Energy industries optimistic after Eni discovery

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by Ahmed Kamal


A state of optimism is prevailing among sectors in energy-intensive industries after the discovery of a natural gas field off the coast of Egypt in the Mediterranean Sea. The new discovery will encourage extra business in iron and steel, cement, and fertiliser industries, according to experts.

“The new natural gas field is very good news for the companies working in the fertiliser industries, as natural  gas is considered one of our industry’s main raw materials, so the issue is very interesting for us,” said Hassan Abdel-Aleem, chairman of the Misr Fertilisers Production Company.

Last August, Italian energy group Eni announced that it found one of the world’s largest natural gas fields off Egypt’s coast. “It could hold as much as 30 trillion cubic feet of gas, or 5.5 billion barrels of oil equivalent,” the company said.

Abdel-Aleem added that the fertiliser industry is still suffering from a lack of gas, which is why production is decreasing and some factories have totally stopped operating as they are in the red.

“Most natural gas in Egypt goes to electricity, so you can find air conditioners working well while the government has left the industry sector without fuel to operate factories,” Abdel-Aleem added.

Claudio Descalzi, chief executive of Eni, said that “this historic discovery will be able to transform the energy scenario of Egypt”.

Abdel-Aleem assures that a lot of companies in the fertiliser sector will rethink their investment plans in putting in more money as the gas will be available as soon as Eni starts the production process.

Mohamed Saad-Eddin, head of the Gas Investors Association, told the Middle East Observer that the companies in energy-intensive industries have a good  opportunity to make their feasibility studies as the price of gas in Egypt will decline to $4 or $5, which they import now at $13.

Saad-Eddin stressed that these sectors will attract more investments as the gas will be readily available.

“The discovery is a result of the agreements the government signed with foreign companies, and Eni will take around 36 months to start producing from the field. Until then, the government will continue importing gas,” Saad-Eddin said.

In June, Eni signed an energy exploration deal with Egypt’s Oil Ministry worth $2bn (£1.5bn), allowing the company to explore in Sinai, the Gulf of Suez, the Mediterranean and areas in the Nile Delta.

However, Khaled Abu-Bakr, the head of Taka Arabia Compay, says that Egypt will continue to import gas over the next four to six years as gas consumption in the country grows by 5 per cent per year.

In the iron and steel sector, the discovery will allow factories to work at full capacity after years of working at partial capacity, according to Rafiq Al-Dow, managing director at Solb Misr Group.

“The natural gas will be produced from the Eni field, which would increase the local added value in the Egyptian industry, and factories will mainly depend on it,” Al-Dow said.

However, Al-Dow does not expect the building of new factories for steel in Egypt in the coming years as the production of current factories is sufficient and “we don’t need more”.

Eni has been operating in Egypt since 1954 through its affiliated company Ieoc. It is considered the main producer of petroleum in Egypt, with rates reaching 180,000 barrels of oil equivalent per day.

Egypt has had a crisis in energy since the ousting of president Hosni Mubarak in 2011, which also made the country incur a lot of debt. Since then, the government has tried to fix the problem by opening the door to renewable energy companies, and signed several agreements with foreign companies to search for natural gas.

Egypt signed a deal with BP to supply 16 cargoes of Liquefied Natural Gas (LNG), which will be received through 2015-2016, The country also reached an agreement with Algeria’s state-run Sonatrach and Russia’s Gazprom trading arm for the supply of six cargoes and 35 cargoes of LNG respectively. It also signed an agreement with Cyprus for gas.

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