The most populous Arab country has shifted back to becoming a net importer of natural gas, purchasing numerous cargoes throughout the year and abandoning plans to act as a gas supplier to Europe, following a notable decrease in its domestic gas output.

“The ministry (of Petroleum) is seeking three or four years of supply to hedge from sudden price increases. It is also seeking to include a flexibility clause as the government hopes it could maybe find gas sooner or doesn’t need that much gas,” the first industry source said, as reported by Zawya.

Cairo is primarily engaging in negotiations with American corporations and investment firms that have American sales agreements, due to their adaptability being superior to other producers, as mentioned by two other trading sources.

Furthermore, Egypt, which paid a premium of USD 1 to USD 2 for its LNG purchases earlier this year, is expected to issue a tender seeking up to 20 LNG cargoes to meet its demands for the first quarter of 2025, as per the information provided by these sources to Reuters in October.

LNG spot prices have recently increased to around USD 14.50 per million British thermal units (mmBtu), rising from approximately USD 12/mmBtu when Egypt commenced tendering for LNG. This price escalation is resulting in higher expenses for new cargo shipments during a period when Egypt is experiencing a foreign currency crisis.

The initial report suggests that Egypt is laying the groundwork for gas imports in both Ain Sokhna and Alexandria. Data analytics company Kpler reported recently that Egypt was planning to add a second floating storage regasification unit (FSRU) at the beginning of the coming year.

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Kuwait Petroleum Corporation and state-owned QatarEnergy’s leading executives signed the long-term LNG sales and purchase deal in Kuwait. In January 2025, deliveries will begin, according to KPC CEO Sheikh Nawaf Al-Sabah.

Speaking about the agreement, Reuters said in August 2024 that Qatar Energy and KPC were in negotiations.

Kuwait, a significant oil producer and member of OPEC, has increased its reliance on imported gas to cover its power needs, particularly during the summer when air conditioning systems use more energy. KPC’s objective includes increasing its gas output in addition to aiming for larger oil production capability.

Due to a break in the local gas supply, Kuwait saw its second round of planned power outages this summer, even though officials had stated there would be no more after the first round in June 2024. Summertime highs can surpass fifty degrees Celsius, or twelve degrees Fahrenheit.

According to Sheikh Nawaf, the agreement will have “a crucial role in electricity generation in Kuwait.”

He said the agreement was secret and failed to share its amount.

This year, Qatar announced plans to expand its North Field project even further, solidifying its position as one of the leading LNG suppliers globally. By 2030, the project will increase the North Field’s LNG output from 77 mtpa to 142 mtpa.

According to QatarEnergy CEO and state minister for energy, Saad Al-Kaabi, some of the LNG from the new supply agreement for Kuwait may come from Qatar’s current output and some from the North Field expansion project. The port of Al Zour in Kuwait will receive it.

In 2020, Kuwait and Qatar agreed to deliver 3 million tons of LNG annually for 15 years starting in 2022, aligning with the current agreement.

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Media reports also stated that the Egyptian Natural Gas Holding Company (EGAS) has already received shipments of LNG totalling over 213,000 tonnes, which it processed and connected to the country’s gas network.

In July 2024, he disclosed, EGAS received two shipments of LNG totalling 143,000 tonnes and one additional shipment of 70,000 tons.

The Egyptian government contracted the Hoegh Galleon freighter to convey the latter, according to the source. With this, there will be about 213,000 tons of LNG imported overall.

The official stated that the gas is dispersed in different amounts between power plants and the industrial sector. The official stated that these arriving LNG cargoes are intended for the Port of Ain Sokhna, where they are regasified and injected into the national gas network.

In addition, the source stated recently that the Port of Ain Sokhna received a supply of liquefied petroleum gas (LPG).

He went on to say that this LPG, which is made in refineries from butane and propane, was transported on a ship flying the flag of Liberia and is presently being unloaded at the oil docks in the Ain Sokhna region.

