Eni’s Zohr brings joy – and sorrow

04 September 2015, News Wires – Italian giant Eni dropped an energy sector bombshell when it unveiled what is potentially the largest gas find in the waters of the Mediterranean Sea.

The Pyramids of Giza

The Pyramids of Giza

The estimated 30 trillion cubic feet deep-water Zohr discovery is a game changer.

It is bound to shake up the energy landscape in the Eastern Mediterranean with far-reaching consequences for Egypt, Israel and Cyprus.

There was jubilation in Egypt since the find will help the Arab world’s largest country meet its domestic needs and save it billions of dollars in gas imports.

Egyptian Prime Minister Ebrahim Mehleb hailed the discovery as a godsend.

Eni’s success is certain to reignite interest in Egypt’s offshore exploration scene and offers hopes for similar finds that could eventually prompt the country to restart its mothballed liquefied natural gas facilities at the ports of Damietta and Idku.

These were starved of gas supplies by the government following the 2011 revolution with priority given to satisfying rising domestic needs.

In contrast, the news sparked a tidal wave of disappointment in Israel, which had hopes on becoming a major gas exporter to Egypt.

The Zohr aftershocks were felt as far as New York, where shares in Noble Energy, with its major position in Israel’s gas fields, plunged in response.

The same misery was also felt by Israeli energy companies with stakes in the Leviathan and Tamar fields amid diminishing gas export prospects.

“The big fear is that this giant gas find will close the door to any option of exporting Israeli gas and will lead to a long delay in developing Leviathan — or even to it not being developed at all,” said Liran Lublin, energy analyst at Israel Brokerage & Investments.

The Israeli Cabinet recently approved a controversial benefits package, including an early permit for gas exports. The Israeli government argued that approval of the plan had to be expedited for economic and geopolitical reasons.

The Zohr find is also a potentially serious setback to Cyprus, which was eyeing the Egyptian market as part of plans to develop its Aphrodite field.

Eni has left no doubt it is bent on bringing Zohr on stream as quickly as possible. Chief executive Claudio Descalzi wasted no time in flying to Cairo to assure the Egyptian government of his intention to fast-track development plans.The field should be relatively easy to develop because of its close proximity to Eni’s existing processing facilities.

“I don’t want to put a date now but it is a question of a few years to have production… then a full production, that will be a very quick fast-track development,” Descalzi declared.

This is music to the ears of Egyptian leaders and especially Oil Minister Sherif Ismail, whose willingness to offer international oil companies attractive prices for domestic gas production has been the main driver behind a surge of new investment in developing costly offshore gas fields.

Zohr will give Ismail more ammunition to increase the appeal of Egypt’s offshore upstream scene to foreign explorers by continuing to reward them with more attractive terms.

(This article first appeared in the issue of 4 September 2015 as a comment.)

(Nassir Shirkhani in London, Upstream)

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