lng solutions from the leader in cryogenics · [email protected] made in italy. february 2017 5...
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LNG Solutions from the Leader in Cryogenics
February 2017
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ISSN 1747-1826
CONTENTS
Copyright © Palladian Publications Ltd 2017. All rights reserved. No part of this publication may be reproduced, stored in a retrieval system, or transmitted in any form or by any means, electronic, mechanical, photocopying, recording or otherwise, without the prior permission of the copyright owner. All views expressed in this journal are those of the respective contributors and are not necessarily the opinions of the publisher, neither do the publishers endorse any of the claims made in the articles or the advertisements. Printed in the UK.
ON THIS MONTH’S COVER
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12
FEBRUARYFEBRUARY 20172017
A unique suite of LNG liquefaction technologies by Air Liquide, the leading operator of cryogenic
plants worldwide and LNG pioneer, will enable customers to reduce LNG
production costs and plant emissions. Safe, reliable and simple solutions for small to large scale plants. Discover more at: https://www.engineering-airliquide.com/LNG
03 Comment
05 LNG news
34 Insulation for all seasonsCarl Davison, Kingspan Industrial Insulation, UK, explains how PIR insulation can help improve the energy efficiency of LNG facilities.
39 Quench the flareChristian Belting-Clar and Leonid Bleicher, Dresser-Rand business, part of Siemens Power & Gas Division, Germany, explain how to minimise BOG flaring by LNG quenching.
45 Quench controlWayne Jacobson, Compressor Controls Corp. (CCC), USA, outlines the advantages of integrated quench controls for LNG refrigeration compressors.
49 Make a predictionNobutaka Umeyama, Japan Marine United Corp., Japan, Kenichi Matsuoka, Azbil Corp., Japan, and David Hill, Chemstations Inc., USA, look at the application of dynamic process simulation for LNG vessel gas management systems.
53 Integration or independence?Peter Sieber, HIMA Paul Hildebrandt GmbH, Germany, debates the benefits of a separate approach to functional safety versus an integrated approach.
57 Waste not, want notArno Brouwer, Cryonorm, the Netherlands, presents a method to recover cold energy from LNG regasification plants.
59 Cool ideaAugusto Bulte, Amec Foster Wheeler, USA, explains how LNG import terminals can make use of the cold energy generated during the regasification process.
64 15 facts ... on the Mediterranean
16 Stop the giantsThibault Marguet, Air Liquide Global E&C Solutions, France, presents a dual mixed refrigerant liquefaction process that addresses mid scale LNG projects.
20 High tide for FLNG operationsMartin Van Der Merwe, Emerson Process Management, Australia, explains how advances in digital technologies can help FLNG operators overcome operational challenges.
25 Achieving cryogenic pump reliabilityYousef Jarrah, Toshi Hayashi, and Daniel McInnis, Nikkiso Cryo Inc., USA, review typical roller bearing profiles.
29 Hold the lineRichard Fawcett, Dynaflow Research Group, the Netherlands, looks at the importance of designing for pressure surges in an LNG bunkering line.
12 A change of courseRichard Bass, Navigant Consulting Inc., UK, looks at how the East Mediterranean gas market has changed over the last 10 years, with particular focus on Egypt, Israel and Cyprus.
Copyright © Palladian Publications Ltd 2017. All rights reserved. No part of this publication may be reproduced, stored in a retrieval system, or transmittein any form or by any means, electronic, mechanical photocoor otherwise, without the prior
ON THIS MONTH’S C
rculations (ABC). our sales department.
A unique suite of LNG liqtect hnologies by Air Liquidleleading operator of cryoge
plap nts worldwide and LNG pwwill enable customers to redu
pproduction costs and plant emirreliable and simple solutions forto large scale plants. Discover mohttps://www.engineering-airliquide
64 15 facts ... on the Mediterrane
FLNG operationsrocess Management, Australia, echnologies can help FLNG allenges.
ogenic pump
niel McInnis, l roller bearing profiles.
Group, the of designing for line.
Register for free at:www.lngindustry.com
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Every year the Mediterranean plays host to holidaymakers from around the world. With reliably hot summers, idyllic beaches, and some fantastic local cuisine, it is no surprise that the region has
become one of the most desirable destinations for those seeking a relaxing break.
