Mediterranean New Gas Hub - Egypt
October 2017
The giant Zohr field discovered in 2015 remains the largest gas discovery in the Levantine Basin to date. With fast tracked development of the 850Bcm field, the future of Egypt’s natural gas market remains brighter than ever before. Despite the previous expectations, regional geopolitical tensions and the highly regulated domestic market did not hamper development and the Zohr field is due to deliver its first gas by the end of this year.

Egypt’s domestic demand for natural gas is soaring and supply has struggled to keep pace with the rising need for natural gas. A country that was once a net exporter of gas with two LNG export facilities—Egypt LNG in Idku and SEGAS LNG in Damietta— began importing LNG in 2015. From 2015 through to 2016, the country imported over 10Mt of LNG, in a desperate need to satisfy its domestic demand. Turning the Zohr field’s tap on is set to change the tides and the country may soon become self-sufficient in regards to its natural gas needs.



The giant Zohr field is expected to contain 5.5Bbbl in resources, transforming these resources into reserves, would roughly double Egypt’s reserves. Development of the field could eventually result in resumption of operations in Egypt LNG and SEGAS LNG facilities. Up until recently, the deep-water Levantine basin remained largely unexplored and more discoveries has been found after further exploration. These include including Israel’s Tamar (300Bcm) and Leviathan fields (500Bcm) and Cyprus’ Aphrodite field (200Bcm). Development of these fields could eventually transform the dynamics of energy markets in east Mediterranean.   

Engineering and logistics costs are expected to be high. The field is located more than 180km off Egypt’s Mediterranean coast, covering an area of 100km² at water depths of around 1,450m. The AME database of projects with similar characteristics suggests that drilling, completion and hook-up of development wells could cost around US$100m for each well. Subsea pipeline construction and installation costs are expected to be around US$4–5m per kilometre. 


The development schedule for Zohr has been fairly rapid compared to typical deep-water projects. First phase development plan for the field included six wells, tied back to Eni’s 140t Temsah platform, a pipeline end manifold (PLEM) connected to four pipelines ranging from 14 to 32 inches each in diameter. Gas would then be sent to the onshore El Gamil Gas Processing Plant for treatment.


The first phase of the project is expected to cost US$5bn and full development of the Zohr field is expected to require US$7-8bn in capital expenditure. In a bid to lower the risk and bring in the needed capital, Eni has already farmed out 40% of its stake in the field to Rosneft and BP. The first phase of development is expected to tap into 141.5Bcm of gas (5Tcf) and 55Mbbl of condensates. Additional development phases would add 200–300Bcm of reserves and are envisaged on the concept plan as potentially reaching production rates that can ultimately feed 25% of Egypt’s domestic demand. 


Although technically complex and costly, the biggest obstacle for full field development may prove to be regulation. The Egyptian Government enforces a proportion of the gas to be sold at regulated domestic prices. Under the production sharing agreement for the Zohr field, 65% of the future output would go to the Egyptian domestic market, and 35% would remain for Eni to sell. Prices paid to producers in such environments have recently varied between US$4/MBtu and US$5.88/MBtu. This compares badly against the expected breakeven prices, but given the strong political interest for the fast-tracked development of the field, the terms could possibly be renegotiated.

Egypt also has the giant US$12bn West Nile Delta (WND) in its offshore scene. This project involves the development of several gas and condensate fields within the North Alexandria and West Mediterranean Deepwater concessions, approximately 75km off the coast of Alexandria, Egypt. 

The combined output from these offshore projects could see Egypt’s gas production surpass its consumption by the end of the decade, leaving a surplus for export. This will ultimately bring Egypt back to the league of net natural gas exporters nations.