The news that Eni SpA discovered a natural gas field at the Zohr Prospect in Egypt has immediately sparked alarm over Gazprom’s prospects in Southern Europe. Many think the Egyptian gas will be a formidable challenge to the Russian gas and a big hope for the south of Europe. How much do these views correspond to reality? The announced parameters of the gas field – up to 850 billion cubic meters of gas in the area of 100 square km. What does it mean?
First, this is a preliminary estimation with a reservation “up to”. Such estimations are often exaggerated. For instance, revaluation of the Middle Asian gas reserves by BP in 2013 resulted in their reduction from 24.3 trillion cubic meters to 17.5 trillion cubic meters of gas in Turkmenistan, from 1.9 trillion cubic meters to 1.3 trillion cubic meters in Kazakhstan. The gas reserves of Uzbekistan and Azerbaijan also proved less than it had been announced.
Second, the gas filed is not “super giant” and not even “giant,” because the standards for such fields start from 5trillion cubic meters and 1trillion cubic meters, respectfully. It is the largest gas filed in the Mediterranean at present, but comparing to “classical giants,” it does not look that big. For instance, the Urengoy gas field in Russia has 10 trillion cubic meters of gas and an area of about 6,000 square meters. The Shtokman field has 3.7 trillion cubic meters of gas reserves. Considering the annual volumes of gas recovery at other offshore gas fields, one can suppose that the annual recovery will total about 20 billion cubic meters – almost guaranteed – up to 30 billion cubic meters
Is it much or little? Generally, the EU imports more than 300 billion cubic meters of gas annually. Therefore, the Egyptian gas cannot have any radical impact on the market, even if it is exported to Europe wholly and immediately. Meantime, the exploration of Zohr Prospect will take at least 7 years amid shrinking recovery scales in the EU countries. In 2011-2014 alone, the recovery shrank by 34billion cubic meters (17%). This year, it is anticipated to recover 150billion cubic meters of gas and in 2020 – 115billion cubic meters. The recovery scales may shrink even earlier than anticipated. For instance, in the Netherlands, the decline of the gas recovery that was anticipated in 2020 has started already.
There are problems also with what is considered the traditional alternative to the Russian gas in the European gas market. Gas recovery in Norway keeps stagnating. If this downward trend continues, it will start shrinking by 2020.
In other words, given the realistic terms of the gas field’s exploration, Egypt cannot have any influence on the EU gas market – it cannot even compensate for the inevitable decline of the EU’s own recovery.
Third, the arguments on exports are speculative. For the time being, Egypt has enough gas reserves to satisfy its domestic need in gas by 95%. However, the recovery is falling in Egypt (connected with ‘revolutionary’ and others developments) and the gas exporter country has turned into a gas importer. At the same time, consumption grows dramatically – by 6% in average annually. Eventually, it is supposed that Egypt’s ‘old’ reserves of gas will be exhausted by 2027. After all, the country simply lacks infrastructures to export as much LNG as necessary.
In other words, Zohr will save only Egypt from total gas deficit. It means that part of the capacities of Israel’s Leviathan field and Jordan will no longer be used to fill the gap in the energy balance of Egypt. This will not have any impact on the European market either.
Geopolitically, it is in favor of Moscow if Egypt obtains “sustained” gas resources. The less Cairo depends on the West generally and on Israel particularly, the more opportunities of cooperation with the Kremlin it will get.
The convulsions of the European officials and experts, who are ready to grasp at a straw when it comes to the gas issue, show that in future the EU may become even more dependent on Russia and Gazprom than it is now.