bcf in the Prinos Basin fields, according to the company’s website. In addition, the company operates with 100% interest in the 25year exploitation license of the West Katakolo offshore field, which contains 10.5 mmboe of hydrocarbon reserves.
Energean hold 100% operating interest in the Prinos and South Kavala as well as the West Katakolo offshore fields Source: Energean Oil & Gas
The company has been consistently increasing its resources in the Gulf of Kavala, where the developed and underdeveloped reserves are currently estimated at 72 mmboe. Energean also operates in Western Greece, where the first exploration phase and a 2D seismic survey are currently in progress in Ioannina. Moreover, the company has planned a three-year exploration phase in Aitoloakarnania, including FTG and 2D seismic surveys. Since 1951, BP has been a significant contributor to the Greek economy as it is one of the leading companies in the country’s market. However, BP’s activities in Greece are only limited to downstream activities, where lubricant sales have a major position in both automotive and industrial market. Furthermore, Total acquired in 2017 50% of the Block 2 license in West of Corfu Island, where explorations are still in progress.
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5. JORDAN Jordan’s local sources of crude oil and natural gas are very limited despite the government’s continuous efforts in developing those sources. Concerning Jordan’s natural gas consumption, it increased by 3.8% in 2017 to reach 3.5 tcf, which represented about 35% of the country’s energy mix , according to the Jordanian Ministry of Energy and Mineral Resources’ (MEMR) annual report in its official website, 2017.
8%
35%
Others
Natural Gas
In 2017, Jordan’s natural gas production recorded 3.6 bcf Source: MEMR
57%
Crude Oil
Jordan’s Energy Mix in 2017
Source: MEMR
The Jordanian Ministry announced six open concessions for crude oil and natural gas explorations in 2017 within the regions of Azraq, Dead Sea, Aljafar, Northern Highlands, West Safawi, and Sarhan. Risha Field is considered one of the most significant fields for natural gas in Jordan. It is a medium- sized field, discovered in 1987 by Natural Resource Authority, with natural gas reserves of 2 to 3 tcf, according to Jordan’s National Petroleum Company’s website (NPC). Jordan’s local production from crude oil and natural gas reached 582.1 thousand tons of oil equivalent (Ktoe) in 2017, where natural gas production alone recorded 3.6 bcf. Thus, there is a gradual decrease in natural gas production, where it decreased from 4.6 bcf in 2014 to 4.3 bcf in 2015, then to 4.1 bcf in 2016, according to the MEMR’s annual report in its official website, 2017. The LNG from floating gas vessels reached about 127 bcf.
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AUTHORITIES AND REGULATORY SYSTEM IN JORDAN The Jordanian government applied Law No. (73) for producing energy efficiency (EE) in 2012. By that time, it had approved the “Jordan’s National Energy Efficiency Action Plan (NEEAP)” from the Cabinet in 2013. The Law No. (17) has been issued to merge the Jordan Nuclear Regulatory Commission, the regulatory activities of the Natural Resources Authority and Electricity Regulatory Commission into Energy and Minerals Regulatory Commission (EMRC), in 2014. The Jordanian government decided then to make a new reformulation in the energy sector, where it prepared a draft Law “Energy and Minerals Law” to be submitted to the parliament for approval,after 2014. The current applied Law was Radiation Protection, and Nuclear Safety and Security Law no. (43) for the year 2007,according to a presentation entitled “Roles and Responsibilities of the Regulatory Authority” for EMRC. The energy strategy (2015 – 2025) aimed to overcome energy challenges through increasing local energy portion in total energy mix, achieving variety in energy resources, and raising energy consumption efficiency. According to the structural framework, by considering the energy sector’s pivotal role in affecting the Jordanian economic, social and political aspects, the Jordanian government amended the institutional framework in 2017 to be composed into six main players: MEMR, Energy and Mineral Resources Regulatory Commission, institutions in the
EGYPT OIL & GAS RESEARCH & ANALYSIS
electricity sector, petroleum, natural gas and mineral ore institutions, Jordan Atomic Energy Commission (JAEC) and Jordan Blogas Company Ltd, mentioned in the MEMR’s annual report in its official website, 2017. The natural gas institutions include; The Ministry of Energy and Mineral Resources MEMR sets a comprehensive planning process, formulates the main sector’s policies, follows up on the implemented tasks, provides the needed energy amount in all its forms for development purposes and delivers electricity to the rural poor communities. Moreover, the ministry attracts investors, provides support for energy efficiency improvement studies and secures loans for energy and renewable energy projects. Energy and Mineral Resources Regulatory Commission (EMRC) EMRC is responsible for managing the regulatory functions of the Electricity Regulatory Commission and the Regulatory Authority of radiation, nuclear work and natural resources power. Petroleum, Natural Gas and Mineral Ores Institutions These institutions undertake petroleum, natural gas and mineral ores explorations in the Kingdom, as well as refining crude oil and selling oil derivatives.
OPERATING COMPANIES IN JORDAN As the natural gas E&P activities in Jordan are considerably small, the IOCs’ activities in the country’s upstream sector are not large and are mainly focused on downstream activities. Shell is among the IOCs operating in the Jordanian upstream sector; however, they are concerned only with crude oil E&P through the Jordan Oil Shale Company (JOSCO). As for Total, its operations have been taking place in Jordan since 2006. The company’s activities focus on refining, chemicals, marketing and services for petroleum products and related services; hence, they are not an upstream player.
