In this paper we will discuss the story of gas in all its details from beginning to end
Will Egypt actually import Israeli gas?
What is the reality of the Convention?
What advantages does Egypt have?
Who are the biggest affected by Egypt in the gas market?
What are the latest developments, expansion and reactions?
What are the gas transportation solutions for Europe and who are the competitors of Egypt?
What is the vision of the largest research centers and the global economic community?
The real name of the agreement is not "Egypt imports gas from Israel", but "Israel rents or uses Egyptian infrastructure to liquefy Israeli gas and transfer it to its customers in Europe for related fees".
Egypt is the only country in the Eastern Mediterranean with gas liquefaction infrastructure, Gas cannot be stored when extracted, it must be consumed directly by transporting it to the consumer market, and for Gas to be transported there are two options, either through established pipelines between the fields of the producing state and the consuming state, or to be transported via Sea freight.
In order to be shipped in vessels it must be liquefied and Egypt is the only country that has the potential for liquefaction in the eastern Mediterranean. This is why Egypt is designated as a center for trading, marketing and distribution of LNG on average or the Mediterranean Energy Hub.
This infrastructure is considered a national wealth, consisting of two stations in Adko and Damietta, worth more than $20 billion, equivalent to almost more than half of the Egyptian cash reserves. In July 2017, Egypt celebrated paying the last installment of the loan that financed the construction. The government owns both 20% and 24% shares respectively, the remaining shares are owned by foreign partners such as Shell and BP and Wayne.
Can neighboring countries build these factories now? Not quite feasible, due to the high cost involved and the long time needed for its construction, and therefore useless because gas needs to be extracted now and as gas cannot be stored as oil, it is practical for these countries to boost their sales via direct utilization of the Egyptian stations.
It is natural for this agreement to provoke Qatar and Turkey and their media to attack Egypt because it is no longer political differences, but a "legitimate" economic move, that affects especially the Turkish gas market and reduce its status and quotas.
That was clear when we followed the latest Turkish threat to Cyprus and Greece. The Economist last August wrote about what she expected today, that Israel will use Egypt's capabilities in liquefaction and Egypt will benefit from this situation by having a competitive advantage over others.
It is clear with Zohr, that Egypt will not need Israeli gas and with current production, the current self-sufficiency plans 2019/2020 are on track.
Egypt will gain two kinds of profits as a result of these developments. First the Financial gains for liquifying Natural Gas for Cyprus and Israel and re-exporting it to their customers. Second the moral gain of being the energy hub in the region for supply gas to Europe and the world.
An unprecedented Egyptian military move Following the announcement of the $15 billion deal during only 24 hours, Egypt moved its naval pieces towards ZOHR field. In the statement, the armed forces did not describe the move with routine or scheduled maneuvers or exercises, but explicitly said: "Maritime operations to protect our economic interests around the field ZOHR against any potential hostilities". This move explicitly reflects the seriousness of the state in safeguarding its economic resources.
Why Turkey's anger? Turkey was aspiring to be the transit / intermediary between the producer and the consumer, the producer is the Eastern Mediterranean countries, the owner of the gas and the consumer is Europe and Russia, this was supposed to be done by building a pipeline between the producers fields and through Turkey then directly to gas importers/ consumers, but the emergence of the Egyptian solution for liquefaction and transport through ships, destroys the Turkish dream, and sets Egypt on a fast track towards immediate operation as the Mediterranean hub.
Poland announced that the country is considering using Israeli gas, which will be liquefied in Egypt. According to Piotr Wozniak, head of the Polish state Gas Company "Poland was dependent on Russian gas but intends to diversify sources”. This marks an important statement of evidence that the world is hungry for the region's gas that has a large consumers market.
On the other hand, Cyprus is about to liquefy its natural gas in Egypt’s plants, and we can reach an agreement in the coming weeks," Energy Minister Georgios Lakotripis said in a telephone interview from Nicosia with Bloomberg. With Cyprus and Israel as our first clients on board, Egypt's dream of an energy center has become a reality.
What benefits Egypt?
The first benefit is selling LNG from Egypt directly, the second, liquefying gas on-behalf of Cyprus and Israel for re-exporting it to Poland or any other customer in Europe via the designated vessels.
On the other hand, it is to be noted that the Egyptian-Greek Cypriot alliance is planning to establish a pipeline between the Cyprus and Greece fields for direct delivery to the Egyptian facilities, which alongside with the Egyptian-Israeli pipeline will guarantee maximum returns, utilized by Egypt’s competitive advantage the Suez Canal for direct shipping to the various destinations.