Gas Competence SeminarMaputo, Mozambique – Septembre 2015

FUNDAMENTALREQUIREMENTSFOR MARKETDEVELOPMENT

Akmal M Zaghloul, MBABusiness Development Director

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Energy Dimensions in Market Development

Engine for Economic Growth (High Correlation: Energy Consumption & GNP)

Facilitator of Social Progress

Key to Poverty Reduction

Employment Generation

Promotes Gender Equality

Vital Input in Production (All Sectors of Economy)

Increasingly Becoming a Need Rather than a Luxury

Key Element for Attracting Foreign Investment

Foreign Exchange Earner

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Market development challenges

Energy Mix

Energy Pricing Crisis

Supply / Demand

Infrastructure

Legal, Governance & Regulatory framework

Social Impacts

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Stages of Gas Market Development

Market Creation Market Development Mature Market (0-15 years) (15-40 years) (after ~40 years)

Undeveloped gas reserves; More supply options; Abundant supplies;Small market; Rapid demand growth; Demand saturation;Limited infrastructure; Heavy investments in

infrastructure;Developed infrastructure;

Integrated Structure; Producers sell some gas directly to buyers;

Unbundled supply chain;

monopoly-monopsony operations;

Third party access; Gas spot market;

Large market competition; Retail competition;

Heavy regulation or state participation

Regulation manages competition;

Minimal government intervention to sustain competition

Assists entry of new players

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Factors affecting level of development

Political differences

Different levels of economic development

Non-existance of own natural gas resources

Unavailability of foreign natural gas resourcescaused by their distance or a distance of supplygas pipelines

Availability of other own / imported energyresources

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EGYPT CASE STUDY

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Egypt’s Gas Industry Milestones

In 2014, Natural Gas share in Egypt total Energy Consumption: 52.5%

1st gasDiscovery

1967 1976 1981 1992 1996 2003 2012

1st

Industrialcustomer

1st

Residentialcustomer

1st CNG Vehicle

Private LDC

1st Gas Export

1st FSRUTender

2015

1st LNG import

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New Exploration Concession Agreements

56 new upstream Exploration agreements signed$12 billion minimum commitment

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Accelerate Existing Gas Development

Total Investment: $21.8 bn Total Production: 3,600 MMSCFD Total Condensate Production: 86.7 MBBL/D

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Abu sir

West Abu Qir

North Idku

RavenScrab/safron

LNGDamietta

Arish &El masaid

Baltem

Port said

Hap’y

Theka

North Bardwell

Akhen

Naf

Roseta

El Sheikh Zowayed

East Port Said P.S & Ind. Area

East Gas

Flower

North SinaiHelm

Temsah

Talkha

Shabshir

Abu MadiAbu Qir

Abu Hommos South El Mansoura

Mahmudiya

Qara

Tanta

SouthBelquas

Abu sultan6 October

QusinaBanhaSadat

Suez

A’youn Moussa

Mostorud I-ATebbin

Koraymat

Ras BakrBeni Suef

Za’frana

October

Unit 103El Menia

Assuit

Unit 104

Unit 108

Zeit bay

Abu Rudis

Morgan

Ramadan

Esma 8

AgibaSea bird

Shoab Ali

Badri

Esma 2

Sinai Cement & industrial Area

Sedi Krier

Ameriya

King

El-Max

Intergene

BorgElarab

Ameriya Cement

12“- 14 Km

El obyed

Salam

South Aum Barkah

El Qasr

Tarek

Bed - 2

Abu Sannan

South Dab’aaMeleha Deep

Bed - 3Bed - 1 265 Km 24“-

Qena

LuxorAswan

Kima

Hurgada

Safaga

Cairo

Neag

A/GHKaroun

SouthEl-Tina

WestEl Tena

Jordan

DeniseTaurt

El GamilUGDC

South El Manzala

Shams

Saffaire

Simian/ sienna

Fayroz

Robi

Tarouse

Theth Med. South East Fields

Vegas fields

Desouk

A/RSuco

Belayim

Wastani

Fayoum

El Sokhna

• Existing . PL• Under cons. PL• Future. PL (5 Years)• Gas fields• Future Gas Fields• Facilities• Distribution Stations• Power stations• Industrial Areas• Consumer• Distribution Co.• Export

