Egypt Seeks Rare LNG Cargoes for Winter, Squeezing Supply
Bloomberg September 6, 2024
Egypt is seeking winter cargoes of liquefied natural gas for the first time in years, highlighting a deepening energy shortage that will increase global competition for the fuel.
State-owned Egyptian General Petroleum Corp. issued one of its biggest tenders, asking for 17 shipments for its floating import terminal at Ain Sukhna and three more cargoes to be delivered into neighboring Aqaba, Jordan, according to people with knowledge of the matter. Egypt is seeking the deliveries from October to December, the people said.
The emergence of Egypt as a surprise buyer in the winter months means a new competitor for LNG on Europe’s doorstep. While the heating season will start with full inventories in Europe, costs could quickly spiral as competition intensifies or global outages squeeze supply. European benchmark gas prices rose as much as 4% on Friday.
The LNG imports are a sign of the shift in Egypt’s position and raise the prospect of the country becoming a net importer of gas.
The Middle East’s most populous nation narrowly avoided an economic meltdown with a $57 billion bailout led by the United Arab Emirates and International Monetary Fund. Authorities let the pound plunge nearly 40% against the dollar in March, seeking to resolve a chronic foreign-currency shortage and unlock overseas funding after two years of uncertainty.
LNG imports this summer have helped Egypt largely end rolling power outages that had caused widespread public discontent and hit industries. Still, the heavy purchases of LNG could be a drain on foreign currency reserves, just as Suez Canal revenues plummet due to a drop in Red Sea shipping following attacks by Houthi militants.
Rapidly-declining gas production in Egypt and an unusually hot summer have prompted the nation to increase LNG imports this year to the highest level since 2018. The latest tender not only matches Egypt’s summer purchases, but is similar to the UK’s imports last December.
“Egypt has really been the surprise on the global LNG market,” said Anne-Sophie Corbeau, a researcher at Columbia University’s Center on Global Energy Policy. “The production has totally collapsed. This is the problem, and there is no way around that: either you reduce demand or you increase net imports.”
LNG imports have climbed every month since Egypt resumed overseas purchases in April. The country hadn’t imported any LNG in most of 2021 and all of 2022 and 2023, according to the Joint Organisations Data Initiative.
The Egyptian General Petroleum Corp. didn’t immediately respond to a request for comment. The tender closes Sept. 12, the people said.
Until this year, Egypt was an LNG exporter, helping Europe navigate its energy crisis in 2022. But Egyptian gas production has been declining — falling to a more than seven-year low in June — with output at its massive Zohr field in the Mediterranean down by about a third since 2019.
Egypt’s LNG exports stopped in April, having plunged this year, depriving the nation of another revenue outlet. The 20 cargoes the nation is seeking mark the first time it is buying LNG for the winter months since 2018.
Egypt’s petroleum minister said in July that part of the reason oil and gas production had declined was an increase in arrears to foreign oil companies that has slowed down exploration and development programs. The country was working on clearing that backlog, he said at the time.
https://gcaptain.com/egypt-seeks-rare-lng-cargoes-for-winter-squeezing-supply/