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6. PALESTINE Palestine mainly manage “Marine A” field to provide Gaza Strip with the needed energy. The energy demand of Palestine is relatively small, although the demand is increasing as the population increases. The Palestinian territories do not have any proved hydrocarbon reserves. Israel controls the shipment of natural gas from offshore resources to the West Bank and Gaza Strip. BG, which is a subsidiary of Centrica, obtained a license in 1999 from the Palestine to explore the Palestinian offshore between Israeli and the Egyptian waters.. The license allowed BG to discover two wells, Gaza Marine-1 and Gaza Marine-2, located 36 km off the Gaza Strip. They are considered to be the first natural gas discoveries in the East Mediterranean offshore after Egypt and Israel, according to a report by the European Parliament’s Policy Department entitled “Energy: a shaping factor for Regional Stability in the East Mediterranean,” written by Simone Tagliapietra, in 2017. Palestine’s total energy production reached 5.37 bcf in 2016, acquiring the 148th rank worldwide, while the energy consumption reached 69.3 bcf and ranked 142th among other countries; and the total petroleum consumption recorded 46.53 bcf, according to the EIA’s 2016 data.
AUTHORITIES AND REGULATORY SYSTEM IN PALESTINE Law No. 12 of 1995 established the Palestinian Energy and Natural Resources Authority (PENRA) to manage the energy market including natural gas and crude oil resources. Article No. 3 of the Law identifies the authority’s responsibilities, which ensures that energy production meets the public needs and is exported to neighboring countries. PENRA also has the right to import energy from other countries, in addition to establishing the necessary networks to transport energy all over the country. The authority also has an administration, known as The General Administration of Gas and Petroleum, which is focused only on natural gas, crude oil and their derivatives. The General Administration of Gas and Petroleum plays a leading role to achieve the desired goals for the public interest, according to PENRA’s website. The administration works on developing petroleum energy policies, which includes issuing exploration licenses for the construction of any crude or natural gas project, in addition to issuing imports, storage and refining licenses. Furthermore, the General Administration of Gas and Petroleum works on developing the storage system and circulation of all fuels on the medium and long term, as well as setting the necessary programs to establish the infrastructure of transportation lines and distribution stations. The administration consists of three departments; exploration, production and distribution control, and research and development.
GAZA MARINE-A CONCESSION
Gaza Marine-1 & Gaza Marine-2
Source: EIA
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1999
Year of Discovery
988.4 bcf
Estimated Reserves
EGYPT OIL & GAS RESEARCH & ANALYSIS
7. ISRAEL Natural gas in Israel is a primary energy source, mainly utilized for electricity production. In 2018, natural gas consumption represented 35% of the country’s energy mix. Nevertheless, oil possessed the highest share by 45%, as explained in BP’s Annual Statistical Review of 2019.
20% Others
35%
Natural Gas
45%
Crude Oil
The Leviathan field is the largest natural gas discovery in Israel and the second largest-ever natural gas found in the East Mediterranean following Zohr gas field in Egypt. The field is located about 125 km west of Haifa and 35 km west of the Tamar field in the East Mediterranean, with estimated reserves exceeding 21 tcf, and production capacity of 437 billion cubic feet per year (bcf/y), as explained in Delek Drilling Company’s website.
Israel’s Energy Mix in 2018
In 2018, Noble Energy has secured contracts to supply over 900 mcf/d of natural gas from Leviathan field
Source: BP Statistical Review, 2019
Over the period from 1999-2000, Mari B and Noa gas fields were discovered by Noble Energy, producing 882 bcf of natural gas. However, the discovery of the Leviathan and Tamar fields in 2009 and 2010, respectively, in the Levant Basin has strengthened Israel’s position to be a net exporter of natural gas, according to the Israeli Ministry of Energy’s website.
Source: Noble Energy
NATURAL GAS DISCOVERIES IN ISRAEL 1999 -2000
2009
2009
2010
2011
2012
2013 -2014
Mari B and Noa
Tamar
Dalit
Leviathan
Dolphin
Shimshon
Karish and Tanin
N/A
10.5 tcf
282 bcf
21 tcf
N/A
176 bcf
2.4 tcf
Source: Israeli Ministry of Energy
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East Mediterranean Gas Forum Countries’ Profile
Although the Leviathan field was discovered in 2010, its first natural gas production is estimated to take place in late 2019. However, Noble Energy has already secured contracts in 2018 to supply over 900 mcf/d of gas from the field, according to Noble Energy Company’s website. The Tamar field is the second largest natural gas discovery in Israel, discovered in early 2009. The field is located roughly 90 km west of Haifa, covering an area of 100 km2, with estimated reserves exceeding 10.5 tcf and a production capacity of 437 bcf/y, as stated by Delek Drilling Company’s website.
to continue over the upcoming period, increasing to 400-500 bcf in 2025 and to 600-700 bcf in 2030, as stated by the EIA’s 2017 data.
AUTHORITIES AND REGULATORY SYSTEM IN ISRAEL The Israeli Petroleum Law was enacted in 1952 to govern all E&P activities onshore and offshore Israel. The Natural Gas and Oil Department
At the end of 2008, the first exploration well of Tamar field was drilled at a cost of about $140 million and a 30% possibility of finding natural gas. The initial results of the well indicated reserves of 9.9 tcf of natural gas and about 13 mmbbl of condensates. In 2013, the field commercially produced 918 bcf of natural gas and further 2 mmbbl of condensates at the Tamar South West prospect. During 2017, the proven reserves in Tamar-8 well reached 11.2 tcf of natural gas and about 14.6 mmbbl of condensates, explained by Derek Drilling Company’s website.
The Natural Resources Administration (NRA) is the entity in the Israeli Ministry which regulates the exploitation of natural resources. The Natural Gas and Oil Department is a unit within NRA that operates under the Petroleum Law 1952 and its regulations. The department’s main roles are represented in: granting oil E&P rights and monitoring their implementation.
Furthermore, in 2013 and 2014, two gas fields were discovered in the Levant Basin by Noble Energy named “Tanin” and “Karish”. However, these fields were acquired by the Greek Energean Oil and Gas Company in 2016. The two fields are considered world-class assets with about 2.4 tcf of natural gas. The two fields’ first production of natural gas is expected to take place in Q1 2021, according to Energean Oil and Gas Company’s website.
