Commissioning Snags Take Shine Off Egypt’s Inaugural LNG Cargo

Egypt’s first cargo of LNG departed from Damietta aboard the 136,000 cu ms Cadiz Knutsen bound for Huelva on 20 January, more than a month after originally scheduled, launching the country into the ever-widening club of global LNG producers. But commissioning snags at the 5mn t/y single-train plant operated by the Spanish Egyptian Gas Company (SEGAS) and difficulties with feedgas pressure and specification have taken the shine off what would otherwise have been a landmark occasion. Despite assurances from ministry officials that pre-commissioning difficulties throughout 2004 had been resolved (MEES, 13 December 2004), the delay in achieving first exports has underlined the massive challenge represented by the size and gas supply configuration of the project, which has been billed as the largest single-train liquefaction plant in the world.

MEES learns that commissioning problems with the two onsite power generators – specifically affecting synchronization – will require SEGAS to carry out a phased shutdown of the plant at some time in the next two-to-three months in order to replace control elements. The date of the shutdown will depend on the delivery timing of the new equipment on order. The other problems that forced the delay of first exports have related to the pressure of gas feeding the plant and the specification of that gas. MEES understands that while these problems have now been resolved, initial flows of gas to the plant contained too much LPG and other heavier molecules which were blocking sieves and lowering the overall performance of the plant. The gas pressure problem is thought to relate to the recent shutdown of the offshore Scarab/Saffron gasfields for the tie-in of the Simian/Sienna/Sapphire fields which cut the amount of gas available to the plant.

Pressure Problems Resolved

MEES understands that the Simian/Sienna/Sapphire tie-in was completed in late January and that the return of Scarab/Saffron production has alleviated pressure problems at the Damietta plant. BG announced in September 2004 that it would toll some 225mn cfd of gas from its West Delta Deep Marine fields through the SEGAS plant from 2005 under a five-year agreement (MEES, 4 October 2004). However, with several of Egypt’s key dual-fired power stations running on oil following the August 2004 blow-out at the offshore Temsah gasfield, MEES understands that Egypt is not suffering from a shortfall of gas for the Damietta plant (MEES, 23 August 2004). Egypt plans to restart gas production from two wells on the Temsah field in February (MEES, 13 December 2004).

SEGAS’ EPC contractors Petrojet and Enpii started work on the project’s single 5mn t/y liquefaction train, which has a feedstock capacity of 7.6 bcm/y of gas, in September 2001. Major SEGAS shareholder Union Fenosa Gas has 2,800mw of combined cycle gas turbine (CCGT) capacity in Spain scheduled to come on-line by the end of 2005, and these plants will be the main end-user of the gas. Italian oil and gas group Eni holds a 50% stake in Union Fenosa Gas. In mid-July 2003, Union Fenosa Gas announced it had sold a 10% stake in the project to both EGPC and the Egyptian Natural Gas Holding Company (EGAS). SEGAS and EGAS have also signed a tolling and supply agreement granting SEGAS a 25-year contract to liquefy gas to be supplied by EGAS (MEES, 14 July 2003). This agreement was supplemented by an agreement reached in mid-2004 under which BP Egypt with partner IEOC will supply some 310mn cfd of gas to the plant from 2008, while its affiliate BP Gas Marketing will lift equivalent LNG under a long-term contract from EGAS. The BP/IEOC gas, which will come from the partners’ recent East Nile Delta discoveries, will back out EGAS supplies from 2008 (MEES, 12 July 2004).

The first train of Egypt’s second LNG project at Idku – operated by Egyptian LNG – is due on-stream in 3Q 2005. The plant’s two trains will produce a total of 7.2mn t/y of LNG using the Phillips liquefaction technology when fully operational. The entire output of Train 1 has been sold to Gaz de France under a 20-year agreement. Train 2, whose entire output has been sold to BG Gas Marketing under a 20-year agreement, is scheduled to produce its first cargo in mid-2006. For the first year of production, BG Gas Marketing intends to supply the entire output to the Lake Charles LNG terminal in Louisiana. After the first year, a portion of Train 2 output will be supplied to the Brindisi LNG import terminal in Italy which BG Group and Enel are developing.