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Egyptian LNG exports soar on back of rising LNG spot price

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Egyptian LNG exports soar on back of rising LNG spot price

Highlights

Nine cargoes shipped from Shell facility since late-October

Exports had dried up in March on low prices before rally

JKM Asian LNG spot price trading at $10.05/MMBtu Dec. 10

London — Egyptian LNG exports from the Shell-operated Idku plant -- the country's only operational LNG facility -- have been coming thick and fast in recent weeks following a sustained rally in the spot LNG price.

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Egyptian LNG exports ground to a near halt in late March as spot LNG prices fell to record lows, with the JKM spot Asian LNG price falling to $1.825/MMBtu toward the end of April.

Egypt is among a small group of spot-exposed LNG exporters that were forced to curtail production because of low prices in mid-2020.

However, the JKM price has risen in recent months with the front-month contract assessed by Platts on Dec. 10 at $10.05/MMBtu, around double Egypt's estimated LNG production break-even cost.

According to S&P Global Platts Analytics and Platts trade-flow software cFlow, a total of nine cargoes have been shipped from the 7.2 million mt/year Idku plant since the end of October, or an average of 1.5 cargoes a week.

That compares with just six cargoes in the first quarter of 2020, and only one cargo between the end of the first quarter and end-October.

Of the nine cargoes shipped since the end of October, six have reached their destinations, with a further three still at sea.

Destinations comprise: Pakistan (two cargoes), Kuwait (one), China (one), India (one) and the UK (one).

Damietta LNG

Egypt is also set for a long-awaited boost to its LNG sector after the shareholders in the 5 million mt/year Damietta LNG facility reached a new deal to allow for the plant to restart in Q1 2021.

The plant has been idled since 2012 and its restart would provide additional export optionality for Egypt, which has a surplus of gas mainly due to production from the Eni-operated supergiant Zohr field in the East Mediterranean.

The new agreement reached earlier this month by Eni, Spain's Naturgy, and the Egyptian government is aligned with a previous agreement reached in February 2020, which was terminated in April due to conditions of the deal not being met.

As part of the December agreement, Naturgy will be released from its 3.5-Bcm annual gas procurement contract to supply its CCGTs in Spain that was due to end in 2029, with Eni taking over the contract for the purchase of gas for Damietta LNG and receiving corresponding liquefaction rights.

After the deal completes, the shareholding of Damietta LNG owner SEGAS will be Eni (50%), and state-owned EGAS (40%) and EGPC (10%).

The restart of operations in Damietta will result in Naturgy's departure from Egypt and the end of its joint venture with Eni.