Egypt Reaches Deal With Hoegh On LNG Import Terminal

Source: Reuters 5/12/2014, Location: Africa

Egypt has secured a means of importing liquefied natural gas (LNG) that will help it address an energy crisis, although the LNG import terminal to be provided by a Norwegian firm will not be in place in time to ease painful gas shortages this summer.

Egypt's oil ministry and Hoegh LNG said they had reached an agreement for Egypt to use of one of Hoegh's Floating Storage and Regasification Units (FSRU) for five years.

Hoegh Chief Executive Sveinung Stoehle told Reuters the firm had signed a contract including "the main details of the agreement, but there are still some details that need to be worked out."

Egypt can export LNG but cannot import it without the terminal, and a worsening gas shortage has caused power cuts that are set to become more acute during the hot summer months.

The tender process to find a company to provide the terminal began around 20 months ago, well before the army toppled Islamist President Mohamed Mursi last July. It continued to run into hurdles under the interim government that replaced Mursi.

The terminal will not be ready for the summer, when the country's next president will take office and face the challenge of power cuts and fuel shortages - issues that helped spur mass protests against Mursi.

But once the terminal is operational, it will enable Egypt to secure badly needed supplies of gas, needed for power generation for households and industry.

The state-run gas company said last week it had reached deals for 12 shipments of LNG from Russian and French firms, without giving details on pricing arrangements.

Hoegh said the FSRU was set to start operations in the third quarter of this year. The ministry said the terminal would be moored off of the Red Sea port of Ain Sokhna from Sept. 1.

Giles Farrer, senior analyst on Wood Mackenzie's LNG team, said that although it was feasible to have the terminal in place by September, technical issues such as connecting it to the main networks made the timeline "look ambitious."

Farrer said the announcement was an encouraging step, but added specifics of how payment - both for the terminal and for gas imports - would be structured were still unclear.

Despite more than $12 billion in loans, donations, and free fuel aid from Gulf oil producers to Cairo since Mursi's ouster, Egypt's finances are still precarious.

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