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Egypt revisits FSRU import plan

24 Oct 2013 12:01:18 | glm

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Egypt’s state-run Egyptian Natural Gas Holding Co (EGAS) is preparing to again consider a floating LNG import project after numerous stalls in the process.

The company is expected to close a fresh tender for a floating storage regasification unit (FSRU) on 29 October which would allow Egypt to start importing LNG at a Red Sea location as early as March or April 2014, sources close to the tender process told ICIS.

The latest tender comes on the back of previous failed attempts at securing an FSRU provider in November 2012 and March 2013 ( see GLM 9 November 2012 ).

As many as 17 companies were initially invited to supply and provide LNG infrastructure over the course of previous tender rounds, but the requested lead times to bring an FSRU on line and operational in Egypt have always limited the number of realistic bidders.

Only two FSRU providers are understood to have tonnage to offer EGAS for the targeted March/April 2014 start-up – US-based Excelerate Energy and Oslo-headquartered Hoegh LNG.

Hoegh LNG is likely to offer its 145,000 cubic metre (cbm) GDF SUEZ Neptune as an FSRU, providing it comes to an agreement with GDF SUEZ, the vessel’s term charterer. The vessel has already been allocated to GDF SUEZ’s Uruguay FSRU project from March 2015 onwards, but Hoegh LNG has another uncommitted FSRU coming out of the shipyard at the same time which could be used to replace the GDF SUEZ Neptune, should it be selected for the Egypt project.

Excelerate, whose fleet of eight FSRU vessels is partly used as LNG carriers, could offer EGAS two different FSRU specifications. The US-based company has the 138,000cbm Excelerate and 150,900cbm Explorer or Expedient available for the March/April targeted start-up, ICIS understands. The Explorer is currently the seasonal Kuwaiti FSRU, but with rival FSRU provider Golar having been awarded the next five-year contract for the floating Mina Al-Ahmadi import terminal from 2014 to 2019, the Explorer joins the list of available Excelerate vessels and also removes any chance of Golar competing in the Egypt tender.

Location, location

The proposed site on Egypt’s Red Sea coast is understood to have been selected for two reasons. Firstly, the necessary interconnections with the Egyptian pipeline grid and local industry have been deemed amenable within the fast-track time frame that EGAS is targeting. Secondly, it relieves Middle East suppliers, principally Qatar, of the need to pay Suez Canal transit fees.

In late 2012, Egyptian private equity firm Citadel Capital and a group Qatari investors formed a joint venture to contend in earlier FSRU and LNG supply rounds. Citadel is expected to participate through a consortium with potential LNG and FSRU suppliers in the latest tender given its lack of access to volumes or infrastructure.

“Citadel Capital is always interested to participate within a consortium in LNG regasification and distribution as part of its core business,” a spokeswoman said on 22 October.


Gas demand on the rise

Egypt’s soaring domestic demand for gas has impacted existing export producers such as UK portfolio seller BG Group and GDF SUEZ at the 7.2mtpa Idku plant and Spain’s Union Fenosa Gas at the 5.5mtpa Damietta plant.

As a result of LNG feedgas diverted to domestic usage, the Damietta LNG plant has stopped exporting since December 2012 and the Idku LNG plant operated a reduced loading schedule over the summer of 2013.

The impetus to fast-track LNG imports into the country is key to helping Egypt maintain its long-term contractual export obligations, combined with its rising domestic demand and falling domestic production.

In order to help improve relationships within the international business community and encourage further domestic exploration and production, EGAS arranged to back-fill five lost Idku cargoes over the summer through an inter-governmental agreement with Qatar and sources say the Damietta LNG plant may also start to export again in late November.

Before it can expect an uptick in domestic production, however, it will need to fill the demand gap from somewhere. The country’s natural gas transmission capacity has grown almost sixfold since 1997, reaching 205 million cubic metres (mcm)/day by the end of year 2012, according to state-owned grid operator GASCO. Meanwhile, the country’s gas consumption is skewed towards summer with peak demand for air-conditioning.

The latest FSRU tender round is likely to determine whether EGAS will continue to seek back-fill cargoes over the hot summer months or whether it will import physical LNG into the country.

Talks to secure 13 supplementary Qatari cargoes in August broke down because of disagreements on price ( see GLM 22 August 2013 ).

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