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What Lurks Beneath
Meet Zohr, Egypt’s New Energy Game-Changer

Two months ago, the Egyptian energy game changed. Italian oil major ENI discovered a “supergiant” gas field 120 miles off the country’s coast, a discovery that could end being the Mediterranean’s largest known field. ENI CEO Claudio Descalzi hailed the find as a “historic discovery” that would “transform the energy scenario of Egypt,” and it seems that Zohr—as the field has been named—may already be poised to do just that. Reuters reports:

A source at the ministry of petroleum said the government expects production at Zohr to begin at some point in 2018, seeing LNG imports begin to decline as soon as the field comes online, with the hope that Egypt can stop importing LNG by 2020.

These are the kinds of discoveries policymakers dream of when they wrangle with the constant pressure of energy security. More domestic production means less money spent snatching up supplies from abroad and dealing with the economic and often geopolitical costs of those sorts of relationships. The New York Times reports on how Egypt’s new energy landscape could affect regional diplomacy:

Egypt’s becoming more energy-independent could sidetrack efforts — backed by the United States — to use energy diplomacy to improve relations between Israel and its Arab neighbors. Israel has its own ambitions for offshore natural gas, including a long-gestating plan to sell gas to Egypt.

Israel’s own Mediterranean gas fields have so far failed to realize their touted potential as offshore development has been mired in domestic political debate. The Zohr field now complicates the prospect of production at Israel’s own Leviathan field, as Egypt was being considered as one of the major buyers of that flood of new gas. From Israel’s perspective, the discovery of a new source of natural gas in the region isn’t exactly welcome news, especially in a market fairly flooded with LNG.

The Zohr field could affect global oil prices, too. Thanks to a lack of cheap alternatives, Egypt is currently burning much of the oil it produces to generate power. Zohr’s gas could displace much of that oil for electricity generation, freeing up those crude supplies for exports. That will take a few years, but it does look like yet another supply of oil is poised to be unleashed on a market already awash in oil. Petrostates, take note.

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  • Andrew Allison

    The link to the earlier TAI post on Leviathan paints a rather different picture than that presented here. Specifically, it states that the (purely contractual) issues have been resolved. A more thorough examination of the potential market for the Leviathan gas points to Europe, rather than Egypt.

  • JR

    Israel would much rather have a stable, energy independent Egypt with a secular general in charge than almost any other alternative. This is one of those win-win situations. The economics graduate in me notes that positive supply shocks are $@$@! awesome!!!

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