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Al-Ahram Weekly 21 - 27 October 1999 Issue No. 452 
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Published in Cairo by AL-AHRAM established in 1875 |
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Al-Ahram Weekly 21 - 27 October 1999 Issue No. 452
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| Published in Cairo by AL-AHRAM established in 1875 |
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Egypt Region International Economy Opinion Culture Features Profile Travel Living Sports People Time Out Chronicles Cartoons Letters Gas race heats up
By Muriel AllenBritish Gas Egypt with partner Edison of Italy have joined the list of oil and gas companies which have applied to export liquified natural gas (LNG) to Turkey, according to Peter Dranfield, BG's president and general manager in Cairo. The Turkish state company Botas is currently evaluating bids submitted in September from several foreign companies to supply Turkey with gas.
"We are having face to face talks with the Turks now so I hope that signals a speeding up of the pace of the negotiation process," Dranfield said. "We are ready. BG has a significant quantity of uncontracted gas from two wells in its West Delta Deep Marine concession in the offshore Mediterranean (north of Egypt's Delta) which could go either to the domestic market or for export." The BG executive said his company's preference "is to supply the Egyptian domestic market, but if that is satisfied, we'd be very pleased to export gas."
Since May 1998 the company has drilled six wells and made six gas discoveries in the West Delta block where it is a 50/50 partner with Edison. Four of these wells are in the Scarab/Saffron field which is the largest gas field being developed in Egypt. The partners drilled the wells in the deepest water in Egypt -- water depths in the block range from 200 to 2,000 meters. Production from this field eventually will exceed one-half billion cubic feet daily. BG and Edison signed a sales agreement with the government in August for gas from the four Scarab/Saffron wells, which will reach the local market early in 2003, Dranfield said. Gas from the other two wells could be exported.
BG has experience in the LNG field through their joint venture company Atlantic LNG based in Trinidad in which they are partners with British Petroleum and Amoco (BP-Amoco). BP/Amoco is one of BG's main competitors in the race to export LNG to Turkey.
"There has been progress in Turkey where the government has approved an amendment to the constitution to provide projects being financed with provisions in their agreements for international arbitration," Dranfield pointed out. "In the past some projects in Turkey haven't been able to reach financial closure because of the lack of an arbitration clause."
Currently most of the gas used in Turkey is coming from Russia. These supplies were not interrupted by the devastating earthquake that hit the country in August.
Turkey is considering increasing its gas supply -- it has the highest demand in the region -- through imports of either LNG or gas transported by pipeline. "If none of the other schemes to bring gas to Turkey from such places as Turkmenistan or Azerbaijan materialise, both LNG and gas pipeline projects from Egypt could satisfy Turkey's demand," Dranfield said. BP-Amoco officials have raised the possibility of carrying out both types of projects.
The BG executive pointed out that the Mediterranean gets deep very fast between Egypt and Turkey, so "this represents a technical hurdle you have to overcome if you want to build a gas pipeline. LNG hasn't got this problem. Certainly, having LNG from Egypt places the country in an extremely strong position because it doesn't have to rely on any third parties," he added. If gas were transported by pipeline, it might require approvals from countries along the route to cross their territorial waters.
"I hope the supply of LNG from Egypt would be seen in Turkey as a way to increase its long-term gas supplies quickly," Dranfield said. LNG schemes are attractive to oil and gas companies because they allow more flexibility in reaching additional markets than a pipeline would. BG is interested in supplying Jordan with Egyptian gas as well as markets across the northern Mediterranean such as Italy, Spain, Portugal and perhaps Greece.
There are working groups of experts from Botas and the Egyptian General Petroleum Corporation (EGPC) currently concentrating more on gas pipeline options, but at the same time discussions are continuing between Botas and the oil and gas companies that want to export LNG from Egypt to Turkey, Dranfield said. "Probably the companies will become involved in the pipeline discussions later. It's not clear yet which option they prefer in Turkey," he added.
Meanwhile, the Nile Valley Gas Company (NVGC), another joint venture linking BG and Edison, is talking to a dozen international banks based in Egypt and local banks about financing for the next phase of its gas pipeline to Upper Egypt, Dranfield said. The massive project will be carried out in four stages, eventually reaching all of the major cities in the southern part of the country.
"In the next two or three months, we think the financing for the phase from Sixth of October City to Assiut will be ready. We anticipate the banks will form some sort of consortium to provide a loan worth as much as one billion Egyptian pounds," Dranfield said. A tendering process is underway, another source said. The Nile Valley gas project, which involves transmission and distribution lines and marketing of the gas, started from point zero 18 months ago. Egypt's vast southern region previously has had no ac-ess to the country's rapidly grow-ng gas supplies.
