LNG supply: Egypt charters FSRU to fight gas crunch; Australia seeks more imports

Egypt’s LNG import capacity will arrive ahead of peak summer demand thanks to EGAS taking Galleon on an 18-month charter agreement, beginning in June 2024.

The FSRU is likely to be deployed at the Ain Sokhna port, replacing BW’s Singapore FSRU, which departed late last year to be deployed in Italy from Q4 2024.

Egypt began experiencing gas shortfalls in 2022 and has become a net gas importer since 2023, increasingly reliant on piped Israeli imports to balance its market. The giant Zohr field, which contributes around 35% of Egypt’s total gas production, suffered water infiltration earlier than expected, reducing its output.

In 2023, production from Zohr stood at 2.3 billion cubic feet per day (bcfd), down from 2.7 bcfd in 2019. Gas from other increasingly mature Nile Delta fields continues to decline and exploration since Zohr has mostly disappointed.

Despite its shortfall of gas, Egypt is also contractually obligated to continue exporting LNG from the Damietta LNG facility, 60 km west of Port Said, but analyst Wood Mackenzie said this could be restricted to only a handful of cargoes during the winter. 

Other disruptions have followed. Following the Hamas attacks in southern Israel in October 2023, Israel’s Ministry of Energy and Infrastructure ordered a shutdown of operations at the Tamar gas processing platform and that outage impacted Egypt, with exports to Egypt briefly dropping from 800 mmcfd to below 200 mmcfd. But even with Tamar back onstream, gas availability and infrastructure constraints limit Egypt’s ability to balance its market with piped imports alone.

In the long term, the energy analyst expects Egypt to continue importing more Israeli piped gas. Cypriot gas is expected to arrive later this decade.

By securing US$50Bn from lenders to help support Galleon’s charter cost and facilitate the immediate procurement of LNG supplies, Egypt has taken action to address any potential gas shortages in the short term.

The Galleon charter also allows the nation to import LNG by paying market price, making it less reliant on other imports markets for gas.

With European gas storage well stocked for the time of year and Asian LNG inventories close to the five-year average, the LNG shipping market is long and is expected to remain so until the end of 2025.