Visions of flip-flops and siestas in the sun seem a distant fantasy at the moment however as cold weather dominates the forecasts in much of Europe. Greece, Italy and Turkey were among the countries grappling with heavy snow and freezing temperatures in January. Large swaths of Greece have been hit by sub-zero temperatures and heavy snowfall. The normally mild Greece has witnessed temperatures of -15°C in the north.
The LNG picture in the Mediterranean right now is also decidedly frosty. Cold weather and problems with Algerian gas supply have pushed up Europe’s gas prices. Supply from Algeria has been reduced due to problems at Sonatrach’s Skikda LNG export terminal, just as demand reached its peak.
French gas grid operator GRTgaz announced in January that a force majeure in Algeria and tensions in the global gas market were reducing deliveries of LNG to southern France. The force majeure is in place after Algeria’s Skikda LNG facility, which is used for deliveries to French and European markets, went into a scheduled maintenance operation. Deliveries to the Fos-sur-Mer terminal were at about 40 GWh per day, considerably lower than the 70 GWh per day required to meet increased winter demand for power and heating.1
Such problems have resulted in US exporters shifting their focus to Southern Europe from Asia. The prices in Europe are currently at their highest premiums to US gas prices for three years. Several cargoes from the US have
already capitalised on this and made their way to Europe.2
In January 2017, one vessel delivered US gas to Spain and another arrived on Turkish shores. Two more vessels transporting US gas were sailing in the Mediterranean and another was moving across the Atlantic. Spain, Greece and Turkey would be other possible destinations for the US LNG cargoes. The flow would be expected to slow in March, as winter comes to an end in Europe and the LNG cargoes are gradually replaced by tourists.
This month’s regional report focuses on the changing LNG scene in the Mediterranean. Richard Bass of Navigant Consulting Inc. considers how the East Mediterranean gas market has changed over the past ten years, and how it will continue to do so in the future. Whilst much of the region continues to import LNG on a large scale, Bass investigates how many smaller countries are intent on exploring their exportation potential, viewing LNG exports as an ideal route to market. How do you see the picture developing in the Mediterranean? Do you believe in the long-term exportation potential of the smaller Mediterranean players? Please let us know your thoughts.
We hope you enjoy this issue of LNG Industry and if you picked up a copy at either the US LNG Summit or the Central & Eastern European Gas Conference, don’t forget to visit www.lngindustry.com to subscribe and receive more world-class technological updates for the international LNG industry.
1. http://www.reuters.com/article/france-gas-lng-idUSL5N1F75F0
2. http://uk.reuters.com/article/usa-asia-lng-idUKL1N1FE4BG
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February 2017 5
LNGNEWSFinlandFinland
LNG-fuelled ferry delivered
A S Tallink Grupp has announced that it has taken delivery of Megastar – its new LNG fast passenger ferry – from
Meyer Turku Oy shipyard in Turku, Finland.The vessel is 212 m long, and is capable of carrying
2800 passengers and 800 passenger vehicles. It features modern dual-fuel engines that are capable of operating on LNG and marine diesel oil, and will comply with both current and future emission regulations for emission control areas (ECAs), including the Baltic Sea.
The vessel has a service speed of 27 knots and will operate on the existing Tallink shuttle service route from Tallinn (Estonia) to Helsinki (Finland). It will replace the current fast ferry, Superstar, commencing service on 29 January 2017.
The CEO of Tallink Grupp, Janek Stalmeister, said: “Connecting Finland and Estonia, and even further – Northern Europe to the Baltic States and being the preferred hub for that is an important goal for us. With Megastar, this hub becomes the most modern sea-hub in the region. At Tallink we have been researching what our customers want in a next generation ferry. Then we worked closely with Meyer Turku on a fresh and functional design of the ship and I am sure the outcome will please all our customers. We are very thankful to Meyer Turku for listening carefully to our wishes and building an excellent ship for us.
“Delivering this ship full of latest environmentally friendly technologies and exceeding our expectations in fuel efficiency and increased comfort level with low vibrations Megastar nicely demonstrates the excellence and quality of Meyer Turku and Finnish shipbuilding.”
