LONDON, Jan. 21 -- Egypt has signed an $8 billion, 20-year agreement to supply Gaz de France SA with 3.6 million tonnes/year of gas.
The contract paves the way for a BG Group PLC-led $900 million project to develop Egyptian liquefied natural gas supplies.
BG and its partners, Italy's Edison International SPA, the Egyptian Natural Gas Holding Co., and the Egyptian General Petroleum Corp. (EGPC), have formed the Egyptian LNG (ELNG) joint venture to build and operate the LNG export plant at Idku, east of Alexandria. EGPC is the state body which implements plans and oversees policies relating to oil and gas operations in Egypt.
Under the deal, GdF will take a 5% stake in ELNG, which will shortly be formally restructured.
The first train from ELNG will have a capacity of 3.6 million tonnes/year of LNG with first production scheduled for mid-2005. ELNG partners will operate the LNG export plant as a tolling facility. The commercial structure will also facilitate future plant expansions and processing of gas reserves by ELNG from other fields and operators.
Frank Chapman, BG Group CEO, said: "This will be the first sale from the Egyptian LNG project based on the very significant reserves BG Group and partners have discovered. Our remarkable 100% successful drilling record in the West Delta Deep Marine Concession (WDDMC) continues, providing sufficient reserves to support the immediate marketing of Train 2.
"Gaz de France is Europe's largest LNG buyer and the gas supply agreed today equates to about 10% of France's current annual gas demand. We welcome Gaz de France as the first customer of Egyptian LNG and also as a partner in the project."
The ELNG project will involve the combined development of discovered uncontracted gas reserves offshore in the WDDMC, associated pipelines, and the LNG plant.
The contract with GdF is expected to lead to final project sanction, following completion of the front-end engineering design studies.
Bechtel Group Inc. is the deepwater managing contractor on the Scarab-Saffron development and has been involved in the early definition and engineering work for the LNG plant.
It is planned that the plant would use the Phillips optimized cascade process, which Bechtel installed at Atlantic LNG in Trinidad.
The initial gas sales contract with GdF is likely to be followed by sales contracts with US customers.
West Delta Deep Marine Concession
BG Group has been the most successful explorer in Egypt, with 16 successes out of 17 wells drilled by BG and discoveries since 1997 totaling more than 10 tcf of gas. The former state-owned UK company has a $3 billion exploration program in Egypt.
BG Group and Edison have been advancing their plans for Egyptian LNG in step with the exploration success in the WDDMC. BG Group and Edison have a strong uncontracted and certifiable reserves position in WDDMC. The Scarab and Saffron fields are currently being developed for the domestic market and the associated Simian, Sapphire, Sienna, and Serpent discoveries will support the LNG scheme.
The Scarab-Saffron WDDMC is the first gas field development in deep water off the Nile Delta, and is the largest gas field development in Egypt. First gas production is expected in January 2003.
As part of the integrated development of the WDDMC, larger offshore pipelines are being installed sufficient to support a two-train LNG development, in addition to supplies to the domestic market from the Scarab-Saffron fields. This pre-investment is expected to ensure the cost-competitiveness of the scheme.
BG Group is operator of the WDDMC with a 50% holding and Edison International holding the remaining 50%.
Burullus Gas Co. a joint venture service company formed by EGPC, BG Group, and Edison International, is managing exploration and field development and operations. EGPC owns 50% of Burullus Gas, BG Group 25%, and Edison International 25%.
The Rosetta field entered commercial operation on Jan. 31, 2001, producing gas via a 60-km pipeline to processing facilities at Idku into the Egyptian national grid. Gas is supplied to the EGPC under a 25-year gas sales agreement signed in October 1997.
The Rosetta development consists of six wells tied back to a not-normally manned platform.
Production is scheduled to rise to 275 MMcfd. BG Group is operator with 40%, Royal Dutch/Shell Group 40%, and Edison International 10%. The field development is managed by a joint service company, Rashpetco, in which EGPC holds 50%, BG Group 20%, Shell 20%, and Edison 10%.
In addition to BG Group's upstream activities, it is a 37.5% shareholder in the Nile Valley Gas Co., which has a 25-year franchise agreement to develop a gas transmission system and market gas in Upper Egypt. First gas was delivered in 1999. It currently has 16,000 customers in Beni Suef.
