Fossil fuel hope found in Egypt
The FT's energy editor Andrew Ward on the geopolitical and business significance of the newly discovered gasfield in the Mediterranean.
Filmed and produced by Andrew Ward. Edited and post-produced by Petros Gioumpasis.
Claudio Discalzi has come to Port Saeed in Egypt to check on the progress of his company's multibillion investment in a huge project to tap natural gas from beneath the Mediterranean. If all goes to plan, this dusty construction site will soon be transformed into a gas processing plant serving the giant Zohr field under development by Eni of Italy. The company is racing to get Zohr on stream by the end of this year.
And Mr. Discalzi is looking for reassurance that the ambitious target can be met. Success is critical, not only for Eni but also for Egypt, which hopes Zohr will make it self-sufficient in gas, and eventually turn into an exporter. That would support growth and energy security in one of the Arab world's most important economies.
It's a big challenge. It's a big challenge. But I saw them very motivated. I'm confident, clearly we need a daily focus. A daily focus 24 hour focus, because that is a project that if we start, and we want to start by this year, will be a record history of the industry.
Sub sea pipelines are being laid to bring gas a shore from Zohr which lies beneath 1,500 metres of water, close to Maritime borders with Israel and Cyprus. Both those countries are also hunting for offshore resources in what has become one of the hottest areas of exploration in the global oil and gas industry. Eni still has its drilling vessel, the Saipem 10,000 in place above the Zohr field in search of further gas.
This drilling ship has already made the biggest gas discovery ever found in the Mediterranean. Now they're back looking for more. They're drilling a deep well underneath the existing field. And they'll soon know whether there's another reservoir of gas down there to meet the growing and voracious appetite for gas of Egypt to the south, and also in the longer term, the industry hopes this is the first stage of making the eastern Mediterranean a wider hub that can also supply Europe to the north.
This would help Europe reduce dependence on Russian gas and fill the gap left by declining North Sea reserves. However, Russia is also seeking a stake in the Mediterranean. One of its biggest energy companies, Rosneft, has bought a 30% stake in Zohr.
Zohr is one of several large discoveries, which have made Eni the most successful explorer among big oil and gas companies in recent years. Some rivals have been shying away from the high risks and expensive offshore exploration in favour of US shale resources, or buying in assets from smaller companies. These ships heading into the Suez Canal highlight the potential for gas from the eastern Mediterranean to also serve the growing markets of Asia to the east. But in the short term, the main use will be here in Egypt, where gas accounts for about 70% of the country's electricity generation.
Eni's success is attracting other companies to Egypt. Many were in attendance at an oil and gas conference in Cairo this month, including BP which has bought a 10% stake in Zohr and is investing $12 billion in another big gas development in the West Nile delta. These projects are part of a global dash for gas, as developing countries scramble to meet rising demand for energy, while reducing dependence on dirty coal fired power.
The longer term outlook is more uncertain as the world shifts towards cleaner energy. But with the discoveries of the Zohr Field, Egypt remains one of the brightest spots on the horizon for oil and gas companies looking to breathe new life into their traditional fossil fuel businesses. Andrew Ward for the "Financial Times" in Egypt.