USAUSA
Eagle LNG files FERC application for Jacksonville LNG project
Eagle LNG Partners has announced that it has filed its formal application with the US Federal Energy
Regulatory Commission (FERC) for authorisation to site, construct and operate natural gas liquefaction and export facilities at a site located on the St. Johns River, Jacksonville, Florida, US.
The proposed Jacksonville LNG project features three liquefaction trains. At full build-out, it will be able to produce up to 1 million tpy of LNG (1.65 million gal./d).
The LNG will then be transported to markets in both Latin America and the Caribbean, where it will be used for power generation. It will also be delivered to local and regional markets, including marine bunkering and high horsepower applications for domestic consumption.
Dick Brown, the CEO of Eagle LNG, said: “The dramatic growth of natural gas supply in the United States has created abundant and affordable natural gas reserves that make LNG a competitively priced fuel alternative to diesel and heavy fuel oil. In addition, natural gas fuel has significant environmental benefits, reducing air pollution and carbon emissions.
“If Eagle LNG receives permission from FERC to begin construction by the first quarter of 2018, we anticipate completion of the project in 2019.”
Singapore
MOL launches study of LNG-fuelled Capesize bulker
M itsui O.S.K. Lines (MOL) has announced that it has reached an agreement to launch a joint study of an
LNG-fuelled Capesize bulker with five other companies.These companies are: BHP Billiton; DNV GL; Rio Tinto;
Shanghai Merchant Ship Design and Research Institute (SDARI); and Woodside Energy. A letter of agreement was signed by the parties at a ceremony held in Singapore.
The joint research project is called ‘Green Corridor’ and aims to reduce NOx and SOx emissions from merchant vessels in advance of international treaties calling for stricter emissions standards. The project will also examine the technological and economic feasibility of an LNG-fuelled bulker.
6 February 2017
LNGNEWSNorwayNorway
Long-term small scale LNG contract for three Multigas vessels
I .M. Skaugen SE has announced it signed long-term contracts for the time charter of three Multigas (MG)
vessels for a project representing a ‘proof of concept’ of its small scale LNG logistics solutions (SSLNG) on 23 January.
The revenues under these SSLNG contracts will be approximately US$42 million/yr and therefore around US$420 million over 10 years.
The time charter contracts are for two 10 000 m3 and one 12 000 m3 MG vessels currently operated by the company. The company will provide shuttle/feeder services, floating storage support, as well as storage and offloading of LNG with a client sponsored by two existing gas fired power plants in Africa. The power plants are new and made for burning natural gas and have been idle because of lack of gas supply. In addition, the company has been requested to perform the complete Project Management of this ‘virtual pipeline’ to be established, encompassing the entire supply chain from the sourcing of LNG supply to the delivery of gas to the power plants.
Start-up of the contract is planned for in late March or early April 2017 by our Company arranging delivery of first LNG.
BelgiumBelgium
Ice class LNG carrier docks at Zeebrugge LNG terminal
F luxys has released a statement claiming that the world’s first top category ice class LNG carrier has docked at the
Zeebrugge LNG terminal in Belgium.The vessel was recently completed at the shipyard, and is
scheduled for a number of operations at the terminal. These include, amongst other things, cooling down its cargo tanks and loading a small volume of LNG. The vessel has moored at the terminal during its maiden voyage, and will continue its sea trials afterwards, setting off to the Yamal Peninsula in Siberia, Russia, to undergo ice performance tests.
The vessel will be used for the Yamal LNG project, which is currently under construction in North Siberia. It has been designed to perform year-round navigation through the Arctic to its destination markets, and is capable of breaking through ice up to 2.1 m thick.
Fluxys claims that this vessel’s call at the Zeebrugge terminal will not be its last. Specifically, a 20-year contract was secured in 2015 to perform transhipments for the Yamal LNG project at the facility. Currently, a fifth LNG storage tank and additional process facilities are under construction to provide these services.
It will join a fleet other 15 similar vessels, which will also serve the Yamal LNG production terminal and regularly call at the Zeebrugge terminal to perform transhipment operations to conventional LNG carriers for further redelivery to a number of destinations, including Asia.