To guarantee no interruptions during the summer, the Egyptian government committed an extra USD 1.18 billion in June for LNG and mazut supplies.

Egypt is ramping up LNG imports as its own natural gas production falls and power demand climbs over the summer period, according to industry sources and data.

“Returning to imports would reverse the most populous Arab country’s position as a natural gas exporter in recent years as part of a plan to become a reliable supplier to Europe,” stated a Reuters report.

Egypt’s government has bought at least two LNG cargoes in April 2024 for immediate delivery and is expected to purchase up to 20 over the spring and summer in readiness for increasing power demand, three industry and trading sources told the media outlet.

Egypt, which faces growing demand for gas from its population of 106 million, is expected to buy three cargoes per month between July and October 2024, regional media outlets reported.

“The government has been seeking a regional supply role, selling Egypt’s own gas and re-exporting Israeli gas as LNG to the Middle East, Africa and Europe. Although it turned into a net exporter from a net importer after the discovery of the giant Zohr gas field in 2015, there have been few large discoveries since and production at the field has fallen partially because of water infiltration issues,” analysts and industry sources noted.

Hamdy Abdelaziz, a spokesman at Egypt’s petroleum ministry, recently noted that the LNG production drop was due to the “natural decline of discovered wells,” adding that this is expected to be offset by new wells being drilled in the field.

In 2023, Egypt’s total natural gas production fell to its lowest since 2017, figures from the Joint Organisations Data Initiative (JODI) show. Gas production in 2023 was around 59.29 billion cubic metres (bcm), falling 11.5% year-on-year to the lowest production level since 2017, when it was around 50.72 bcm.

Egypt has also begun a USD 1.8 billion programme to drill natural gas exploration wells in the Mediterranean Sea and Nile Delta, with the aim of drilling 35 in two years. The country, however, suffered a wave of rolling blackouts last summer, after enjoying a decade of reliable power supplies.

Power cuts have remained in place since, except for a temporary halt during Ramadan and are widely expected to continue throughout the summer.

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Novatek’s main goal is to develop the Yamal Peninsula, a crucial area for its operations. The company’s flagship project, the Yamal LNG project, is a partnership with major international companies such as TotalEnergies from France and CNPC from China.

This project aims to tap into the extensive natural gas resources in the Yamal region, process them into liquefied natural gas, and export them to global markets. The Yamal LNG project has become one of the largest and most ambitious liquefied natural gas projects in the world, significantly enhancing Russia’s position in the international LNG market.

Apart from Yamal LNG, Novatek has been proactively broadening its footprint in the liquefied natural gas industry via diverse initiatives and collaborations. The business has been investing in the construction of new infrastructure and LNG facilities and is renowned for its creative use of liquefaction technology. In order to diversify its revenue sources and improve its competitiveness in the global energy market, Novatek has also been looking into opportunities in downstream industries, such as petrochemicals.

Novatek has proven to be resilient and adaptable in navigating the challenging terrain of the energy industry, even in the face of obstacles like geopolitical tensions and regulatory uncertainties. Due to its dedication to sustainable development, operational excellence, and technological innovation, the company has established itself as a major player in the global energy transition. Novatek is still a major player in determining the direction of the natural gas sector and propelling economic growth in Russia and abroad with its aggressive expansion plans and astute investments.

The brain behind this successful venture is 68-year-old Leonid Mikhelson, Russian-Israeli billionaire businessman, CEO, chairman and major shareholder of the company.