Also, one of the main activities of the department is managing and archiving data and information submitted by the operating O&G companies, including all the scope of activities in petroleum rights such as seismic, log and other geophysical data, geological, drilling, engineering, and environmental data and reports, rock cuttings and core samples, as explained by the Israeli Ministry of Energy’s website.
Consumption exceeded 350 bcf
The department manages the engineering aspect of all work stages, starting from the drilling plan through the drilling process and ending in the complete abandonment of the drilling site,
Granting Natural gas and Petroleum Rights According to the Petroleum Law, three types of petroleum rights can be granted: preliminary permit, license and lease.
• Preliminary Permit: The right to perform preliminary
Natural Gas in Israel in 2017
Source: BP Statistical Review, 2019
Production of about 347 bcf
Proven reserves reached 6.2 tcf
In 2017, Israel’s consumption of dry natural gas exceeded 350 bcf, 80% of which were allocated for generating 60% of all electricity produced. On the other hand, the country’s production recorded about 347 bcf. However, Israel’s proven reserves of natural gas reached 6.2 tcf. It is worth mentioning that the accelerated growth of natural gas consumption, due to population growth and high standard of living, is expected
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surveys such as seismic surveys within the permit area, based on field characteristics and potential. This right is limited to 18 months. License: A three-year exploration license is granted with the option of up to a seven year-extension, subject to change by the Petroleum Commissioner. Lease: The right to produce oil and gas in the right area for a period of 30 years with the option to extend to 20 additional years. A lease is granted by the Petroleum Commissioner after the production is approved to be financially profitable. Natural Gas Authority
• •
The natural gas authority, which is responsible for developing the natural gas market in Israel, acts according to the Natural Gas Sector Law in the light of promoting the Law’s goals. . The natural gas authority encourages competition, activities and investments within the private sector by creating the necessary conditions as well as ensuring high quality services are provided in align with the safety regulations, according to he Israeli Ministry of Energy’s website.
EGYPT OIL & GAS RESEARCH & ANALYSIS
The Authority’s functions
• Implementing governmental policies to promote the
natural gas sector. of tenders and preparation of licenses in accordance with the Natural Gas Sector Law; and supervision of licensees, terms of service and tariffs. Recommending tariffs to be approved by the Natural Gas Authority Council which establishes the main criteria for services and tariffs. Defining safety orders, regulations, and procedures for the planning, construction, operation and maintenance of natural gas facilities.
30%
Kerogen Capital
• Publication • •
OPERATING COMPANIES IN ISRAEL Delek Drilling discovered the two giant natural gas fields Leviathan and Tamar. For the Leviathan field, the company has a working interest of 45.34%, while its partners hold 39.66% and 15% by Noble Energy and Ratio Oil Exploration, respectively. On the other hand, the Tamar field was discovered by Delek (working interest: 22%), and its partners Noble Energy (operator: 25%), Isramco (28.75%), Tamar Petroleum (16.75%), Dor Gas (4%), and Everest Infrastructures (3.5%). The first offshore discovery in Israel was made by Noble Energy in 1999 in the Levant Basin, and the first delivery for Israeli’s domestic natural gas was in 2004. Currently, Noble Energy’s Tamar platform provides nearly 70% of the Israeli power generation. Moreover, the company will contribute in Leviathan field’s first production by the end of 2019.
Operating Interests in Tanin & Karish
70%
Energean Israel Source: Energean Oil & Gas
of 4.54 tcf and hydrocarbon liquid reserves of 22 mmbbl. Moreover, in July 2019, Energean was awarded additional four exploration licenses in Block D, offshore Israel. In March 2018, Energean signed a $1.27 billion deal with Morgan Stanley and Natixis, Bank Hapoalim and Societe Generaleto finance the developments of Tanin and Karish fields, as stated by the Jewish Virtual Library’s website. In April 2019, Energean announced a significant gas discovery in the Karish North exploration well, with estimated natural gas reserves of 1 tcf to 1.5 tcf of natural gas. Currently, Energean is on track to start production from the Karish field in 2021. Karish’s daily production is estimated to reach 80,000 boe/d, with more than 80% of natural gas.
Another active player in Israel is Energean, as it holds 100% interest in nine exploration licenses at offshore Israel, through its subsidiary Energean Israel. In 2016, Energean acquired Tanin and Karish fields in offshore Israel, holding 70% interest in partnership with Kerogen Capital (30%). The two fields combined have total reserves of 2.4 tcf of natural gas and 32.8 mmbbl of light hydrocarbon liquids. In 2017, Energean Israel awarded five offshore exploration licenses in the Israeli EEZ, which contain natural gas reserves
Karish field will come on stream in 2021, with estimated daily production of 80,000 boe/d Source: Energean Oil & Gas
Energean holds 100% interest in nine concessions in Israel Source: Energean Oil & Gas
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EAST
MEDITERRANEAN LNG INFRASTRUCTURE
www.egyptoil-gas.com
East Mediterranean LNG Infrastructure
Damietta plant functions as a tolling facility, with a current capacity of 264.8 bcf/y of LNG. The plant’s natural gas supplies are provided by the Temsah fields, Ha’py Development Area, in addition to Scarab and Saffron fields in the West Delta. However, the plant is currently idle, according to EGAS’ website.
The East Mediterranean countries heavily depend on natural gas imports. Accordingly, most of the region’s infrastructure is built to maintain LNG imports. However, Egypt is the only country in the region that has LNG exporting terminals. With this regard, other neighboring countries tend to export natural gas to Egypt, in order to be re-exported through its facilities to external markets.
The Idku terminal, on the other hand, was established in 2001 when EGPC and Edison signed an agreement with Shell to develop an integrated LNG export project in Egypt. The project is a two-train LNG terminal on the Mediterranean Coast with a capacity of 353 bcf/y of LNG, aiming to export ELNG to Europe and the US. The ELNG performs as a tolling facility with natural gas suppliers paying a tariff for the liquefaction service, according to EGAS’ website.
