Newly discovered offshore gas deposits in the exclusive economic zones (EEZs) of Egypt, Israel and Cyprus, coming on top of similar major finds in recent years, are poised to alter the energy map of the Eastern Mediterranean irrevocably. LNG projects, which already play a key role in the region’s gas distribution logistics, will be impacted by the upcoming development of the Eastern Mediterranean gas fields.
Most LNG projects in the area are import schemes. Floating storage and regasification units (FSRUs) have proved the most popular route to securing access to new gas supplies quickly and at relatively low cost. Turkey, Egypt, Israel and Jordan make use of FSRUs to import LNG, while Greece, Cyprus and Lebanon are evaluating FSRU projects.
There are also two liquefaction plants in the region; both are in Egypt and both have lain largely idle in recent years, due to the lack of sufficient feed gas. However, the discovery of new gas fields in Egyptian and neighbouring waters hints at an imminent turnaround in fortunes for the two LNG export facilities.
Egypt and Turkey are the region’s biggest and fastest-growing natural gas consumers by a wide margin, with annual gas usage in both countries around the 50 billion cubic metres (bcm) mark. Israel consumes approximately 10 bcm per year and Jordan 3.5 bcm, while Greek gas use has slumped by 30% in recent years, to 2.8 bcm.
LNG in the mix
Greece’s only LNG terminal, on the small islet of Revithoussa to the west of Athens, has been in service since February 2000. DESFA, Greece’s state-owned gas transmission authority, is adding a third in-ground tank at the site and the regas capacity is being boosted by 40%, to 4.7 million tonnes per annum (mta) of LNG. The expansion project is set for completion by the end of 2018.
The Greek government is seeking to promote the country as a transit hub, in terms of both LNG terminals and gas pipelines. The privatisation of certain state assets, including a significant shareholding in DESFA, is also on the cards.
In addition to the Revithoussa expansion in the south, plans for two FSRU-based LNG terminals in the northern part of the country have been tabled, as part of the drive to establish Greece as a gas hub. The most advanced is the 4.5 mta Alexandroupolis facility, a project being led by gas utility Gastrade and in which GasLog has a 20% stake and is set to provide the required 170,000 m3 FSRU.
The aim is to integrate the Alexandroupolis FSRU operation with the planned Trans-Adriatic Pipeline (TAP) and Greece-Bulgaria Gas Interconnector (IGB) links. However, an expected final investment decision on the scheme has recently been delayed to late 2018.
Earlier in the decade DEPA, Greece’s state-owned gas company and parent of DESFA, had also proposed a 3.7 mta FSRU terminal for the northeastern part of the country. But the need for such a facility - to be known as Aegean LNG and located in the Kavala Bay region - was obviated when Gastrade moved ahead with its proposed Alexandroupolis FSRU scheme at a nearby location
Turkey turns to expansions
Turkey has a large and well-established gas market and, like Greece, depends almost exclusively on imports to meet its gas needs. Pipeline deliveries from Russia, Iran and Azerbaijan predominate, but LNG purchases are growing in importance as the country seeks to diversify its energy supplies.
Turkey began importing LNG in August 1994 when the Botas-operated Marmara Ereglisi terminal, 100 km west of Istanbul, opened for business. The 5.9 mta facility on the Sea of Marmara features three 85,000 m3 storage tanks.
Turkey’s second shore-based import terminal, the 4.6 mta EgeGaz facility at Aliaga, features two 140,000 m3 storage tanks. The terminal did not receive its inaugural cargo until December 2006, despite being commissioned more than three years earlier. It was the world’s first LNG-receiving terminal to be constructed without firm capacity contracts in place.
Turkey has recently committed to expanding its two shore terminals, in addition to building three new FSRU-based projects, to boost its LNG import capabilities. Throughput capacity at both the Marmara Ereglisi and EgeGaz Aliaga terminals will be increased by two-thirds, in 2020 and 2021 respectively, through the provision of an additional storage tank and increased regasification capabilities.
Two of the Turkish FSRU terminals are already in service, while the third is planned for Saros on the Gallipoli peninsula’s northern coast. Etki LNG in Aliaga’s Candarli Bay, the first FSRU terminal, came onstream in December 2016 and makes use of the 145,000 m3 Neptune.
Dörtyol LNG at Iskenderun on eastern Turkey’s Mediterranean coast commenced operations in February 2018 and utilises the 263,000 m3 MOL FSRU Challenger, the world’s largest FSRU, under a three-year charter to Botas.
Turkey received 7.33M tonnes of LNG in 2017, a 34% jump on the previous year. The surge pushed Turkey into third spot among European LNG importers, just a shade less than France’s 7.35M tonnes.