News Highlights
Visit our website for more news: www.lngindustry.com
MAN Cryo to deliver LNG fuel gas supply system to Italian ferry
Houlder and KLAW LNG join forces MSC Cruises partners with ARTA to develop LNG
bunkering system
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8 February 2017
LNGNEWS
13 - 14 February 2017
Floating LNGLondon, UKwww.floating-lng.co.uk
14 - 16 February 2017
CWC Iran LNG & Gas Partnerships SummitFrankfurt, Germanywww.iranlngandgas.com
28 - 30 March 2017
StocExpo EuropeRotterdam, The Netherlandswww.easyfairs.com/stocexpo-rotterdam-2017/
stocexpo-rotterdam-2017
04 - 07 April 2017
GastechChiba, Tokyo, Japanwww.gastechevent.com
IndiaIndia
AG&P to build LNG terminal in India
Atlantic, Gulf and Pacific Co. (AG&P) and Hindustan LNG (HLNG) – a Hyderabad-based LNG import terminal development
company – have signed a memorandum of understanding (MoU) to supply tolled gas to power stations in the East Godavari region of Andhra Pradesh, India.
Under the terms of the MoU, AG&P will provide an integrated solution to deliver regasified LNG through a new LNG import terminal. The company will also design and construct the terminal at the port in Andhra Pradesh.
The agreement was signed at the Partnership Summit 2017 organised by Confederation of Indian Industry (CII). It will ensure energy supply to power producers, fertiliser plants, cold storage and other industries in Andhra Pradesh and other markets along the east coast.
Speaking at the signing ceremony, C. R. Prasad, the Chairman of HLNG, said: “Andhra Pradesh is the ideal place for developing an LNG import facility to serve the growing energy demands of the east coast of India where existing gas-fired power projects urgently need a reliable supply of LNG. The partnership with AG&P will provide a strong platform to develop a fast-track and low-cost LNG import solution that enables the region to continue on its growth trajectory.”
AG&P will be responsible for the design and construction of all necessary facilities for the import terminal. These include a floating storage and mooring system, a regasification terminal, related utilities, and the provision of tolled gas to power plants and other users. The company will also carry out any necessary conversion works and, upon commissioning, ongoing operations and maintenance activities.
USAUSA
Magnolia LNG and VGS sign contract
LNG Limited has announced that its 100% owned subsidiary, Magnolia LNG has signed a Heads of
Agreement (HoA) with Vessel Gasification Solutions (VGS) in relation to the Magnolia LNG Project, in Lake Charles, Louisiana, US.
The non-binding HoA provides for a 20-year Free-on-Board Sale and Purchase Agreement of up to 4 million tpy. The obligations of the parties are conditional upon MLNG’s satisfaction with or waiver of conditions precedent including financial close of the KGLNGT terminal and satisfaction by VGS of defined credit requirements underpinning their LNG purchases within agreed timeframes.
LNG Limited’s Managing Director & CEO, Greg Vesey, said, “We look forward to supplying long-term volumes to the Indian market to meet their growing needs for clean energy. Overall, this agreement represents another important step forward for the MLNG Project.”
“With the execution of this agreement, VGS is now in a prime position to execute on the first- mover advantage we have established on India’s East Coast,” said Gaurav Tiwari, President of VGS. “We are very excited to take this step forward in our relationship with Magnolia, and we look forward to working with the Magnolia team to bring a significant tranche of US-produced LNG to a key new market on the East Coast of India.”
22 - 24 February 2017
Australasian Oil & Gas (AOG)Perth, Australiawww.aogexpo.com.au
23 - 24 February 2017
LNG Summit United StatesHouston, USwww.lng-usa.com
10 February 2017
LNGNEWSChinaChina
World’s first barge-based FSRU undocks
Wison Offshore & Marine has released a statement claiming that the world’s first barge-based floating storage and
regasification unit (FSRU) has successfully undocked from the company’s dry-dock in Nantong, China.