1. LNG EXPORTING FACILITIES Egypt Egypt has a relatively large, well-developed natural gas export infrastructure, which includes two world-class LNG exporting facilities. The Spanish Egyptian Gas Company (SEGAS) and the Egyptian Liquefied Natural Gas Company (ELNG) manage the LNG facilities. The first facility is located in Damietta, while the second one is in Idku, east of Alexandria.
Noticeably, the Idku facility resumed its operations, as Shell started to export natural gas from the offshore Burullus and Rosetta fields. In February 2019, LNG exports from Idku facility increased to 800 mcf/d, Minister of Petroleum Eng. Tarek El Molla told the local media.
LNG EXPORTING FACILITIES Location
Capacity
SEGAS
Operating Year
Operation Status
Damietta
264.8
2004
Idle
Idku
Idku
353
2001
Operating
(bcf/y)
Source: World LNG Report, 2019
2. LNG IMPORTING FACILITIES The Greek LNG terminal is located on the islet of Revithoussa in the gulf of Pahi at Megara, west of Athens. It started operating in 2000 and has a current annual capacity of 247.1 bcf. The terminal has two LNG tanks with a total storage capacity of 130,000 cubic meter, stated by DESFA. Currently, the Revithoussa terminal provides regasification and truck loading services.
Greece The Revithoussa Terminal As the demand increases in Greece, the natural gas imports increase. Around 25% of the Greek imports come in the form of LNG through its terminal at Revithoussa.
LNG IMPORTING TERMINALS IN GREECE Revithoussa
Operating Year
Capacity (bcf/y)
Owner
Type
Status
2000
230.4
DEPA 100%
Onshore
Operating
Source: World LNG Report, 2019
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EGYPT OIL & GAS RESEARCH & ANALYSIS
In 2007, DESFA implemented a significant investment by completing the first upgrade of the terminal, which increased its loading capacity and gasification rate.
The terminal is operated by the GNL Italia, with a current capacity of approximately 120 bcf/y. The terminal has an expansion plan that includes increasing the facility’s send-out capacity, storage, and capability to unload ships, according to GNL Italia’s website, the terminal’s owner.
The second expansion project at Revithoussa started in 2014 and was expected to be completed in 2017. However, the upgrade continued to 2018, increasing the total storage capacity to 225,000 cubic meters and the gasification rate by 40%, as stated by the DESFA.
The send-out capacity is planned to reach 282.4 bcf/y, by 2020, while the storage capacity will increase to 240,000 cubic meters, and the capability to unload ships will be up to 140,000 cubic meters.
Italy
Adriatic LNG Terminal
Most of the Italian natural gas imports are transported through pipelines; however, the remaining is imported through the country’s LNG facilities. Italy has three operating LNG gasification facilities, namely are Panigaglia, Adriatic, and Toscana.
The Isola di Porto Levante LNG terminal, also known as “Adriatic LNG”, is located in the northern Adriatic near Rovigo. The LNG terminal was officially initiated in October 2009; however, it received the first cargo in August 2009. Noticeably, the Adriatic LNG terminal remarks the first offshore Gravity Based Structure (GBS) for LNG unloading, storage, and regasification.
Panigaglia Terminal Located in Porto Venere in the western part of the Gulf of La Spezia, the Panigaglia LNG import terminal is one of the oldest LNG import facilities in the continent, as its operations date back to 1971.
The Italian terminal has a regasification capacity of 282.4 bcf/y, which represents around 11% of the country’s natural gas demand, according to Adriatic LNG’s Website.
LNG IMPORTING TERMINALS IN ITALY Panigaglia
Operating Year
Capacity (bcf/y)
1971
124.8
Owner
GNL Italia 100%
Type
Onshore
Status
Operating
Adriatic
Operating Year
Capacity (bcf/y)
2009
278.4
Owners Qatar Petroleum 46.35% ExxonMobil 46.35% Edison 7.3%
Type
Offshore
Status
Operating
FSRU Toscana
Operating Year
Capacity (bcf/y)
2013
129.6
Owners EON 46.79% IREN 46.79% OLT Energy 3.73% Golar 2.69%
Type
Floating
Status
Operating
Source: World LNG Report, 2019
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East Mediterranean LNG Infrastructure
FSRU Toscana LNG Carrier called the Golar Frost LNG Carrier was converted into an offshore FSRU project called LNG Toscana, in 2008. The FSRU, which came into operation in December 2013, is located about 22 km off the Italian coast between Livorno and Pisa. The Italian FSRU has a regasification capacity of 132.4 bcf/y, which represents approximately 4% of Italy’s natural gas demand. Moreover, it has a storage capacity of 135,000 cubic meters, according to Offshore LNG Toscana’s website. Israel Hadera Deepwater LNG Terminal The Hadera Gateway is Israel’s first LNG import terminal, launched in January 2013. The LNG terminal, which is operated by Israel Natural Gas Lines (INGL), acts jointly with the Israeli production coming from Tamar field to provide Israel with its needs of natural gas. The terminal is located in Hadera over six miles offshore Israel, and has a capacity of 600 mcf/d. In addition, the terminal has a 3.2 bcf-storage capacity. Until October 2017,
the terminal was able to deliver 70.6 mcf of LNG, in addition to regasifying around 48 bcf. The Israeli national transmission system receives half of its annual needs of natural gas, which is around 88.25 bcf, through the Hadera terminal, as stated by Excelerate Energy’s Website. Jordan Alshaikh Subah LNG Terminal In 2011, the Jordanian government issued a tender to establish an LNG regasification terminal at Aqaba, southern Jordan. The terminal’s regasification capacity was planned to be approximately 100 mcf/d. The Aqaba terminal was funded by the Kuwait Fund for Arab Economic Development and started operating in 2015 when it received the first cargo on May 27. The terminal is authorized by the Aqaba Development Corporation (ADC), which is a government associate group, according to an official statement by the Jordanian Ministry of Energy and Mineral Resources. The terminal is supplied by Shell through LNG cargoes arriving from Qatar. The terminal’s current send-out capacity is 490 mcf/d and its storage capacity is 160,000 cubic meters, according to Aqaba LNG Terminal Corporation’s Website.