Who is Leonid Mikhelson?
• Leonid Mikhelson was born on 11 August, 1955 in the Russian city of Kaspiysk
• He completed his graduation in Industrial Civil Engineering from the Samara Institute of Civil Engineering in 1977
• After his graduation, Leonid Mikhelson started working as a foreman at a construction and assembling company in the Tyumen area of Siberia
• He was appointed as a Chief Engineer of Ryazantruboprovodstroy in 1985, and in 1987, he became General Director of Kuibishevtruboprovodstroy, which was renamed NOVA in 1994
• The same year, Leonid Mikhelson then became General Director of its holding company, Novafinivest, which later became known as Novatek
• He was Chairman of the Board of Directors for OAO Stroytransgas and OOO Art Finance, from 2008 until 2010
• Other than being the director of companies, Leonid Mikhelson owns 57.5% interest in Sibur
• He also holds a 25% stake in Novatek, and he also owns a megayacht, Pacific
• Leonid Mikhelson is the founder of the V-A-C Foundation, which supports modern Russian art and maintains connections with the Tate Museums in the United Kingdom, the New Museum in New York, and the Whitechapel Gallery in London
• In 2012, he was listed as the second-richest Russian in several articles including Bloomberg
• According to Forbes, as of 2024, Leonid Mikhelson’s net worth is around 2,900 crores USD

Novatek Sets Up China Office

Meanwhile, Novatek is assembling a new team in China to investigate marketing the fuel, despite US sanctions impeding plans for exports from its new, multibillion-dollar Arctic project. The action demonstrates how Russian energy companies have continued to shift their focus to Asia, particularly, China, since the conflict in Ukraine closed off their access to European markets.

Following the imposition of US sanctions, Novatek may be able to find buyers for Arctic LNG 2, its most recent LNG project, with the assistance of a China operation. Experts say that Novatek, the biggest LNG producer in Russia, has been assembling a business development and marketing team in Beijing in recent months.

US sanctions were imposed in November 2023 on Arctic LNG 2, a project that was supposed to begin operations in 2024 as part of Russia’s goal to become the world’s leading supplier of LNG. Shipments would not be delivered, as advised by Novatek and its partners, including TotalEnergies of France, to China’s Shenergy Group, Zhejiang Energy, and Spain’s Repsol.

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Costs for transporting energy are rising as a lack of ships to transport necessary fuels this winter as a result of Europe’s rush for supply.

As the conflict in Ukraine shows no signs of coming to an end, ships are transporting liquefied natural gas (LNG), diesel, and crude oil to Europe from farther afield than usual to replace Russian energy supplies.

According to maritime experts, this is keeping vessels busy for longer and delaying their return to service, which has caused an increase in international freight prices.

During this time of year, liquefied natural gas freight prices are high and on pace to surpass the winter peak of the previous year.

According to data from the Baltic Exchange, shipping a cargo of United States oil to China now costs more than it did in 2020, and sending a cargo of naphtha petrochemical feedstock from the Middle East to Japan now costs more than two times as much as it did in March.

According to traders and shipowners, the shortage of ships poses a threat to Asian economies that buy oil and gas from the United States because it may be challenging for them to obtain spare cargo quickly if the winter turns extremely cold.

Even shipments of petrochemical feedstock are becoming more costly to transport, adding to the pressure on purchasers already struggling with sluggish demand for chemicals as the rate of manufacturing slows.

According to Oystein Kalleklev, chief executive officer of shipowner Flex LNG Management AS, there are very few liquefied natural gas ships available for lease through the winter, and only for brief excursions.

Oystein Kalleklev pointed out that shipowners are demanding their ships back because their fleet has been fully booked and they need them to be ready for when the Freeport LNG export plant starts up again.

After a fire at the Freeport facility in Texas in June disrupted a sizable chunk of United States LNG exports, the facility is expected to resume operations in November.

Energy firms are refusing to release liquefied natural gas ships as they usually do at the end of summer because firms are booking vessels for the winter season much earlier than usual.

According to traders and shipbrokers, petroleum tankers bought at lower freight rates are being retained on rent, sometimes consuming additional fuel to travel between Singapore and Malaysia for the sole purpose of keeping the boats.

To ensure supplies in the competitive market, dealers are refuelling ships at sea with natural gas and petroleum fuels.

Xeneta chief analyst Peter Sand said, “What we’ve seen in shipping this year has been remarkable as a result of the war in Ukraine.”

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