Jordan/Egypt deal precedes maiden regional gas forum
Amman and Cairo reached an agreement in early January to increase supplies of Egyptian gas piped to Jordan to meet half of the latter’s power generation requirements.
Deliveries through the Arab Gas Pipeline resumed three months ago after a hiatus of more
than seven years – a symptom of the North African country’s return to self-sufficiency.
The amended deal was signed on the eve of a regional gas summit in the Egyptian capital – during which the East Mediterranean’s existing and aspirant producers and importers agreed to establish a forum for co-operation.
In a ceremony in Cairo on January 13, state-owned Egyptian Natural Gas Holding Co. (EGAS) signed an agreement with Jordan’s National Electric Power Co. (NEPCO) which was said to entail the supply of sufficient gas to meet 50% of the latter’s needs in 2019 – at a price indexed to Brent crude.
The signing was attended by the Jordanian Minister of Energy & Mineral Resources Hala Zawati and her Egyptian counterpart Tareq el-Molla.
According to reports in the Egyptian media, the volumes were in the process of being expanded to 1.02 bcm per year from the level of around 0.517 bcm per year that has existed since the resumption of flows in September – and would rise further to 2.58 bcm per year during the summer months of peak power demand.
The remainder of NEPCO’s requirements this year will be met through costlier imports of LNG via a 5.17 bcm per year FSRU moored at the port of Aqaba – continuing to strain the kingdom’s parlous public finances.
The terms of the new deal amend a 15-year sales and purchase agreement (SPA) between the two parastatals signed in 2004. This was interrupted first by the revolution of 2011 and then by the onset of a period of domestic shortage in Egypt, and was only brought to an end last year with the commissioning of the giant offshore Zohr field.
Zawati said that the volumes enshrined in the latest pact could be revisited in 2020 when a clearer picture had emerged of Cairo’s gas production and commitments.
However, also in early 2020, NEPCO is due to begin receiving imports from Israel’s giant Leviathan field under a 15-year SPA for a total of 45 bcm finalised in March with the US/local operating team of Noble Energy and Delek Drilling. A 65-km pipeline north from the Israeli border across Mafraq Province for connection to the Arab Gas Pipeline is due for completion early in 2020.
The existing Egypt-Jordan section of the pipeline – running from Arish in northern Sinai via Aqaba to El-Rehab near the Syrian border – has capacity of 10.3 bcm per year.
According to a statement from the Ministry of Energy & Mineral Resources (MEMR), the kingdom’s average requirements for power generation stand at 3.4 bcm per year.
Despite lying at the heart of a region synonymous with crude oil, Jordan at present produces no oil and minimal quantities of gas from the Risha field in the far west. The latest move in the decades-old search for indigenous reserves was made in late 2017 in the form of a licensing round for six large blocks covering the bulk of the kingdom’s onshore territory.
The MEMR was reported in mid-2018 to have shortlisted four firms from among 12 applicants – Pakistan Petroleum, Royal Dutch Shell, US-based Southern Procurement Services and France’s Total – and to have requested bids by year-end.
Such continued energy impoverishment has been made all the more galling by major discoveries elsewhere in the Levant and East Mediterranean since the start of the decade.
The beneficiaries of the finds and other interested parties gathered in Cairo on January 14 for an inaugural regional gas forum. This involved senior officials from Egypt, Jordan, Cyprus, Greece, Italy, the Palestinian Authority and – attracting the most attention – Israel, which was represented by Energy Minister Yuval Steinitz himself.
Noble and Delek signed a ground-breaking US$15 billion deal in February 2018 – with the open blessing of both governments – to export a total of 64 bcm of gas over 15 years from Israel’s Tamar and Leviathan fields to Egypt’s Dolphinus Holdings.
Steinitz claimed during the event that supplies from Tamar would start in two-three months following final checks to the existing East Mediterranean Gas (EMG) pipeline, which has been modified to allow the reversal of the original flow direction.
The Cairo conclave concluded with a declaration permanently establishing the new East Mediterranean Gas Forum, headquartered in Cairo, including all seven attendees. A statement said that it had been designed to support producing countries by “enhancing their co-operation with consuming and transitory parties in the region, taking advantage of existing infrastructure and developing further infrastructure options to accommodate current and future discoveries”.
Meanwhile, it would support consumers by “securing their needs and allowing their participation with the transitory countries in the development of gas policies in the region”.
The organisation would also be one “that respects the rights of members with respect to their natural resources in accordance with the principle of international law”.
The notable absentee at the gathering was Lebanon – which had provoked Israeli ire by awarding a licence for a block containing offshore territory contested with Tel Aviv during Beirut’s debut international bid round in 2017. Meanwhile, exploration activity off the coast of Cyprus has inflamed tense relations between the island’s government and Ankara.