LNG IMPORTING TERMINALS IN ISRAEL Hadera Gateway
Operating Year
Capacity (bcf/y)
2013
144
Owner
Israel Natural Gas Lines 100%
Type
Status
Floating
Operating
Source: World LNG Report, 2019
LNG IMPORTING TERMINALS IN JORDAN Aqaba
Operating Year
Capacity (bcf/y)
2015
182.4
Source: World LNG Report, 2019
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Owner Jordan Ministry of Energy and Mineral Resources 100%
Type
Status
Floating
Operating
EGYPT OIL & GAS RESEARCH & ANALYSIS
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EAST
MEDITERRANEAN
NATURAL GAS PIPELINES www.egyptoil-gas.com
East Mediterranean Natural Gas Pipelines
Recent discoveries of natural gas in the East Mediterranean are highlighting the geopolitical map of the region. These discoveries globally affect many countries, particularly the EU countries. These countries suffer from a critical situation regarding their energy security as a result of the shortfall between production and consumption of natural gas. Hence, linking the major East Mediterranean discoveries to the European continent would help in diversifying its energy supplies. These discoveries led to closer relations between many countries in the Levant Basin either by facilitating Israeli economic integration with Arab neighbors or by the Turkish reconciliation with Cyprus. Furthermore, these discoveries highly contributed in reducing the volatility in the region, as explained in a paper entitled East Mediterranean Gas Fields and a New Energy Corridor to Europe, published in 2012 by George Chr. Pelaghias. Natural gas is directed to the end user via pipelines projects. These projects’ costs are proportionally related to the length of the pipelines and their diameters. Offshore pipelines are usually more expensive than onshore pipelines, as the offshore pipelines are very large in diameter with compression facilities. As an alternative of the pipelines, natural gas is liquefied and transported by sea via shipments. However, this option
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is economically feasible only in the case of long distances or pipeline complexities due to geographical or geo-political reasons, as stated in Major Gas Finds in East Mediterranean – a source of new supply and conflicts in South East Europe, another paper published in 2012 by Pelaghias. Theoretically, there are three main natural gas pipelines directed to Europe: the East-Med Gas Pipeline (EMGP) that connects Israel, Cyprus, and Greece to Italy; Israel-CyprusTurkey pipeline connecting the three countries with a potential of extension to Europe, and finally; Israel-Cyprus pipelines that are connected with Egypt’s idle liquefaction plants in Idku and Damietta. Moreover, Israel is connected to Jordan through IsraelJordan pipelines. Other than that, one of the most important pipelines in the East Mediterranean region is Arab Gas Pipeline (AGP), which mainly connects Egypt to Jordan and Syria. Furthermore, there are other Greek pipelines; the Poseidon Pipeline, connecting Greece to Italy, as well as the IGB Pipeline, connecting Greece to Bulgaria, as explained in a paper entitled The Importance of East Mediterranean Gas for EU Energy Security: The Role of Cyprus, Israel and Egypt, written in 2019 by Theodoros Tsakiris.
EGYPT OIL & GAS RESEARCH & ANALYSIS
1. THE EAST-MED GAS PIPELINE Major natural gas discoveries offshore Israel and Cyprus over the period from 2009 to 2014, in addition to Greek gas fields discoveries and developments, have set up new energy security alternatives and have improved regional cooperation. This cooperation is essential to ensure the effectiveness of the East Mediterranean resources as a whole. In 2015, Israel-Cyprus-Greece Pipeline project, also known as EMGP, was confirmed as a Project of Common Interest (PCI) between the three countries. The offshore/onshore gas pipeline connecting gas fields in Cyprus to southern Europe through Greece and injects gas from the Levantine basin into southern Europe’s gas grid with a total capacity of 565 bcf/y.
In 2015, Israel-Cyprus-Greece Pipeline project was confirmed as a Project of Common Interest Moreover, the pipeline helps to supply Cyprus with additional 35.3 bcf/y for its domestic consumption. The pipeline’s structure extends 200 km offshore from the East Mediterranean gas fields to Cyprus; 700 km connecting Cyprus to Crete Island; 400 km from Crete to mainland Greece (Peloponnese); and 600 km crossing Peloponnese and West Greece, as explained in Tagliapietra’s paper. EMGP is supported by the EU as part of its Southern Gas Corridor (Southern Energy Corridor). The project helps to diversify the region’s energy sources and boost energy security and independence, as well as reducing reliance on natural gas imports from Russia, according to the paper by Tagliapietra. Furthermore, in April 2017, Israel, Cyprus, Greece, and Italy have signed a preliminary agreement to start establishing another pipeline to be completed by 2025. Stakeholders are suggesting a sufficient demand for gas within Europe of 1.4 to 2.1 tcf/y, making the pipeline commercially viable, as reported in Pipelines and Pipedreams: How the EU Can Support a Regional Gas Hub in East Mediterranean, a paper published in 2017 by Tareq Baconi.
