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Egypt to remain the low-cost option for East Med LNG exports: Shell executive

Cairo — Egypt's Idku and Damietta LNG export plants are likely to remain the low-cost option for East Mediterranean gas producers looking to export, and the process of starting up supplies through Egypt from around the region is one of "normal project development," Shell country chair and vice president Gasser Hanter said Tuesday.

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Hanter played down the idea of any remaining political obstacles to bringing supplies to Egypt from countries such as Cyprus or Israel. He pointed to Egypt's hosting of an East Mediterranean Gas Forum in January that brought together governmental representatives from the region, and recent commercial agreements.

"I think we're in the normal project development stage. We've seen that the geopolitical piece -- we've seen it with the inter-governmental agreements, and we've recently seen the East Mediterranean Gas Forum, where you had all the countries from the East Mediterranean. You just have to go through the normal project development process," Hanter told journalists at the EGYPS conference in Cairo.

In recent months Israel has agreed to begin pipeline exports to Egypt, and Cyprus has reached a provisional deal to pipe gas from its Aphrodite field to Egypt.

Egypt's Dolphinus Holdings is set to import 64 Bcm/year of gas from Israel over a 10-year period, with supplies sourced from the Tamar and Leviathan fields, after producers Noble Energy and Delek agreed to buy a stake in the idled East Mediterranean Gas pipeline.

Hanter said the economics of Egypt's export plants remained compelling, suggesting any other future liquefaction projects in the region might struggle.

Partly, this was because the Egyptian plants had been built in a different commercial environment, and costs had since risen, he said. "If you want to build something similar to that today, you're looking at a large number of billions of dollars," Hanter said.

"In my mind it's a question of can you build it cheaper in Cyprus or elsewhere, or is it better for you to transport it and not build? I think everything is possible. I still think that having these advantaged plants that were built in the good old days with very experienced operators behind it, the very solid infrastructure, the gas market at the back of the pipe, these are all ingredients that are quite important," Hanter said.

Israeli energy minister Yuval Steinitz held bilateral talks in Cairo in January with his Egyptian counterpart Tariq al-Mulla on his first visit to Egypt since the Arab Spring in 2011. He described the invitation as "further proof that the benefit of developing gas resources is not only economic and environmentally beneficial, but also geopolitical and political in nature."

-- Nick Coleman, nick.coleman@spglobal.com

-- Edited by Richard Rubin, newsdesk@spglobal.com