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Egypt considers reducing natural gas exports: paper

By on November 11, 2009

Egypt is considering reducing exports of natural gas due to a rise in domestic consumption in the most populous Arab country, an Egyptian newspaper reported on Wednesday.

Egypt’s al-Masry al-Youm daily said Petroleum Minister Sameh Fahmy was in consultations to reduce gas exports and was reviewing contracts with foreign firms.

It quoted an unnamed source as saying the ministry wanted to determine the minimum amount it was required to export.

A ministry official told Reuters that Egypt would respect its contracts and said the newspaper report did not reflect Egypt’s official position. He would not comment further.

“We view this news, if correct, as positive and significant for the local market, especially for the industrial sector, which has been consuming more energy,” Egypt’s Beltone Financial said a research note commenting on the newspaper report.

“According to our understanding, the increase in local demand for energy has placed increasing pressure on production capacity, in light of the rising costs, stipulating either an increase in the costs of production to increase available gas, or to reduce exports,” Beltone added.

Egypt’s state-owned Egyptian Natural Gas Holding Company (EGAS) said last month that plans for a second liquefied natural gas train at Damietta had been postponed until enough gas reserves were found.

Britain’s BP and Italy’s Eni had proposed a second LNG train at Damietta with a capacity of around 2 billion cubic metres per year.

EGAS, which monitors development of the gas industry in Egypt, said the gas companies had found 2 trillion cubic feet of gas, half of what is needed for the train.

“It is not clear how flexible export agreements are, and whether they would allow a renegotiation of export quantities. The revision could mean, however, that plans to expand gas exports, under the Arab Gas Pipeline or the Nabucco Pipeline could be altered significantly,” Beltone said.

Egypt’s proven natural gas reserves rose to around 77.2 trillion cubic feet in the 2008/09 fiscal year.

Egypt is a significant natural gas exporter but said last year it would not sign any new gas export contracts until 2010 in order to meet rising local demand.

Egypt currently exports 200-250 million cfd of natural gas to Jordan, its main export market, according to EGAS.

Reuters

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