Davos (Bloomberg) — because of plummeting prices Egypt is planning to reduce the number of spot liquefied natural gas cargoes it offers, and negotiate long-term sales deals with customers instead.
Egypt’s oil minister Tarek el-Molla said in an interview Tuesday on the sidelines of the World Economic Forum’s 50th annual meeting in Davos. “We canceled several LNG tenders last year because the prices that we received don’t even match the cost of production, “This year will be even more challenging if we continue seeing the drop in prices.”
Last year, after canceling some tenders, Egypt offered about 80 spot LNG cargoes for sale. In 2020, this will fall further “because they’re not giving us the value that we want.” The country will focus on negotiating long-term gas sales contracts instead.
Egypt will target a price of $5 per million British thermal units for long-term gas sales deals and the government is already in talks with international partners to achieve this,
The plan is for the deals to last for about one year to 18 months, after which time they’ll be renewed.
El-Molla said “it’s a win-win situation” which will allow Egypt to increase its gas production to above 7.5 billion cubic feet a day this year, up from 7 billion cubic feet in 2019.
Egypt exports about 1 billion cubic feet of gas a day, which it wants to double this year after the Damietta LNG plant restarts, which El-Molla said he expects to happen “in the coming few weeks” with initial output of about 500 million cubic feet a day, eventually reaching 700 million cubic feet a day.
Egypt currently receives about 200 million cubic feet a day of gas from Israel, which will gradually increase to about 550 million cubic feet a day, El-Molla added.