Wison provided engineering, procurement and construction (EPC) services for the Exmar vessel. The FSRU will become the world’s first such vessel with small scale storage capacity, and has a regasification capacity of 600 million ft3/d. The vessel features two SPB cargo tanks installed in the hull for storage. Each tank has a capacity of 12 500 m3.
The project is the second one that Wison and Exmar have cooperated on (the other being the Caribbean FLNG project). By adopting a modularised approach, the FSRU’s hull and topside modules have been fabricated simultaneously, reducing safety risks, improving construction quality, and helping to reduce the delivery schedule. In addition to this, Wison developed its own cargo containment system and cargo handling system for IHI SPB tanks. The regasification module, meanwhile, has been successfully applied in Caribbean FLNG’s final performance test as its temporary regasification skid.
The Senior Vice President of Wison Offshore & Marine, An Wenxin, said: “The successful undocking of the FSRU once again verifies Wison’s strong competence in the lump sum turnkey projects for floating LNG facilities. It further proves that we are capable of providing the market with the most cost-effective EPC solutions that are applicable in other LNG developments, such as the new W-FSRP (Wison – Floating Storage, Regasification and Power generation) series we launched recently.”
USAUSA
Magnolia LNG extends validity of EPC contract with KSJV
PakistanPakistan
Excelerate to develop second FSRU for Port Qasim
Excelerate Energy has announced that it is prepared to help a consortium of Engro, Fatima and Shell to
deliver a proposed floating LNG terminal and second floating storage and regasification unit (FSRU) to the Pakistan market.
The company recently commissioned GASCO’s Ruwais floating LNG terminal in the UAE, successfully implementing it in less than 12 months. In early 2016, Elengy successfully developed Pakistan’s first LNG import terminal using Excelerate’s floating regas technology.
The consortium’s project site is located just across the Port Qasim channel. When the project comes online in 2018, the total regasification capacity of Excelerate’s two FSRUs at the port will be more than 1 billion ft3/d. This is enough natural gas to support over 6000 MW of power generation.
Daniel Bustos, Chief Development Officer, said: “Excelerate is extremely excited to work with this strong partnership of Engro, Fatima, and Shell to implement this project in what we view as one of the largest markets for natural gas in the world.
“Our project development and operations teams are aggressively reviewing implementation plans for this project. We have been very pleased to be involved with the country’s first floating LNG terminal developed by Engro’s subsidiary Elengy over the past 18 months.”
L NG Limited has announced that Magnolia LNG LLC – its 100% owned subsidiary – has agreed to further extend the
validity period of its engineering, procurement and construction (EPC) contract with KSJV.
The agreement will now be valid through 30 June 2017. As announced on 26 April 2016, Magnolia and KSJV – a KBR-lead joint venture (JV) between KBR and SKE&C – had extended their original binding lump sum turnkey (LSTK) EPC contract for four LNG trains and related facilities until 31 December 2016, with a subsequent interim extension to 31 January 2017. This latest extension will ensure that the contract remains valid for an
additional six months.Greg Vesey, LNG Limited Managing Director and CEO,
said: “We continue to work closely with key contractors and suppliers such as KSJV to maintain momentum on the Magnolia LNG project as we continue our marketing efforts. This further extension of our LSTK EPC contract with KBR-SKE&C, together with our FERC final order and Department of Energy non-FTA export approval, further cements Magnolia LNG as construction-ready and the next US LNG export project that will move forward into construction and operation.”
COUR
12
Richard Bass, Navigant Consulting Inc.,
UK, looks at how the East Mediterranean gas market has changed over the last 10 years, with particular focus on Egypt, Israel and Cyprus.
A change of
URSERRSE
13
A discussion held 10 years ago about East Mediterranean gas would have focused on Egypt. It would have
concentrated specifically on the quantity of pipeline gas that Egypt could export regionally and the capability of its two LNG terminals to compete for customers in Europe, North America, and Asia. Fast forward to today, and any discussion of East Mediterranean gas would consider when Egypt will cease to be a significant LNG importer, as well as the prospects for gas exports from Israel and Cyprus. So how, in less than a decade, have the region’s circumstances changed so markedly? And what is the next decade going to look like?
