North Africa Builds Back With the Rise of Egypt and East Med Gas

Abstract

With Europe facing winter gas shortages, North Africa’s role as an energy supplier is in the spotlight, particularly as Algeria’s 1 November closure of the Maghreb–Europe Gas Pipeline to Spain via Morocco further tightens volumes of gas that Europe can import. The International Energy Agency (IEA) projects a 40% drop in Europe’s domestic gas production by 2025 outside of Norway, with the Netherlands and the UK accounting for more than 80% of that decrease. The Netherlands is closing its Groningen field, source of almost half the country’s production in 2019 but also a cause of earthquakes. Its output will be cut by more than 50% to 3.9 Bcm in the year through October 2022, which will be the last year of regular production, according to the Dutch government. The UK cannot seem to offset declining North Sea production despite Total’s 2018 Glendronach discovery in the West of the Shetland Island area and its 2019 Glengorm discovery in the central North Sea with China’s CNOOC. Norwegian production remains flat, averaging 120 Bcm per year over the next 5 years, the IEA reports. And despite the energy policy voiced from Brussels that focuses mostly on renewables, few in the know dispute that gas is and will remain a critical component of the energy transition moving forward for transport, power generation, and as a feedstock to produce hydrogen. North Africa can provide gas—specifically from the Eastern Mediterranean where Egypt, Israel, Cyprus, and Greece are developing a world-class resource base while Cairo positions itself, buoyed by support from the EU and the US, as a regional hub for pipeline gas to Europe as well as LNG and electricity distribution between North Africa, the Middle East, and Europe. North Africa’s Future Shifts From Sand to Deep Water Eni is Egypt’s largest gas producer. The Italian major is active across the North African upstream, investing in new exploration in Libya, Morocco, Tunisia, and Algeria, but its crown jewel is Egypt’s Zohr gas field in which it has a 50% operator interest and partners with Russia’s Rosneft (30%), BP (10%), and Abu Dhabi’s Mubadala Petroleum (10%). The Zohr gas field is located in the Shorouk concession which Eni holds under a production-sharing agreement with Egypt. Situated 190 km north of Port Said, Zohr is Egypt’s largest-ever gas discovery and the largest-ever discovery in the Mediterranean Sea. Eni brought Zohr’s gas on stream in record time, 2 years after the field’s initial discovery in 2015, according to the company’s website. Production reached a targeted 2.7 Bcf/D in August 2019, nearly 5 months ahead of plan, due to the swift completion of eight land-based treatment units including those for sulfur removal, as well as the commissioning of three wells and a second 30-in., 216-km-long gas pipeline to join underwater production facilities to the land-based treatment plant, Eni reported. Eni’s 2020 plan included drilling of two more production wells to boost gross capacity to 3,200 MMscf/D and the upgrading of subsea facilities and onshore treatment.