The tender for 20 winter LNG shipments in Egypt has been fully awarded, according to sources

Trading sources informed Reuters on Friday that Egypt has purchased 20 shipments of liquefied natural gas (LNG) through the first contract arranged to meet its winter needs since 2018. The country has obtained the entire quantities it was seeking at lower than anticipated rates.

The most densely populated Arab nation has reverted to becoming a net importer of natural gas this year, purchasing almost 50 shipments thus far and abandoning its aspirations to establish itself as a dependable supplier to Europe.

On September 12, the Egyptian General Petroleum Corporation (EGPC) concluded the tender process. The acquisitions are intended to meet the expected demand for the fourth quarter of 2024. The tender issued by EGPC has been awarded on a deferred payment basis of six months.

“Despite the geopolitical barriers in the region and the tightness of the market, EGPC received offers from over 15 prominent participants at highly competitive rates that were 30%-40% lower than the anticipated market prices,” stated a trading source.

“The offers represented a premium of around $1 per million British thermal unit (mmBtu) to the TTF, excluding the financial cost, which amounts to around $0.60/mmBtu…this is significantly lower than the market’s anticipated premium of over $2/mmBtu.”

According to three different trade sources, Egypt would be required to pay a premium ranging from $1.70 to $1.90 above the fixed gas price at the Dutch TTF hub for the cargoes.

Contrary to expectations, the lesser premium caught many market participants off guard, considering Egypt’s foreign currency challenges. However, one trading source attributed this partly to the faith in EGPC and its robust relationships with large energy corporations.

According to consultancy Energy Aspects, Egypt’s domestic gas production reached its lowest level in six years in May and is projected to decrease by a further 22.5% by the end of 2028. Additionally, power consumption is anticipated to increase by 39% during the next ten years.

According to data analytics firm Kpler, Egypt’s natural gas balance is projected to become more constrained in 2025, as natural gas production is anticipated to continue declining due to insufficient investment.

“Egypt is projected to have a higher demand for LNG in the upcoming year. However, it is crucial for Egypt to focus on obtaining more LNG import capacity, especially if Jordan’s FSRU charter is not renewed by 2025,” stated Laura Page from Kpler Research.

Saudi Arabia and Libya have provided financial support for the acquisition of gas cargoes valued at a minimum of $200 million to assist Egypt in addressing an escalating energy crisis, according to sources cited by Reuters.