14 February 2017
Egypt’s change of fortunesBy 2006, Egypt’s gas sector was highly successful. The LNG liquefaction plants at Idku and Damietta had been operating for several years, having been constructed at a low cost per t of capacity and rapid schedule that were close to industry-leading. Pipeline gas exports had been negotiated with Israel and an offshore pipeline constructed to deliver gas into Ashkelon. This was a politically significant and valuable commercial agreement between the two countries. This gas supply supplemented Israel’s own modest gas production and allowed it to continue expanding its power generation fleet’s reliance on gas.
During that time period, Navigant Consulting Inc. was helping the Jordanian government to negotiate pipeline gas imports from Egypt. An agreement to import up to 3 billion m3/yr was realised in 2003, with first gas being delivered to the steam turbine power plant in Aqaba. The gas pipeline crossed Egypt’s Sinai Peninsula. An offshore segment then headed to Israel, whilst the Jordan-destined branch turned south toward the Gulf of Aqaba. Despite the relatively short distance to Jordan, the crossing of the Gulf of Aqaba was technically complex, requiring one of the world’s largest pipe-lay vessels due to the steep offshore gradient. The geography of the Gulf of Aqaba would also come to affect the construction of Jordan’s LNG import terminal approximately 10 years later. Like Israel, Jordan converted its power plants to gas; the
independent power projects, developed by a consortia led by both KEPCO and AES, were built as efficient combined cycle gas turbines (CCGTs). In 2006, authorities were considering the development of gas distribution businesses in both Aqaba and Amman to deliver low cost Egyptian gas to residential, commercial, and industrial consumers.
In Egypt, gas was supplied to new power plants and a growing petrochemical industry. However, all was not well in the Egyptian gas industry; production declines at older fields were starting to bite. The low price offered by Egypt for domestic gas production in a world of US$140/bbl of oil did little to incentivise exploration activities. Meanwhile, highly subsidised gas prices encouraged rapid increases in domestic consumption, and the commercial structure of the production-sharing agreements offered to energy companies were looking increasingly uncompetitive.
By 2010, these issues were beginning to create problems for Egypt and its gas customers, with deliveries to Jordan and Israel becoming somewhat unreliable. However, the serious problems kicked off in 2011. With the Arab Spring spreading across North Africa, the government of Egypt was overthrown. The new regime had different priorities to that of its predecessor; gas supply to domestic consumers was ranked above exports, which declined rapidly. As a result, the LNG liquefaction facility at Damietta was mothballed almost immediately.
The Idku facility continued to export cargoes for some time, as it was supplied directly from a producing gas field, but eventually even that supply was diverted for domestic consumption. Pipeline supplies to Jordan became highly intermittent and effectively ceased by the middle of 2012. This created massive problems for the Jordanian government, as it was forced to buy expensive gasoil to operate its new fleet of CCGTs. The gas supply deal with Israel was cancelled. Although substantial, the impact in Israel was mitigated to some extent by its rising gas production.
By 2013, Egypt’s gas shortage had become so severe that it had to rapidly implement an LNG import facility on the Red Sea. At the same time, Navigant was assisting Jordan in implementing its own LNG import terminal at Aqaba to replace the now absent Egyptian gas supplies. Jordan later signed a deal to allow
Figure 1. Multiple options exist for the monetisation of East Mediterranean gas.
February 2017 15
Egypt to import additional LNG cargoes via the Aqaba terminal, to be delivered to Egypt using the now reversed pipeline across the Sinai. A second Egyptian LNG import facility followed and a third facility is being considered.
Gas developments in Israel and CyprusWhile Egypt was struggling with growing gas demand and declining production, Israel’s gas industry was developing rapidly. A consortium led by Noble Energy discovered Tamar, Leviathan, and other smaller gas fields. Tamar was developed quickly to meet domestic demand as Egyptian supplies faltered. Israel also implemented an LNG import terminal to supplement domestic production, especially during the summer peak demand months.
Noble and its partners began searching for development options for the much larger Leviathan gas field, initially focusing on LNG exports to Asia or Europe (The North American market that had originally been targeted by Egypt’s LNG terminals had long since vanished as a result of North America’s shale gas revolution).
