Egypt in Talks with Algeria's Sonatrach on Natural Gas Imports

Source: Reuters 3/20/2014, Location: Africa

Egypt is in talks with foreign companies including Algeria's Sonatrach to secure natural gas imports to run power plants this summer, Oil Minister Sherif Ismail was quoted as saying in Thursday's edition of the Al-Bursa newspaper.

Negotiations are over "around 400 million cubic metres of liquefied natural gas (LNG) daily throughout the coming summer", Ismail reportedly said. State-run Sonatrach was the only company the Egyptian minister listed by name.

Egypt has LNG plants and a pipeline to export gas, but it has no facilities to import LNG. Talk since last autumn from the army-backed interim government of securing an LNG import terminal has not yet resulted in any tender.

Officials, however, had hinted that the government saw Algeria as an option for gas imports as political tensions with gas giant Qatar cut off a lifeline Egypt enjoyed last summer, before the army ousted Islamist President Mohamed Mursi.

An oil ministry spokesman was not immediately available to comment on the newspaper report.

Egypt, an oil- and gas-producing country of 84 million, has faced perennial summer energy shortages in recent years. The government has been unusually frank about the extent of the crunch it faces this summer - a problem linked to political turmoil and energy sector mismanagement.

Ismail told Reuters last month that Egypt would need to import an additional $1 billion worth of petroleum products and secure significant natural gas supplies to get through the hot summer months.

Egypt agreed to import Algerian gas during Mursi's year in office.

But it was gifted LNG cargoes from Qatar, a close ally of Mursi and his Muslim Brotherhood, that helped Cairo cover its export commitments to foreign firms last year as Egypt diverted gas to cover its soaring domestic demand.

Since the army's ouster of Mursi last summer, Cairo's relations with Qatar have deteriorated and promises of additional gas cargoes evaporated.

Meanwhile, foreign firms including BG have recently issued profit warnings, cutting production forecasts as the government diverts gas promised for export to satisfy domestic demand.

All signs point to Egypt becoming a net importer of natural gas in the near future, London-based Capital Economics wrote in a report this week, pointing to stagnant gas production and rapidly increasing domestic consumption.

The oil ministry forecast last month that gas production would fail to meet surging domestic demand for the first time in the fiscal year beginning in July.

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