Ameriya

24“- 26 Km

18“- 12 Km

16“- 9 Km

24“- 26 Km

24“- 26 Km

32“- 160 Km

24“- 14 Km

30“- 26 Km

22“- 87 Km

24“- 25 Km

32“- 75 Km

24“- 215 Km

32“- 85 Km

28“- 86 Km

42“- 40 Km

30“- 28 Km

16“- 256 Km

16“- 192 Km

24“- 10 Km

22“- 40 Km

24“- 50 Km

36“- 196 Km

36“- 264 Km10 BCMY

20“- 660 Km

20“- 40 Km

12“- 40 Km

National Oil, Gas Grid & Facilities

Dahshour

Nubariya

North Port Said

Port Fouad

Sharm El Shikh

Suco

West Aswan

Ras Shukir

El Fayoum Offtake

Deshna

Quos

New Assuit

Upper Egypt P/L930 km, 1 Billon $

Total Length is 18000 Km with Capacity of 190 MM meter3/D In June 2012

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Transmission Projects

Planned Projects: $355 million

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Abu Madi

El Qara

Abu qir

Sedi Kreir

Ameriya 1

TarekEL-ObayiedSalamSouth Om Barka

Abu ElGhradikأ

Bed 2,3Ayoun Moussa

tebbin

suez

Zafrana

Ras bakr

Ras shoukier

المنیا

LTSLPGLTS & LPGNGLLNG

N. Abu Madi

Port said

Port fouadDamiatte

Production 2011/2012LPG : 1475 MTCond : 39.8 MMBBL Propane: 605 MT Ethane/ propane : 437 MT

Gas Treatment Facilities

Added Valuebillion $

Abu qirLPG& LTS

Design capacity:480 mmscf/d

sales Gas: 238 mmscf/dCond: 5530 bbl/d

Lpg: 220 Ton/d

SalamLTS

Design Capacity:400 mmscf/d

Sales Gas: 427 mmscf/dCond: 24000 bbl/d

TAREKLTS

Capacity: 100 mmscf/dsales gas: 111 mmscf/d

Cond: 12000 bbl/d

ObayiedLTS

Design capacity:420 mmscf/d

sales gas: 376 mmscf/dcond: 9500 bbl/d

Abu sanan / s. dabaaDesign capacity: 85 mmscf/d

Sales Gas: 38 mmscf/dCond: 980 bbl/d

Abu sanan

Bed 2,3LTS

Design capacity: 315 mmscf/dSales Gas: 275 mmscf/d

Cond: 5930 bbl/d

Abu ElghradigDesign capacity: 160 mmscf/d

Sales Gas: 72mmscf/d Cond: 1360 bbl/d

S.MansouraLTS

Design capacity:15 mmscf/d

Cond: 178 bbl/d

RosettaDesign capacity:

400 mmscf/d Sales Gas: 393mmscf/d

Cond: 340 bbl/d

BurullesFeed : 1328 mmscf/d

Cond: 6850 bbl/d

El GamilDesign capacity:1650 mmcsf/d

Sales Gas: 1368 mmscf/d Cond : 21685 bbl/d

WASCOSales Gas: 160 mmscf/d

Cond: 3920 bbl/dLPG: 190 Ton/d

W/ KHELALASales Gas:73 mmscf/d

Cond: 85 BBL/D

DahshourDesign capacity: 140 mmscf/d

Sales Gas: 0 mmscf/dLPG: 0 ton/d

Trans Gulf Design capacity : 130mmscf/d

Saled Gas : 1.8 mmscf/dCond : 1085 bbl/d LPG : 232 Ton/d

Ras ShoukierDesign capacity:

220 mmscf/dSales Gas: 24 mmscf/d

Cond: 555 bbl/d LPG: 185 Ton/d

Zeit BayDesign capacity : 90 mmscf/d

Sales Gas : 17 mmscf/dCond: 510 bbl/dLPG: 103 Ton/d

Abu RudiesDesign capacity: 50 mmscf/d

Sales Gas : 0.5 mmscf/dCond :1075 bbl/dLPG : 242 Ton/d

IdkuTrain1 : 580 mmscf/d Train2 : 580 mmscf/d

UGDCFeed : 1100mmscf/dPropane : 839 Ton/d

Lpg : 755Ton/ dCond : 3365 bbl/d

W/D Gas ComplexNGL Unit

Design capacity : 900 mmscfdEthane/ Propane : 1195 Ton/d

Propane : 815 Ton/d LPG : 1255 Ton/dCond : 2155 bbl/d

AmeriyaDesign capacity :

300 mmscf/dCond : 440 bbl/dLPG : 520 Ton/d

Hapy & TaurtDesign capacity:

600mm`scf/dSales Gas: 513 mmscf/d

Cond: 305bbl/d

N. SinaiDesign capacity:

180 mmscf/dSales Gas: 128 mmscf/d

Damiatte LNG Feed : 750 mmscf/d

LNG : 30 mscm/d

W.Dikrnis (Ph.1) S.Batra &Sales Gas : 14mmscfd

Cond :240 bbl/dLPG : 40 Ton/d

Abu Madi &N. Abu adiLTS

Design capacity : 360 mmscf/dLPG

Design capacity : 540 mmscf/d Sales Gas : 352 mmscf/d

Cond: 6600 bbl/d LPG : 290 Ton/d

S manzlaDesign capacity:

35 mmscf/dSales Gas: 18 mmscf/d

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Expand & Upgrade Infrastructure

Projects in Refining: $9 bn

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Develop the Petrochemicals Industry

Projects in Petrochemicals: $9.7 bn

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Ensuring power generation security

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Demand & Consumption Evolution

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Gas Usages

Gas GridLocal Distribution

Gas Delivery

Fertilizers

Industry

CNG

Domestic

Power

Gas Value Chain in Egypt

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85

10

5

One LPG Bottle NG Equivalent

95 15Total Price

Average CustomerPrice

EGP

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Egypt’s Strategic Rationale – LPG Price Vs NG

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Gas to end users

• FactoriesMedium Heavy

- Chemical - Steel- Paint - Cement- Textile - Fertilizer- Food

Fuels substitution & conversionWater heating Space heating

Cooking Steam Generation

Furnaces Manufacturing Process Heat

Refrigeration Gas-fired Air-conditioning

Natural gas will replace:

• Diesel for water and central heating

• LPG for heating and cooking

• Fuel oil and diesel for industrial applications

• Gasoline in cars

Residential

Commercial

Industrial

• Apartments• Houses• Villas

• Hospitals• Schools and Universities• Offices• Restaurants• Bakeries etc.

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GASCO

Power Stations HouseholdsIndustrial

FactoriesCommercial

Establishments

EGAS20-25Y Concession Agreement to :Finance, design, execute, operate& maintain Gas Networks

Manage, operate andmaintain the EgyptianNational Gas Grid

Transportation Vehicles

Gas Supply Contract

Agreement for :Gas Delivery & Metering

Gas Midstream & Downstream Market Structure

Gov. guarantees 18%IRR for LDCs (+ O&Mcosts +5Y tax exemption)

Local DistributionCompanies

EPCs

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Gas Distribution – Deregulation Development

The Main National Grid / Trunk line is constructed & Operated by GASCO (on behalf of EGAS)Everything down stream of the Pressure Reduction Station is within the cost of the LDC connection rate. Payments made “per converted customer”