2. ISRAEL-CYPRUS-TURKEY PIPELINE Although Turkey does not significantly possess amounts of crude oil and natural gas reserves, the country has a very strategic position as an energy hub among Russia, the Caspian region, the Middle East and Asia as well as the markets in Europe. Since 2014, Israel and Turkey have been discussing the project of constructing a pipeline to transport and sell Israeli
natural gas to the latter and further to Europe. That way, Israel could have access to Turkey’s developed infrastructure, which redistributes natural gas to many markets. Accordingly, increasing natural gas flow volume through Turkey would strengthen Ankara’s position to be an internal gas hub, as reported in Hydrocarbon Developments in the East Mediterranean: the Case for Pragmatism, a paper published in 2016 by Charles Ellinas, John Roberts, Harry Tzimitras, and David Koranyi. However, this project faces major obstacles as it either has to cross the Cypriot water or Lebanon and Syria. Due to the unrest in Syria, the tension between Turkey and Israel, and the conflicts between Turkey and Cyprus, the project’s implementation became more complicated. Yet, the project was directly competing with Russia on the European markets. With the continuous tension between Turkey and Israel, the relations between Turkey and Russia have flourished with stronger cooperation. As of January 2017, two operational pipelines were constructed to supply Russian natural gas to Turkey; the Trans-Balkan pipeline and the Blue Stream pipeline. Turkey imports more than 50% of its natural gas from Russia, 16% of which are LNG imports, as explained in a paper by Elias Boustros called Natural Gas in East-Mediterranean Basin – Changing the Energy Landscape, published in 2018. According to the Political, Economic and Social Research Center in Washington, the energy equation in the East Mediterranean cannot be figured without Turkey, which should not be considered as only a natural gas transit country to Europe, given its own domestic needs and drive to reduce reliance on Russian and Iranian gas. Overall, developing this pipeline through Cypriot water will be a good option, especially if Aphrodite production increase and hence its gas exports proceeds. However, technoeconomic studies on exports for Europe should be further done taking into consideration gas quantities, project costs, and gas prices.
3. ISRAEL-CYPRUS-EGYPT PIPELINE Egypt’s potential to be a natural gas trading hub has been boosted by recent reforms in the country’s domestic energy policy as well as the implementation of legal reforms and the Modernization Project. Accordingly, this led to the liberalization of Egypt’s midstream and downstream natural gas supply and trading activities. After the discovery of Zohr gas field in Egypt, the option of utilizing Egypt’s two LNG plants, Idku and Damietta, to export Egyptian, Israeli and Cypriot natural gas would be great. This option facilitates regional exporting, and could fast-track the region’s presence as a main source of natural gas for Europe. With a 670 bcf/y capacity from LNG plants, Egypt could export large volumes of its natural gas that is not domestically needed from Zohr field or any other field. However, the option of exporting Cypriot and Israeli natural gas is commercially beneficial to Egypt. It will gain additional revenue from transportation, in addition to further investment opportunities within the country, according to Tagliapietra’s paper.
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East Mediterranean Natural Gas Pipelines
It is noteworthy that Zohr field is connecting Egypt with Israel and Cyprus as field is located only 90 km away from Aphrodite and only 7 km off from Leviathan. In August 2016, Egypt and Cyprus signed an agreement for a pipeline that would transport natural gas from Aphrodite field to Egypt. With Shell being the operator of the Idku plant, as well as the co-owner of Aphrodite, it could be possible to secure such an agreement in which Cypriot gas is transported to Egypt. This option helps Cyprus to have access to the global LNG markets, as explained by Tagliapietra. On the other hand, Israel could also rely on Egyptian plants to re-export the Israeli natural gas. In 2018, Delek Drilling signed two agreements with the Egyptian Dolphinus Company for $15 billion to sell natural gas at an amount of roughly 2.2 bcf for a ten-year period, with renewed investment in Egypt’s pipeline infrastructure, as stated by Delek Drilling’s press release, published in February 2018.
4. ARAB GAS PIPELINE The AGP represents a significant model for strategic Arab Cooperation projects, as it connects Egypt to Jordan, Syria, and Lebanon as well as other countries in Africa, Asia, and Europe in future phases. The project has four phases:
5. ISRAEL-JORDAN PIPELINES Israel has approved the construction of natural gas pipelines connecting it with Jordan. In 2014, Israel signed its first gas export deal with Jordan’s Arab Potash Corporation and Jordan’s Bromine Company. The deal provided a small volume of natural gas supply, averaging about 70 bcf over 15 years, at a cost of $500 million.
In 2014, Israel signed its first gas export deal with Jordan to supply 4.2 bcf/y of natural gas over 15 years, at a cost of $500 million In 2019, second pipeline is expected to supply 1.6 tcf of natural gas from Leviathan to Jordan over a period of 15 years
Under this deal, in 2017, the first natural gas pipeline from Israel to Jordan was established in the Sodom area by the Dead Sea. This pipeline supplies natural gas from the Tamar reservoir to private customers in Jordan, as stated in a paper by Simon Henderson, Jordan’s Energy Supply Options: the Prospect of Gas Imports from Israel, published in 2015. In 2016, a gas supply agreement was signed between the Leviathan Consortium and the Jordanian National Electric Power Company (NEPCO), which resulted in the establishment of another Israel-Jordan pipeline in the Beit Shean area. The pipeline is expected to supply 1.5 tcf of natural gas from Leviathan to Jordan over a period of 15 years, at a cost of $10 billion. as explained by Boustros, in 2018.
6. GREEK PIPELINES Greece has the potential to become a new natural gas hub in the South East side of Europe. The country has diversified supply routes whether in the form of pipelines or LNG facilities, which help the country to export natural gas to different
ARAB GAS PIPELINE PHASES
1st Phase
In July 2003, the first phase of AGP extends from Arish in Egypt to Aqaba in Jordan, with a length of 265 km and capacity of 353 bcf/y, with investment cost of about $200 million.
Source: MoP
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3rd Phase 2nd Phase
In January 2006, AGP was extended from Aqaba to the city of El Rehab on the Jordan-Syria border, with a length of 393 km and 36-inch diameter, with a capacity of 233 bcf/y and a cost $300-350 million.
In 2007, The pipeline was then extended to run from EL Rehab in Jordan to the Jordan-Syria borders, with a length of 342 km, at an estimated cost of $400 million. Initial gas sales are estimated at 35.3 bcf/y.
4th Phase
In 2008, Syria completed the fourth phase of AGP to run from Jordan-Syria borders to Homs, with a length of 330 km and a 36 diameter.
