Egypt may take seven LNG cargoes from Gazprom in 2015

Russian incumbent gas producer Gazprom could supply state-owned Egyptian Gas Holding Company (EGAS) with up to seven LNG cargoes over the course of 2015, a source familiar with the issue told ICIS on 12 January.

A draft agreement was negotiated as early as April 2014, but the final deal is not expected to be signed until later this month when a delegation from Gazprom travels to Cairo, the source said.

The origin of the cargoes is yet to be determined, but some could be sourced from Nigeria and as reloads from Spain, the source added.

An agreement with Egypt is likely to stipulate a restrictive pre-payment clause due to the political and credit risk associated with the destination.

The pricing mechanism for transaction is understood to be based on a Brent 
crude benchmark.

“We can confirm that we are effectively considering supplying LNG to Egypt and negotiations are on-going,” a spokesman for Gazprom Marketing & Trading said in an e-mail on 12 January. EGAS did not reply to request for comment at the time of going to print.

EGAS signed a charter agreement for a floating storage regasification unit (FSRU) with Norwegian shipowner Hoegh LNG in November 2014.

The FSRU is expected to arrive to Egypt in March 2015 and become operational by the end of the month.

EGAS has also reportedly concluded a deal with Algeria’s state-owned oil and gas company Sonatrach back in December 2014 for six cargoes for delivery in 2015.

Parallel supply tender

EGAS issued a buy tender in December for multiple cargoes for delivery in 2015 
and 2016.

The deals with Gazprom and Sonatrach run parallel to the tender process in which at least seven sellers submitted a bid.

Trading sources said that the award of the tender has been delayed. Several counterparties were short-listed during the process, but no concrete deals have yet been finalised, trading sources said.

“I don’t understand that strategy of running a tender and negotiating deals on a bilateral basis at the same time,” one 
trader said.

Another trader said the offers were relatively high due to the credit risk issues.

“There is too much uncertainty about Egypt’s ability to pay for the cargoes. There is a credit risk premium attached to that,” the trader said.

Egypt’s two LNG export facilities have virtually ceased commercial operations as feedstock gas has been diverted to the domestic market due to 
critical shortages. Roman Kazmin