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OverseasGas Maya Gas

Gas Contractor

LDC

Gas Distribution – Market Players

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From ONE state monopoly …

… to 14 private sectors & 5 state-owned LDCs/EPCs

Development of the Egyptian Gas Distribution Sector

Off Take

P.R.SRegulator

Regulator

Typical Downstream Gas Network

Ongoing Distribution ActivitiesApprox. 3.5 Million customers connected

Over 1 bn $ of Foreign & Local investment

16 Egyptian Governorates covered by Gas networks

600 MM $ /Year Saved in subsidies

Enhanced HSE Standards

Introducing new technologies

Attracting the Multi-Nationals

Social Investment – Jobs/Employment - Environmental

Provide a better quality of life for Egypt’s citizens

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Market based Incentives: CNG Smart Card

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Mechanism

Financing 100% of cost of conversion throughcommercial lending on a debit card to bepresented at fueling stations by convertedvehicles’ drivers

Increase

No. of Vehicles Converted

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CNG

LNG

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Gas CNG Mobile

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Scope:• Using absorption chillers / heater units• BOO District cooling projects• 250 000 Ton

Clients Benefits:• Saving of 30-40% of operating cost

compared to electricity driven chillers• Less building Capex & Opex• Less Power • Less maintenance & staffing• Economical operating costs• No chillers noise & vibration• Space saving in the buildings

District cooling consists of 3 main parts:

Plant

Gas District Cooling

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Synthetic Natural Gas (LPG+Air) Distribution Network

R

R

R

R

SNG StationLPG Tank

SNG =

LPG + Air

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SNG Ready to use

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EGYPT ENERGY STRATEGY

Winning hearts and changing mindsets ...

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Egypt’s Strategic Investment/Development Rationale

Government Solutions Creating Market Opportunities

Egypt’s Economic Growth Vs. Energy Challenges

• Large increase in energy demand to 13 % annually• Economy growing at 7.2% before 2008 Global crisis• Energy subsidy increased from 30 B EGP in 2004 to 100 B in 2014-2015 budget.• National plan to convert additional 4 million customers to natural gas, to the existing 3

million• Government need to increase Power Generation capacity from 25 GW to 75 GW by 2030

• Egypt’s government is taking bold steps to liberalize the energy sector gradual phasingout of subsidies which is currently a burden on the budget, gradual market deregulation

• Implement and activate strong regulatory bodies• Encourage strong involvement of private sector investment and foreign direct investment

• Driven by rapidly rising domestic energy consumption on the back of population anddemographic dynamics, rising per capita income levels and a heightened level ofindustrialization, urbanization, real estate and tourism related investments, Egypt's primaryenergy demand continues to outpace energy supply infrastructure;

• From 2002 to 2012, oil products and natural gas consumption levels increased by 37%while electricity consumption increased by 30%. According to the Government's guidance,the former is expected to increase by 30-35% by 2015 and the latter is forecasted toincrease by 37-40% over the same period after incorporating the dragging effect of thecurrent economic slowdown.

Growing Energy Demand

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Egypt Energy Challenges & Policy Options

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Pricing Reform: Tariffs Subsidies

Institutional Restructure: Integrated Energy Regulator Market Liberalization (unbundling)

Legislation Modifications: New Electricity Law Hydrocarbon / Petroleum Law

Assessment & Prioritization of Energy DemandSecurity & Affordability of Energy Supply LNG import New & Renewable Energy Development

Energy Infrastructure DevelopmentAttraction of FDI in most of the Egyptian Energy Value ChainHuman Capacity Building & Best Practices Development

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Lessons from international experience

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The best practice cases are thought to have benefited from:

Long term political commitment at a high government level.

Creation of a proper (and specialized ) institutional set up.

Creation of incentives including appropriate energy pricing schemes.

Mobilization of sustained financial resources.

Monitoring and measurement of results.

Effective communication with the public