EGYPT OIL & GAS RESEARCH & ANALYSIS
regions. Greece is aiming to supply natural gas to Russia by attracting most of the EU funds, as Russia is at the center of the EU natural gas policy. Rather than the East-Med pipeline that connects Greece with Cyprus and Israel, the country is connected to Italy and Bulgaria via two pipelines named Poseidon Pipeline and IGB Pipeline. Poseidon Pipeline The Poseidon is a natural gas pipeline that stretches from the Turkish-Greek border to Italy, with initial capacity of 529 bcf/y and expansion capacity of up to 706 bcf/y. The pipeline is already a mature project, having the most technical activities completed. The pipeline is designed to link Greece with the Italian, Bulgarian, and European natural gas systems, providing access to the Greek natural gas infrastructure and resources. In addition, the pipeline is in connections with the East-Med Pipeline and the IGB Pipeline, creating a great opportunity for Europe to strengthen its energy security.
Corridor projects. Besides, IGB has been specified as a top priority project of the EU’S Central and South-east European Gas Connectivity (CESEC) initiative that mainly targets the acceleration of the strategic infrastructure development
IGB Pipeline is connecting Greece with Bulgaria, with an initial transportation
capacity of 106 bcf/y, expansion capacity up to 176 bcf/y
Source: IGP Poseidon
It is worth mentioning that the two projects are listed to be involved in the 2018 Ten Years of Development Plan (TYNDP) of the European Network Transportation System Operators of Gas (ENTSOG), in light of the EU’s goal towards unifying a single natural gas market and developing a reliable and safe transmission network to meet Europe’s current and future needs.
The Poseidon is stretching from the Turkish-Greek border to Italy, with an initial capacity of 529 bcf/y and expansion capacity of up to 706 bcf/y Source: IGP Poseidon
The pipeline will extend for about 760 meter on the Greek territory from the Turkish-Greek borders in Kioi to the landfall in Floroyouni, and for about 216 km from the Ionian Sea up to the landfall in Italy and the receiving terminal in Otranto, as it will be connected to the Italian national natural gas transport system. IGB Pipeline The IGB pipeline is a natural gas interconnector pipeline that connects Greek and Bulgarian networks, boosting South East Europe’s (SEE) energy security and allowing imports from various sources. The pipeline is a 50/50 joint project between IGI Poseidon SA and Bulgarian Energy Holding, with an initial transportation capacity of 106 bcf/y from Greece to Bulgaria, and could be extended up to 176 bcf/y in response to the market demand. The pipeline is connecting komotini with both DESFA and The Trans Adriatic Pipeline (TAP) systems and will be extended by about 180 km reaching Stara Zagora in Bulgaria, where the pipeline will be connected with Bulgartransgaz system. In 2015, the pipeline was confirmed as a PCI by the EU Commission in the second PCI list among the Southern Gas
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CONCLUSION A positive outlook exists for the future, as Egypt and six East Mediterranean countries are taking firm steps to enhance cooperation, through identifying each country’s main natural gas , LNG discoveries and potential explorations, in addition to maximizing the usage from existing pipelines. The East Mediterranean countries are enriched with enormous capabilities and potentials for further natural gas explorations. For instance, Egypt is well-known for its well-developed terminals and infrastructure. Through the country’s giant field Zohr, the AGP, and IsraelCyprus-Egypt Pipelines, Egypt was able to sustain its cooperation with Jordan, Cyprus, Israel and Syria. As per to the EMGF, it was agreed that Israel will start to export natural gas from Tamar field and Leviathan field to Egypt during November 2019. Likewise, Cyprus intends to export natural gas from Egypt’s natural gas liquefaction plants by 2025/2024, according to a Delek Drilling Press Release, through a
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pipeline to the Egyptian liquefaction stations with the aim of re-exporting once the development of the Cypriot Aphrodite field has been completed. The United States, as an observer in the forum, assured its enduring support to develop the natural gas discovery operations in the East Mediterranean region. The States pointed out to the 17 refineries working under the umbrella of the US Energy Agency, with the goal of the development of the latest technology to strengthen the sector. Furthermore, the forum discussed the Turkish moves to explore for natural gas in Cypriot waters. Each country has its own comparative advantage in natural gas and energy field, which must consider the distinct vulnerabilities, commonalities and differences among such countries. Accordingly, cooperation is essential to exist in the region, where such forum is a step forward towards a brighter future.
EGYPT OIL & GAS RESEARCH & ANALYSIS
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References
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• Adriatic LNG Official Website: https://www.adriaticlng. it/en/the-terminal
• Aqaba LNG Terminal Corporation Official Website: http://altc-jo.com/lng-project/
• Baconi, T. (2017, April). Pipelines and Pipedreams: How the EU Can Support a Regional Gas Hub in Eastern Mediterranean.
• Boustros, E. (2018, December). Natural Gas in
East-Mediterranean Basin – Changing the Energy Landscape.
• BP Official Website: https://www.bp.com/ • BP. (2018). BP Annual Statistical Review. • BP. (2019). BP Annual Statistical Review. • Cerzzini, F. (2018). The History of the Oil and Gas
Exploration in Italy. The American Association of Petroleum Geologists.
• Cyprus Profile Official Website: https://www. cyprusprofile.com
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APPENDICES
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Appendices
A1: OPERATING COMPANIES IN THE EAST MEDITERRANEAN Over the past few decades, major oil and gas companies have been playing an effective role in discovering and operating natural gas fields within EMGF countries. It is worth mentioning that Delek Drilling, Noble Energy, Shell, Energean Oil and Gas, British Petroleum (BP), and Eni represent some of the most active companies in the region as equally as other International Oil Companies (IOCs) like ExxonMobil, Rosneft, and Total.
