Egypt indicated it’s ready to rejoin the club of major exporters of liquefied natural gas, making its biggest offer to supply the market in at least five years.
The state gas company EGAS tendered to sell four cargoes of LNG for loading in April, people with direct knowledge of the matter said. The bids are due on Monday and valid until March 25, according to the people, who asked not to be named because details of the process are confidential. The company is also marketing four cargoes for loading in May and three for June, people said.
For Egypt, the tender marks a revitalising of its gas industry, where sagging domestic production forced it to halt most exports of LNG in 2014. The North African nation has regained self-sufficiency with the help of major discoveries including the giant Zohr gasfield. LNG is exported from the Damietta and Idku plants, which were largely left idle five years ago.
Extra supplies from Egypt would hit a market already battling with the lowest spot prices for the super-chilled fuel since July 2017 following a mild winter that curbed demand across Europe and Asia. The US, Russia and Australia all are contributing to a glut, starting new plants to export the fuel and build market share.
“The speed and scale of which Egypt has turned from importer to notable exporter is likely to further loosen the already wide supply/demand balance,” Nick Campbell, a director at industry consultant Inspired Energy Plc, said by email. That will exacerbate “the lower demand environment with warmer winters in Europe and Far East leaving storage levels relatively full.”
When plants restart and come back into the market, sellers have a lack of commercial visibility and doing a tender will allow Egypt to test the market, said Jean-Christian Heintz, founder and director of industry consultant Wideangle LNG in Lugano, Switzerland.
“It is a good way for Egypt to figure out the real appetite and the price level,” he said. “Fragmenting the initial supply in several tenders is a good way to proceed, rather than creating price precedents on midterm indexed deals.”
Egypt became a major consumer of the fuel in 2015, using its regasification and import units to take in cargoes. Purchases that once were as large as 120 cargoes a year stopped in 2018 as flows increased from the Zohr field, setting the stage for a resumption of exports.