Oil and gas
BMI has said that investor sentiment in Egypt has improved as political stability has returned and the government has started repayments to oil companies. Therefore, BMI has forecast upside for investment and production in natural gas projects, however, fuel subsidies will continue to disincentivse investment in the downstream sector.
Looking at gas, BMI expect Egypt to become a net gas importer this year following the finalisation of a FLNG import terminal to be installed at the Ain Sokhna port by March. Also, there is potential to restart LNG exports in the country after talks between the owners of Israeli gas fields and the two LNG terminal operators in Egypt. Gas volumes from the Tamar field, BMI has said, may be used to supply the Damietta facility, while the Leviathan field could be linked to BG’s Idku terminal.
BMI has reported that fuel price reforms, implemented earlier than expected in July last year, will temper demand for gasoline, diesel and industrial volume natural gas. This is also expected to improve the government budget balance enabling Egypt to pay back debts owed to international oil companies. Fuel consumption forecasts for 2015 have been downgraded to reflect the expected implementation of fuel subsidies, which will temper demand.
When it comes to refining in Egypt, BMI has said that the sector remains low tech and inefficient regardless of being the largest in Africa.
It has been reported that Egypt is moving forward with the petrochemicals sector and BMI expects it to become self sufficient, however, the country does remain plagued by an energy crisis. Gas shortages are plaguing the sector and the wider economy. Also Egypt needs approximately 500 000 tpy of ethylene in order to sustain downstream production, but last year, local production was far below this level. This has hindered growth in output as well as delayed the completion of projects.
Adapted from reports by Claira Lloyd
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