Ahmed Kamel – Egypt Daily News
The Egyptian government has rejected a request by Italy’s Eni to raise the purchase price of newly produced natural gas from the Zohr offshore field by 54 percent, a move that would have pushed the price to more than $10 per million British thermal units (MMBtu), according to a government official cited by Asharq.
The proposed price hike would have exceeded the average cost of Egypt’s liquefied natural gas (LNG) imports, a key factor behind the government’s refusal. Eni and its partners currently receive an average price ranging between $5.7 and $6.5 per MMBtu for gas produced from Zohr, one of the largest gas discoveries in the Mediterranean.
Eni justified its request by citing rising operational and production costs, particularly given the technical complexity of deepwater gas extraction in the Mediterranean Sea, which requires substantial capital investment. However, the request was not accepted by the state-owned Egyptian Natural Gas Holding Company (EGAS) or the Ministry of Petroleum and Mineral Resources, the official said. Eni did not respond to requests for comment.
Zohr currently produces about 1.3 billion cubic feet of gas per day, accounting for roughly 25 percent of Egypt’s total daily gas output. This is significantly below the field’s peak production of 3.2 billion cubic feet per day reached in 2019, highlighting the challenges Egypt faces in sustaining output from mature fields.
The pricing dispute comes as EGAS and Eni continue negotiations over a major new investment plan at Zohr, including the installation of a floating offshore gas processing unit and the construction of an onshore facility to treat water produced alongside gas. The combined investments are estimated at up to $2 billion and are seen as critical to slowing production declines and boosting recoverable volumes from the field.
Egypt is under mounting pressure to increase domestic gas production amid a widening gap between supply and demand. Current local production stands at around 4.2 billion cubic feet per day, while consumption has risen to approximately 6.2 billion cubic feet, forcing the country to rely on LNG imports to meet domestic needs, particularly during peak demand periods. The government aims to raise output to 5 billion cubic feet per day by the end of the year.
In an effort to attract fresh investment and accelerate exploration and development, Egypt has recently introduced a package of incentives for foreign energy companies. These measures include allowing companies to export a share of newly produced gas and use the proceeds to recover outstanding dues, as well as improving the pricing terms for their production shares.
Despite these incentives, the standoff with Eni underscores the delicate balance Cairo is attempting to maintain between encouraging foreign investment in a high-cost sector and containing energy import costs at a time of fiscal strain. The outcome of ongoing negotiations over Zohr’s future development is expected to play a significant role in shaping Egypt’s gas supply outlook over the coming years.
