EMGC '17: Prospects for accelerating gas trade and regional energy cooperation
NICOSIA -- Gulf Publishing Company's Eastern Mediterranean Gas Conference (EMGC) 2017, the world's primary event for discussing the forces shaping gas industry development in the Eastern Med, continued on March 15. Sessions covered a variety of topics, ranging from predicting energy demand, to the logistics of operating gas projects and boosting regional gas supplies, to the long-term future of the Eastern Med gas market.
In the fourth session of the day, there was a focus on accelerating efforts to ramp up gas trade in the Eastern Med. Charles Ellinas, CEO of E-C Natural Hydrocarbons Co. Ltd., first spoke about the impact of global markets and prices on the Eastern Med. "In the last two days, we've heard a lot about hope and optimism for the energy industry in the region," said Ellinas. "I would like to concentrate on realism." He commended George Pantelides, partner and head of Consulting Services at Deloitte, for earlier outlining many of the challenges that Cyprus faces in developing its energy sector.
"Gas cannot be developed unless it is sold," stressed Ellinas. "Before this resource can be produced, it needs to find buyers." He noted that a gas glut in global markets is leading to low prices. Based on market research and data by major oil and gas players, such as BP, Ellinas believes that the world will face a long-term oil and gas glut. "This will mean sustained low prices," he said. However, the CEO noted that gas is expected to overtake coal by 2030, with two-thirds of the supply increase coming from shale. LNG supplies are also expected to grow rapidly, accounting for roughly half of global gas trade by 2035.
Examining regional markets, Ellinas noted that Egypt expects to become self-sufficient in gas demand by 2019 and begin gas exports by 2020. A new major gas discovery onshore in the Nile Delta, with an estimated 15 Tcf to 30 Tcf of reserves, is expected to be announced soon. More gas will likely be discovered in Eni's Zohr field. Also, 12 new projects are in the works to deliver an additional 55 Bcm/year to 65 Bcm/year of Egyptian gas by 2019.
With regard to the Turkish market, Ellinas said that the country's energy mix and strategy have changed. It is boosting its use of coal/lignite, renewables, nuclear and LNG, but its overall dependence on gas is dropping. So far in 2017, Turkey's gas demand has fallen 46 Bcm. Turkey also has aspirations of becoming a major gas hub, but Ellinas does not believe this will happen. "You must have gas coming in and coming out," he said, adding that Turkey is unlikely to be able to achieve gas production and exports on a large scale.
In Europe, overall gas demand has decreased 20% from 10 years ago. "It may have peaked already," said Ellinas. The CEO cited cheap coal and subsidized renewable energies for the drop in gas consumption. However, he noted that the depletion of indigenous resources in Europe will lead to greater import demand.
To this end, Russian gas deliveries to Europe are increasing, due to low prices. In addition, U.S. LNG has tried to infiltrate the European market, but has met with little success. As a result, some gas fields that could be developed to cater to European demand may not be utilized, due to demand uncertainty and stagnancy, which could leave these reserves stranded, explained Ellinas.
In conclusion, the CEO noted that the Eastern Med region is volatile, and that developing and exporting gas reserves is a challenge. FLNG may become a viable option for gas exports to Europe and Asian markets, however, particularly if Total is successful in drilling Cyprus' Block 11 this summer.
Ellinas also noted that Eastern Med gas dynamics are changing quickly, as global markets and prices are undergoing long-term structural shifts. "The region must plan with realism and pragmatism," he asserted.
Eastern Med supplies to Europe. Meanwhile, senior economic officer at Cyprus' Ministry of Finance, Panayiotis Tilliros, briefly discussed the role of regional gas supplies in meeting European energy demand. He noted that several geopolitical rivalries are ongoing around the world, with respect to energy trading routes, which will shape gas trade into the future.
Europe's gas supply comes mainly from Russia, Africa, the Middle East and indigenous supplies. However, Eastern Med gas supplies can provide a "fifth corridor" for gas supply to the EU, the economist noted.
Please see additional stories posted on World Oil’s website for discussions of the remainder of the March 15 sessions.