Then, Israeli domestic politics intervened. Noble’s successful exploration programme had transformed Israel’s energy sector. A consequence, however, was that a single consortium now controlled the vast majority of Israel’s newly discovered gas resources. That fact caused Israel’s monopoly commission to review the status of the gas industry and, in particular, the status of Noble’s consortium. The review turned out to be a long and protracted process, during which the development of Leviathan was essentially put on hold.
In Cyprus, Noble’s consortium had discovered another large gas field: Aphrodite. Once again, LNG exports seemed like an ideal route to market. However, a combination of economics and geopolitics has held back Cyprus’ gas ambitions. Although Aphrodite is a substantial resource, it is not big enough by itself to justify a world scale LNG liquefaction plant. Noble needed to find more gas – or others active in Cyprus (e.g. Eni and Total) needed to do the same. Unfortunately, that has not yet happened. One factor is that the domestic energy market in Cyprus is very small. Unlike in Israel, Noble was not able to develop Aphrodite initially for domestic consumption and then consider further export opportunities.
Geopolitics also complicates any gas development in Cyprus. Whilst the Cypriot government had identified a number of exploration blocks to the south of the island, Turkey (which controls the north of the island) had also identified a number of blocks. Many of these blocks overlapped, including those held by Noble and Total.
Gaza MarineWell before the discovery of significant gas resources in either Cyprus or Israel, BG Group discovered the Gaza Marine field offshore from Gaza in 1999. Development of the resource was complicated by the political relationship between the Palestinian Authority
and Israel. BG negotiated for several years to supply gas to Israel and Gaza. A CCGT power plant was developed (initially by Enron and completed by CCC) in Gaza with a view to utilise the gas from Gaza Marine. That process essentially came to a halt when Hamas came to power in 2007. As a result, Gaza’s power plant has never received any gas and has had to burn expensive gasoil instead. BG tried again in 2012 after the Egyptian pipeline contract to Israel was cancelled, but Noble’s development of Israel’s own Tamar field meant that Gaza Marine remained undeveloped. Shell’s recent takeover of BG is unlikely to aid the development of Gaza Marine, as Shell is seeking to divest US$30 billion of assets – Gaza Marine is probably on the disposal list.
Now and the futureThe Egyptian gas sector may be about to take another change in direction. Eni’s recent discovery of the giant Zohr gas field may, along with other recent discoveries, bring Egypt’s gas supply and demand back into balance. The fast-track implementation of Egypt’s two LNG import projects and the progress being reported on Zohr suggest that a turnaround in Egypt’s fortunes could be reasonably rapid. A pause in the execution of the third LNG import facility may be further indication that Egypt is heading back on track. The Zohr discovery, just to the south of Cyprus’ maritime border with Egypt, has also increased interest in Cyprus’ recent licensing round.
Will Egypt return to exporting significant quantities of gas? Yes, but the source of the exported gas is unlikely to be Egypt’s own gas fields. Shell’s recent agreement with Cyprus and its investment in Cypriot gas resources suggest the probable import of Cypriot gas for re-export as LNG from Egypt’s mothballed Idku liquefaction terminal. Both Idku and Damietta have reportedly been running at bare minimum throughput and exporting a cargo occasionally to keep the units cold. With the supply of Cypriot gas, these facilities could return to something close to full capacity. The economics of this approach should be attractive for all of the companies and governments involved because investment in the export terminals has already been made and Cypriot gas is looking for an economically viable route to market. Development of Aphrodite for export via Egypt should also enable gas to be supplied to Cyprus’ domestic market, lowering its high electricity costs.
Leviathan also appears to be moving forward. Noble’s recent announcement of two agreements to supply customers in Jordan, as well as possible further gas sales in Israel, should enable a final investment decision (FID) to be made in 2017. Like Cyprus, interest in Israel’s latest licensing round appears strong. Domestic Israeli gas consumption has the potential to grow and access to Egypt’s other LNG terminal at Damietta may provide a cost-effective export route.
There is no doubt that the East Mediterranean is a challenging place to do business, where economics take a back seat to geopolitics more often than not. However, after a tumultuous decade, recent developments point to a brighter future for the region’s gas sector.
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