Shell May Try Floating LNG Tech in Egypt

March 24, 2009
Dinakar Sethuraman, Bloomberg

Royal Dutch ShellPLC, Europe’s largest oil company, may produce liquefied natural gas from an area in Egypt using a floating vessel, a government official said.

Shell may use the untested floating LNG technology in the northeastern part of the Mediterranean sea near Cyprus to produce the cleaner-burning fuel, said Omar El Sisi, an official at state-owned Egyptian Natural Gas Holding Co.

The Egyptian government last year announced it won’t sign new gas-export contracts until 2010, citing price volatility and the need to meet domestic demand. Explorers must set aside a third of gas reserves for domestic use and a third for storage before being allowed to export the rest.

“We have no comments to make on floating LNG at this point in time,” Catherine Aitken, a spokeswoman for Shell, said in an e-mail today.

The Egyptian government agreed last year to pay more for gas supplied by foreign companies to the domestic market to attract investments in deep water areas.

Shell, the world’s biggest non-government LNG producer, is studying the use of floating LNG terminals for projects in Australia, Egypt and Iraq, John Mills, an executive vice president for gas and power in North Africa, Middle East and South Asia, told reporters in November.

Shell will invest $337 million in Egypt’s West Desert field in 2009-10, the country’s Oil Ministry said in January. The North African nation’s economic growth will ease to 3.5 percent this year from 7 percent the past two years because of the global recession, Standard Chartered said on Feb. 12.

Egypt produces 700,000 barrels of oil per day, Oil Minister Sameh Fahmy said in a statement on the ministry’s Web site. That compares with a record high of 950,000 barrels in 1995.

Floating facilities may take less than half the time to build compared with onshore units and may cost a third of an onshore plant, Citigroup Inc. said in April.

LNG is natural gas chilled to liquid form, reducing it to one-six-hundredth of its original volume, for transportation by ships to destinations not connected by pipeline.

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