Energean Oil & Gas has started its operations with two million barrels of oil equivalent (mmboe) in Greece in 2007. By 2018, the company was able to extend its sources to reach total reserves of 405 mmboe across the four East Mediterranean countries. In July 2019, Energean acquired Edison E&P’s assets for $750 million. This acquisition added to Energean’s portfolio, producing assets in Egypt, Italy, Algeria, the UK North Sea and Croatia, as well as development assets in Egypt, Italy, and Norway. Energean’s recent acquisition provided potential for balanced-risk exploration opportunities across its portfolio.
Delek Drilling
BP
Delek Drilling is one of Israel’s largest leading and independent development, sale, E&P natural gas, and condensate companies. Delek Drilling is subsidiary of Delek Group, contributing to the development of major fields in the Levant Basin and in the East Mediterranean, including Leviathan, Tamar, Aphrodite, and others.
BP, a company of a British origin, currently operates in 78 countries within Europe, North and South America, Australasia, Asia, and Africa. is the company operates in three East Mediterranean countries: Egypt, Cyprus, and Greece. However, while its upstream activities are concentrated in Egypt, its downstream activities mainly take place in Cyprus and Greece.
Noble Energy Noble Energy is a leading independent energy company. Noble Energy’s activities are concerned with crude oil and natural gas E&P. The company’s main operational regions are concentrated in three core areas including three premier US onshore operations; this is also in addition to offshore operations in the US Gulf of Mexico, West Africa, and East Mediterranean specifically in Israel and Cyprus. The company has succeeded in drilling 12 exploration and appraisal wells, and has also discovered 40 tcf of natural gas. In 2018, Noble Energy discovered gross recoverable resources in the East Mediterranean of approximately 35 tcf, with total proved reserves of 10.9 tcf.
Eni Since its foundation in 1953, Eni became one of the most significant players in the global petroleum market. The Italian company currently carries out activities in 67 countries. Eni has a variety of operations in the five East Mediterranean countries it focuses on including Egypt, Italy, Greece, Cyprus, and Jordan. These operations vary between upstream, midstream, and downstream activities. Eni is an active player in the upstream sectors of Egypt, Cyprus, and Italy. However, in Jordan, Eni operates in natural gas and Liquified Natural Gas (LNG) marketing. In Greece, the company is active in the secondary distribution of natural gas.
Shell
ExxonMobil
The Royal Dutch Shell is considered one of the largest global energy and petrochemical companies, operating in more than 70 countries. The company operates in five East Mediterranean Countries: Egypt, Italy, Cyprus, Greece, and Jordan.
ExxonMobil is an American company, which evolved, over the past 135 years, from a regional marketer of kerosene to the largest publicly traded petroleum and petrochemical enterprise in the world.
It is worth mentioning that, in 2015, the company signed an agreement to acquire BG Group’s global portfolio, at $82 billion. Energean Oil and Gas Energean Oil & Gas is an independent E&P company that is based in London, but focuses on Mediterranean resources. The company’s early activities started in 1974 with the discovery of the Prinos-1 well in the Prinos reservoir. However, it came in action with the beginning of production from West Kavala natural gas field in 1981. Energean currently holds 17 licenses across five countries in the East Mediterranean region with production, development, and exploration assets. It operates in four main East Mediterranean countries: Egypt, Israel, Greece, Italy, and Cyprus.
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ExxonMobil currently operates in 52 countries all over the world, including three countries in the East Mediterranean region: Egypt, Cyprus, and Italy. The company’s operations in Egypt and Cyprus include both upstream and downstream activities, while, in Italy, ExxonMobil’s activities focus on midstream and downstream activities. Rosneft Rosneft is a Russian company working in the petroleum industry, that mainly focuses on upstream offshore projects and E&P of hydrocarbon deposits, crude oil, natural gas and gas-condensate. The company is the world’s largest publicly traded petroleum company. Rosneft not only has a diversified portfolio in Russia, but also in other regions as in Europe, Africa, Asia- Pacific, and America.
EGYPT OIL & GAS RESEARCH & ANALYSIS
In 2016, Rosneft succeeded to discover 13 fields and 127 new deposits with total reserves of 8.11 tcf. Moreover, 85 exploration wells were completed and tested, and was given an exploration drilling success rate of 79%. In Q4 2016, the company’s natural gas production increased by 7.3%, reaching 2.367 tcf.
Total Total is the second largest global leader in LNG market. It was founded in 1924. Total is considered a major energy player, present in more than 130 countries, concentrated in Middle East, North & South America, Europe & Commonwealth of Independent States (CIS), Africa, and Asia -Pacific region.
A2: LNG EXPORTING FACILITIES IN EAST MEDITERRANEAN REGION COUNTRY
FACILITY
LOCATION
CAPACITY (BCM/Y)
CAPACITY (BCF/Y)
OPERATING YEAR
OPERATION STATUS
EGYPT
SEGAS
Damietta
7.5
264.8
2004
Idle
Idku facility
Idku
10
353
2001
Operating
A3: LNG IMPORTING TERMINALS IN EAST MEDITERRANEAN REGION COUNTRY
FACILITY
OPERATING YEAR
CAPACITY (MT/Y)
CAPACITY (BCF/Y)
OWNER/S
TYPE
STATUS
EGYPT
BW
2015
5.7
273.6
EGAS 100%
Floating
Idle
Panigaglia
1971
2.6
124.8
GNL Italia 100%
Onshore
Operating
278.4
ExxonMobil 46.35%; Qatar Petroleum 46.35%; Edison 7.3%
Offshore
Operating
Floating
Operating
Adriatic
2009
5.8
ITALY FSRU Toscana
2013
2.7
129.6
EON 46.79%; IREN 46.79%; OLT Energy 3.73%; Golar 2.69%
GREECE
Revithoussa
2000
4.8
230.4
DEPA 100%
Onshore
Operating
ISRAEL
Hadera Gateway
2013
3.0
144
Israel Natural Gas Lines 100%
Floating
Operating
182.4
Jordan Ministry of Energy and Mineral Resources (MEMR) 100%
Floating
Operating
JORDAN
Aqaba
2015
3.8
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