Egypt may stop LNG exports, tightening EU supply – experts

Published on : 2023-11-02

Montel - Europe’s gas balance may tighten this winter due to turmoil in the Middle East as Egypt is expected to stop LNG exports amid lower supply from Israel and lower domestic production, experts said this week.

Last winter, LNG imports from Egypt into Europe and Turkey were around 3.4m tonnes (4.6bcm) or 5% of the region’s total supply of the liquid fuel for the period.

But it has exported no cargoes since the Hamas attack on Israel on 7 October, which led to the precautionary shutdown for of the 10bcm/year Tamar field, one of two giant fields that supply gas to Egypt.

As a result of lower Israeli exports to Egypt and insufficient domestic production, Egypt was not expected to export any LNG this winter and could become an LNG importer, experts said. At least one vessel that was enroute to load LNG in Egypt rerouted away from its LNG plants this month, according to Kpler ship-tracking data.

“We just cut the Icis export forecast again following recent failures to load cargoes,” said Tom Marzec-Manser, an Icis gas analyst, on LinkedIn.

“If upstream production doesn’t improve and pipe imports from Israel remain very low, then it looks like an Egypt domestic supply and demand imbalance in Q1,” he said, adding there could even be LNG imports.

Upstream issues

Globally, Turkey was the biggest importer last winter of Egyptian LNG at 1.9bcm, trailed by Spain with 0.6bcm and Italy with 0.5bcm, while Egypt was the seventh biggest supplier of the liquid fuel to Europe and Turkey.

“Considering the upstream issues in the country and the reduced Israeli piped gas availability, Egypt’s LNG exports are most likely to dry up this winter, adding to a tighter winter gas balance in Europe,” said International Energy Agency gas analyst Greg Molnar.

He was citing media reports that Israeli flows to Egypt have dwindled between 70-80% since the shutdown of Tamar, from an average supply in the first eight months of the year of 23mcm/day.

Egypt’s own gas production has dwindled by 10% year on year from January-August due to the country’s ageing gas fields and “growing upstream issues”, or 4.5bcm in absolute terms, Molnar said, adding the country partly offset the decline with Israeli flows.

Production cut

But the shutdown of Tamar led to a 40% cut in Israel’s own production in October, or around 0.8bcm, he added.

“This tightness is likely to keep TTF prices elevated for some time still,” Marzec-Manser told Montel, adding that the main impact would likely be seen in Q1 as Icis forecast a balanced global LNG market in Q4.

European gas markets were pricing in expectations of further tensions in the Middle East even though the conflict had not had a substantial impact yet on prices or supply, Claudio Descalzi, CEO of Italian energy group Eni, said on Tuesday.

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