Egypt: the oil minnow that wants to become a gas giant

CAIRO, Dec 7 (AFP) - Egypt, which is this week hosting an OPEC meeting of the world's top oil-producing nations, may have only limited oil resources itself but is pinning national hopes on becoming a gas giant.
With his country an OPEC observer, Egypt's Oil Minister Sameh Fahmi has called for "coordination between OPEC and non-OPEC producers to bring stability and balance to the international oil market," ahead of the meeting.
Egypt's income from modest oil and gas exports has soared 70 percent from 2.4 billion dollars for the equivalent of some 14.2 million tonnes of oil in 2000-2001, to 4.1 billion dollars in 2003-2004 for 18.6 million tonnes.
Egypt produces 600,000 barrels of crude per day and has proven oil reserves of 2.8 billion barrels.
But with reserves expected to fall to 2.5 billion barrels in 2005, the absence of significant discoveries plus rapid growth in domestic consumption could usher in the day when Egypt becomes a net importer of crude, experts say.
Today, 60 percent of the country's energy consumption is fueled by oil, which amounts to 30 percent of national exports.
Domestic prices, heavily subsidised, are the lowest in the region, while fuel and gas consumption is soaring.
So as oil fields dry up, Egypt is eyeing a future in natural gas, evident from an ambitious government export project. Several foreign companies who have already exceeded their oil allowances have switched to gas.
Egypt is in the process of "making money out of its gas," confirmed Shamel Hamdy, an official at the oil ministry.
By 2010, it hopes to become one of the principal world gas exporters supplying European and American markets, he said.
Known reserves of natural gas are in the realm of 1,800 billion cubic metres (63,566 billion cubic feet) or eight percent of the world's supplies. The outlook is prosperous and new discoveries possible, say experts.
The first section of an intra-Arab gas pipeline inaugurated in July 2003 already supplies a billion cubic metres of Egyptian liquefied natural gas (LNG) to Jordan each year.
There are plans to extend the pipeline to Lebanon, Syria and Turkey, and tentative arrangements to include Bulgaria and Romania.
Further afield, Egypt is to start supplying LNG to Spanish electricity company Union Fenosa in 2005.
With this deal in mind, a one-billion-dollar gas refinery was built in Damiette, in the north, paid by private investors from home and abroad.
From 2005, Egypt is also due to ship 4.8 billion cubic metres of LNG to France -- amounting to 10 percent of the needs of state operator Gaz de France (GDF) -- from its factory in Edku.
The same station is set to supply 3.6 billion cubic metres a year to British Gas, as well as pump out exports to the United States and Italy.
Securing other projects in the pipeline could push Egyptian LNG exports to 50 billion cubic metres per year.
"In the coming years, Egypt will be one of the largest liquefied natural gas suppliers," a British Gas official told a recent energy conference.
Israel, which signed a peace treaty with Egypt 25 years ago, has also expressed interest in Egyptian gas for its electrical power stations.
But negotiations have dragged ever since the Palestinian uprising broke out in 2000, with Cairo fearful of the political repercussions in the Arab world of concluding such a deal.

12/07/2004 13:08 GMT - AFP