War and Waste: How the Israel-Hamas Situation Highlights Wasted Gas Issues in Egypt and Beyond
Egypt is likely to lose gas volumes as Israel shuts down its exports. But by making strategic investments that tackle the 3.3 BCM of gas being wasted per year from flaring, venting and leaking, Egypt could generate $1 billion from additional exports whilst also improving security.
One obvious and immediate consequence of Hamas’s terrible and unexpected attack on Israel is the sharp increase in oil prices. This is not primarily because Israel (or Palestine) are major oil producers, but partly due to the potential for tighter sanction-based restrictions on oil exports from Iran and an increased geopolitical risk premium.
However, a less obvious implication of the war is the impact on global gas markets, which have already risen by 8% in Europe. Israel’s major gas finds (Tamar, Leviathan, and Karish) enabled it, in 2022, to produce 22 BCM of gas, exporting 9 BCM to Egypt and Jordan. Historically, some of the gas destined for Egypt has been re-exported as LNG to Europe, although Egypt has been a net gas importer since the summer (importing up to 900 million scf/day).
In recent days, however, Israel has demanded the shutdown of Tamar (operated by Chevron), and more fields may follow. The ramifications for Egypt could be significant, precisely when plans to restart LNG exports to Europe are in the works (exports were halted in June, August, and September). Egypt’s stalled exports are symptomatic of significant domestic supply and demand problems. Since 2021, it has struggled with falling gas production (gas production at the giant Zohr field has slowed due to “water breakthrough”, and production from Apache, Sinopec and the ex-Shell assets has also declined), insatiable demand for power (especially for air-conditioning), and blackouts in major cities multiple times per day—even though many power stations have switched from natural gas to fuel oil. The possibility of delayed or lower LNG exports, driven by the new political developments, will exert further strain on its economy and heighten the risk of currency devaluation, triggering further jitters in markets, especially as Europe braces for another winter without significant Russian gas.
Nevertheless, there is a silver lining. Capterio’s analysis highlights that Egypt wastes approximately 3.3 BCM of gas per year through common practices of flaring, venting, and leaking. If captured, even at modest prices, this gas could generate $900 million of additional revenue ($26 per second), whilst also saving 32 million CO2-equivalent tonnes of greenhouse gas emissions. There is probably even more upside since many fields in Egypt “cold flare” by design, and many burn significant volumes of condensate and natural gas liquids (NGLs). Furthermore, much of the flaring, venting and leaking has remained undetected to date (and the scale is often unknown by the companies that operate the assets, most of whom do not track their flaring). Equally, since 75% of flared volumes are within 20 km of an existing gas pipeline, a clear roadmap could be created to monetise this gas relatively quickly.
It’s encouraging that flare gas capture is seen as a strategic priority by Minister Tarek El Molla and several strategic initiatives are in place (e.g., the major decarbonisation initiative by a consortium of industry players). As we profiled in our paper “Leadership on Flaring in Egypt”, there have even been several good examples of specific flare gas projects that include both sending the gas to a nearby pipeline and using the gas to generate power (thereby reducing the burn of diesel, saving cost, and reducing emissions). But Egypt needs to do more.
The real opportunity is to move much faster. There are no good technical reasons why Egypt should not be dramatically reducing gas flaring by accelerating investments into flare capture projects. And fears that waste gas monetisation projects do not deliver attractive or investable commercial returns are also misplaced. Citing Capterio’s numbers, the opportunity to reduce flared, vented, and leaked gas received specific support from Joe Biden in Egypt at COP27 (“we will also work with Egypt to capture nearly 4 billion cubic metres of natural gas, which Egypt currently flares, vents, or leaks from its oil and gas operations”). Apache has the biggest flaring reduction opportunity – and given that it recently flaunted its success in achieving “zero routine flaring” in the US, it should prioritise the same operational performance in Egypt. Material reductions in emissions are truly possible, although some will require creative thinking and innovative contracts that enable Egypt to “see the big picture” and work across contractual licensing boundaries and complex organisational structures.
The prize – which we expected also to be highlighted at COP28 – is also material in the broader North Africa region. Capterio’s paper with Columbia University last year (“North Africa can reduce Europe’s dependence on Russian gas by transporting wasted gas through existing infrastructure”) highlighted that 23 BCM of gas from Algeria, Libya, Egypt and Tunisia could be brought to the market though under-utilised pipelines and LNG terminals. As a major gas buyer, Europe’s “you collect, we buy” policy – plus its enthusiasm to help countries that supply it to decarbonise – should be a source of inspiration.
In an era defined by environmental urgency, Capterio is at the forefront of change. Our advanced analytics harness the power of satellite technology, enabling real-time monitoring and decision-making on flaring and methane emissions. We have honed our capabilities to not only identify these critical issues but to design sustainable projects and connect with investors who share our vision.
In a world grappling with the consequences of wasted gas and the imminent threat of climate change, Capterio stands as a beacon of innovation and accountability. We are not just tracking emissions; we are transforming them into opportunities. The time to act is now, and Capterio is leading the way towards a more sustainable, prosperous future for all