Fall in oil price in the global market, which lingered since 2019, seem to be hitting Egypt hard. Reports say the government of the North African country is currently working on a plan to reduce the number of liquefied natural gas (LNG) cargoes offered on the spot market, to encourage the signing of more long-term contracts.
For a greater part of last year, gas prices on the Asian and European markets collapsed due to the oversupply. Oil expert Medhat Youssef told Daily News Egypt that gas prices began to decline when the United States increased its production of shale gas significantly in recent years. This also contributed to a lessening of dependence on natural gas as oil prices declined during this period.
Youssef said that shale gas exploration companies are suffering from financial pressures due to high investment costs, although production of gas rose by about 15% during May. Additionally, LNG exporting countries are said to have seen their revenues fall sharply due to lower gas prices, nearing the actual production cost of LNG, which includes production, liquefaction, and shipping.
The oil expert added that the markets are experiencing seasonal fluctuations, where demand peaks in the winter and then turn to lower levels in the summer. “Consumption falls sharply with the start of the spring and autumn months. The LNG prices are also affected by the race between Russia and the United States over increasing gas exports,” he said
In their report yesterday, the Egyptian news medium said, if natural gas prices continue to decline in world markets, coal-importing countries will transition to natural gas for industry and power plants due to natural gas’s economic feasibility and its position as a cleaner alternative
It said that under the new configuration, Egypt will sell its gas at the equivalent of $ 5 per million British thermal units for sales contracts. The Egyptian oil minister, Tarek el-Molla, was quoted saying talks are underway with many international partners to implement this government plan.
According to the official who met the press on the sidelines of the 50th annual meeting of the World Economic Forum in Davos, the new agreements will last between a year and 18 months, before being renewed.
“It will be a win-win scenario for all (…) Egypt will be able to take advantage of this to increase its gas production to more than 7.5 billion cubic feet per day in 2020, against 7 billion cubic feet in 2019”, he said. The North African country exports about 1 billion cubic feet of gas per day, a volume it wants to double this year after the restart of the LNG plant at Damietta.
Chibisi Ohakah
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