5/28/2024–|Last updated: 5/28/202406:26 PM (Mecca time)
The decline in Egypt’s production from the Zohr natural gas field last year prompted the start of a “load shedding” plan, so that power outages returned to Egypt, and the field itself returned again. To the forefront after the Italian company Eni announced that it was forced to withdraw the Saipem Santorini drilling ship from it, because it had not received the $1.6 billion owed to it by the Egyptian government.
The American Energy Platform (which specializes in energy affairs) stated that in light of Eni’s withdrawal, plans to develop the Zohr field (the largest gas field in Egypt) are facing a halt, which will prevent increased production of the country’s most important gas sources.
The sources said that Eni received $270 million some time ago, but it still has $1.6 billion left.
Since last year, Egypt has sought to increase the production of the Zohr field through a plan that includes drilling and completing 20 wells, in addition to 5 additional wells starting in 2024, according to what Egyptian Minister of Petroleum Tarek El Molla said.
Egypt announced last August that it aimed to support production rates from the Zohr field, which then reached about 2.2 billion cubic feet of gas per day.
Dues
The Energy Platform quoted a source in the Ministry of Petroleum and Mineral Resources in Egypt as saying, “We have already paid the company $270 million, but there is still other debt, and we tried with them to complete the work on developing the Zohr field and pay the rest of the amount later.”
The source added that Egyptian Minister of Petroleum Tarek El-Molla tried to dissuade the company from withdrawing the ship, and contacted the CEO of the Italian company Eni, Claudio Descalzi, but “attempts to persuade them did not succeed.”
Egyptian Ministry of Petroleum spokesman Hamdi Abdel Aziz sought to deny that Eni had withdrawn the drilling ship through televised statements.
Egypt plans to pay 20% of the dues of foreign oil and gas companies operating in the country during next June, after it paid 20% last March, amounting to $1.5 billion, according to Reuters and a statement by the Egyptian Council of Ministers.
The ongoing shortage of foreign currencies in Egypt caused the accumulation of arrears owed to companies and contractors, and the shortage decreased during the month of February last year after the announcement of the Ras al-Hikma investment deal, the devaluation of the currency, and the increase of Egypt’s loan from the International Monetary Fund from 3 billion dollars to 8 billion dollars.
The oil companies’ arrears come from Egypt obtaining its share of fields and reservoirs inside the country, according to prior exploration and extraction agreements.
The government does not mention the value of the amounts owed to foreign oil companies, but Egypt accumulated billions of dollars in arrears to these companies 10 years ago, and began paying them after a devaluation of the currency and an agreement with the IMF in 2016.
Egyptian gas production
According to the data of the Joint Data Initiative (Judi), which Al Jazeera Net viewed, Egypt’s production decreased from the level of 6 billion cubic meters in February 2021 to 5.1 billion cubic feet in the following month, rising until July 2022 to 5.8 billion cubic meters. cubic meters, and then decreased until it stabilized at 4.5 billion cubic meters last March, the latest available data.
Mies magazine, specialized in energy, reported last year that natural gas production in Egypt had decreased since 2022, when the production of the Zohr field began to decline, which continued during the first months of 2023.
According to the magazine, the decline is an important indicator of the continuation of operational problems in the Zohr field, which appeared with the beginning of the water leak, years ago, after government decisions to accelerate the pace of gas extraction from the field, despite the danger that this poses to the sustainability of the field’s operation, according to a study by petroleum sector experts in multiple companies. It launched a project in the Zohr field to try to support its continuity in advance (part of which was reported by Mada Masr newspaper).
The Italian company Eni accelerated the start of production from the Zohr field, after compressing the timetable to 28 months instead of 6 to 8 years to achieve (the aspirations of Egyptian President Abdel Fattah El-Sisi), according to what local newspapers quoted the company’s CEO, Abdi Claudio Descalzi.
During the past year, with the start of reducing electricity loads, the Egyptian government was quick to deny that the Zohr field was damaged several times, in the words of Minister of Petroleum Tarek El Molla and Prime Minister Mostafa Madbouly.
Information about Zohr field
- It is about 200 kilometers away from Port Said in the Mediterranean Sea.
- The field was discovered by the Italian company Eni in an area in the Mediterranean Sea at a depth of about 1,500 metres.
- The well was drilled to a depth of 4,000 meters in the Egyptian economic zone in the Mediterranean.
- The production of the Zohr field represents between 35% and 40% of Egypt’s daily production, according to an estimate by former Egyptian Minister of Petroleum Osama Kamal.
- Zohr field reserves amount to 30 trillion cubic feet of gas, equivalent to 5.5 billion barrels of oil equivalent.
- Its maximum depth reaches 4131 metres.
- Zohr field covers an area of up to 100 square kilometers.
- It took 28 months to start production after the field was announced.
Power outages
Egypt suffers from electricity outages, so it began allocating more gas production for export to address the scarcity of hard currency, and imported environmentally polluting fuel oil, in order to continue operating power plants, according to Reuters.
The government attributed the interruption to high temperatures, but it continued during 2023 after the end of the summer, even after the government stopped exports to meet domestic demand.
Egypt seeks to become a regional exporter of energy, and is looking forward to selling electricity to countries including Saudi Arabia and Libya. It also intends to achieve electrical interconnection with Greece and ship liquefied natural gas from two liquefaction stations.
Officials attributed the power outage to the increase in demand as a result of the increase in the population of 106 million people, and to the mega projects supported by the Egyptian presidency, and urban development.
Power cuts were suspended during the month of Ramadan and the last Eid al-Fitr holiday.
In a speech last week, Egyptian President Abdel Fattah El-Sisi gave citizens a choice between power outages and high prices, and with the halt of development of the Zohr field, a question arises: Will the power outage crisis continue in Egypt?