Egyptian ups and downs
The discovery of sizeable gas fields off its Mediterranean coast enabled Egypt to construct two LNG export terminals, both of which were commissioned in 2005. Damietta despatched its inaugural cargo in January while Idku commenced operations in May. During their peak year of 2008 the two facilities exported an aggregate 10M tonnes of LNG to world markets.
However, field depletion was faster than anticipated and burgeoning domestic demand forced Egypt to shut down its LNG and pipeline gas exports and implement FSRU-based import projects to meet gas needs. Damietta ceased export shipments in February 2013 and Idku followed suit 12-months later.
The FSRU Hoegh Gallant went on station at Ain Sokhna in April 2015 and in October 2015, BW Singapore commenced regasification operations in the same Red Sea port. In 2016, the peak year for Egyptian imports, the two 170,000 m3 FSRUs regasified 7.5M tonnes of LNG.
More recently, new offshore Mediterranean gas finds have signaled yet another turnaround in Egypt’s fortunes. In addition to some newly found BP deposits, Eni discovered the Zohr field in 2015. With 30 trillion cubic feet (tcf) of gas reserves, Zohr is the largest gas deposit in the Mediterranean.
Zohr holds the promise of not only bringing an end to LNG imports and meeting local demand for gas, but also supporting a rebound in LNG exports. LNG import volumes handled by the two Ain Sokhna FSRUs are already in steep decline and there is a possibility that both Damietta and Idku could be operating at their nameplate LNG export capacity by the end of 2019.
Idku exported 0.78M tonnes of LNG in 2017, an increase of 52.9% over the previous year.
Jordan is another country that turned to LNG imports when Egypt’s gas fields began to rapidly deplete earlier in the decade. Jordan had depended on pipeline imports from Egypt to meet most of its gas needs. But following terrorist attacks on the line in the midst of Egypt’s civil strife, Jordan began to look elsewhere for its gas.
LNG came to the rescue in May 2015, when the 160,000 m3 FSRU Golar Eskimo was positioned in the port of Aqaba on a 10-year charter. Import levels grew rapidly and it was not long before Jordan was sending some of its regasified LNG to Egypt, reversing the direction of the earlier pipeline flow.
Jordan imported 3.31M tonnes of LNG in 2017, an 8.2% rise on the previous year. LNG purchases have enabled the country to meet upwards of 90% of its electricity-generating requirements with clean-burning gas, easing Jordanian reliance on fuel oil and diesel imports.
Israeli export options
In January 2014 Israel became the world’s 30th LNG import nation, when Excelerate Energy stationed its 138,000 m3 FSRU Excellence 10 km off the coast near Hadera. Back in 2010, Israel had depended on Egyptian pipeline deliveries to meet 40% of its gas needs, but Egypt’s gas difficulties put paid to this supply and prompted FSRU imports.
Like Egypt, Israel has had the good fortune to discover major deposits of gas offshore in recent years. The most notable of these is the 22 tcf Leviathan field, but Tamar, with its 10 tcf of reserves, is another major new play. Whereas Leviathan gas is still to flow, Tamar’s riches are already being pumped ashore via a subsea pipeline to Israel. The Hadera FSRU contract has been extended by a further two years, to September 2019, to serve as a backup measure should the Tamar flow be disrupted for any reason.
The Israeli government has been studying the best ways to realise the value of the Leviathan and Tamar deposits, which are well beyond the needs of Israel itself. Jordan has already signed up for pipeline deliveries from the two fields, to supplement its Aqaba-based FSRU imports, while negotiations are underway for similar subsea links to Egypt, Turkey and Europe.
The pipelines to Egypt would be directed to Shell’s Idku and Gas Natural Fenosa’s Damietta LNG export terminals, providing an additional source of gas for liquefaction at these plants. The gas for Europe would arrive in Italy via the proposed EastMed Pipeline, which would make use of Cypriot and Israeli gas, delivering via Crete and Greece.
The Shell Idku proposal would draw on both Leviathan pipeline gas and that from the newly discovered 4 tcf Aphrodite field in the nearby Cyprus offshore EEZ. As a final twist in the Cypriot LNG tale, irrespective of how the Aphrodite gas ultimately plays out, the island EU-member state will commence LNG imports under the CyprusGas2EU project banner by 2020, to meet its EU clean environment obligations. The FSRU will be based in the port of Vasilikos.
In the meantime, back in Israel two further new gas finds have recently been made. Although the proven reserves of the Karish and Tanin fields are in aggregate just 2.4 tcf, the Greek-based Energean Oil and Gas has proposed the construction of a floating LNG production (FLNG) vessel to enable gas production and LNG exports in 2021.