Investment in gas and LNG from the Middle East and North Africa will expand rapidly out to 2030, but will remain focused on existing suppliers unless significant political shifts are achieved.
An
existing high dependency on gas for power and export wealth combines with the
producers’ neighbours’ long term historic power issues, growing energy demand
and political tensions to form a powderkeg that could create or destroy wealth
in the region. There is also an observable, significant discrepancy between the
nations that are able to process their gas and those that are not, defined by
political unrest.
In
the Middle East, Qatar and Iran remain dominant gas producers, with Saudi
Arabia in a comfortable third position with its oil by-products. All three
nations are stable participants in the hydrocarbon market, though only Qatar
has made investment into LNG production a priority. Iran’s recent political
struggles have ensured wary eyes are kept on the country.
In
northern Africa, Algeria and Egypt are both leaning on increasing domestic gas
supply over the mid-term. Algeria’s wealth has been traditionally bound up in
gas exports over the Mediterranean to Europe via pipeline or LNG, and the
country has profited massively from higher prices caused by the war in Ukraine.
Libya’s NOC may increase its gas exports after a deal with Italy’s Eni in
January, but LNG remains out of reach.
Egypt,
on the other hand, is desperately exploring its offshore waters in the hopes of
securing energy independence. The country has the potential grow its political
power in the region with its ability to supply Lebanon and Jordan, both long
term energy importers, as well as increase its LNG production.
The
Middle East & North Africa region remains heavily disrupted by war, with
Syria, and Yemen’s conflict throughout the 2010’s crippling their hydrocarbon
industries. Yemen’s civil war continues to suppress its nascent LNG industry,
with little sign the conflict will end any time soon.
An
economically struggling Lebanon has been offered a hand from on high with an
agreement between TotalEnergies, Eni and Qatar Energy to drill in Blocks 4 and
9 in its offshore waters. While exploration will take some time, positive
results from Israel, Egypt and Cyprus have all been found in recent years.
QatarEnergy has been moving to increase its eastern Mediterranean footprint
after taking non-operational stakes in Cyprus and Egypt’s discoveries in partnership
with ExxonMobil.
Algeria’s
Hydrocarbon Dependence
Algeria’s LNG exports amount to 15Mtpa in
2022, flat year-on-year. LNG’s increasing importance in Europe will keep LNG
exports steady out to 2040 despite increasing Algeria’s pipeline exports to Europe
generally and Italy specifically.
Like Egypt, increasing domestic demand is
decreasing enthusiasm for LNG, but LNG’s high pricing and profitability has
kept exports high. Hydrocarbon trade comprises 98% of Algerian exports by value
and is almost singlehandedly keeping the nation’s trade balance in the black in
2022, having been over US$3bn in deficit until mid-2021.

Ongoing
exploration in Algeria by state oil and gas company Sonatrach has been steady, with
diligent controlled spending by the government leading to successfully
expanding its already sizable reserves. In mid-2022, reserves at the newly
discovered Hassi R’mel field in the Sahara were estimated at between 100-340bcm
of gas and condensate, adding another 10% to Algeria’s national gas reserves of
around 2.4Tcm.
Sonatrach’s
production is increasingly focused on pipeline exports, particularly given the
recently signed deals with Italy to put in a new subsea pipeline across the
Mediterranean. The pipelines will be reducing the share of gas exports from the
nation’s two LNG facilities, unless Sontrach puts in an unlikely effort into
development of LNG production and exports.
Algeria is a key component of Europe’s hydrocarbon
mix, supplying around 11% of the gas consumed in Europe historically. However, Algeria’s climate goals are minimal, largely stemming from a 7-22%
reduction in emissions by 2030 announced in 2015.
As Europe’s Carbon Border
Adjustment Mechanism (CBAM) approaches, however, there may be stronger pressure
on the country to invest in decarbonising its exports, particularly from the
energy-intensive LNG facilities.
Egypt’s
Supply Struggle
Egypt’s LNG production for 2022 is 7.2Mt
after reduced production from Damietta in the second half of the year. It is
expected to grow to around 11.3Mt in 2025 as new discoveries in the eastern
Mediterranean continue to improve the production outlook. There are ongoing
negotiations for additional gas supplies from Israel to restore the nation’s
LNG production.
Increasing domestic demand decreased LNG exports up to 2020
before new gas field discoveries in the eastern Mediterranean restored supply
in the short term. The country has also been supplying its neighbours via
pipeline gas through the Arab pipeline and expects to heavily support Lebanon’s
energy market in 2023.

Egypt is highly invested in the gas
sector as Africa’s second largest gas producer. It was also 2022’s host of the
COP27 climate conference. The country is currently scaling up its fossil fuel
production and use. While it has reduced use of coal-fired electricity and
increased renewable investment, gas is providing the largest share of domestic
power growth, which resulted in a long shutdown of one of its LNG plants due to
restricted supply. Investment is likely to continue in the country due to its
view of fossil gas as a ‘bridging fuel’. The fate of LNG in the country depends
heavily on the ability to find gas for export and domestic uses.
With the development of the Leviathan
field offshore Israel and the calming of tensions over the Qana and Karish gas
fields, Israel is entering the local gas market as a supplier. The increased
availability of gas has enabled Egypt’s Idku plant to begin exports as LNG,
with a trilateral memorandum signed between Israel, Egypt and the European
Commission to secure additional supply from the middle of 2022.
Short vessel
transit times and an increasing availability of LNG regasification terminals in
the Mediterranean are improving the profitability of the plants and both Idku
and Damietta are expected to have a long future.
Gulf
Dominance Continues
Qatar’s position as local king of the LNG
hill is secure as it competes with the US over the next five to ten years for
title of largest LNG producer. The development of the 48Mtpa North Field
expansions is supported by a networked equity of majors, securely controlled by
Qatar Energy.
Gas production in the country will need to expand slightly to
support the growth, but the already large capacity means minimal impacts from a
supply perspective. The additional LNG is expected to help supply Europe and
southern Asia in the medium to long term.
Likewise, Iran and Saudi Arabia continue
to dominate their respective hydrocarbon production markets, with energy
turbulence over 2022 leaving the major producers production rates largely
unmoved, despite ineffectual shifts in OPEC+ production targets.
Iran’s political turbulence at the end of
2022 and early 2023 has not yet begun to impact their industry, but a
significant political shift later in the year could eventually see Iran
entering the market as an exporter in the long term.
The partly built Iran LNG
has been in limbo since 2012, and a new surge of interest in small LNG
facilities has been spurred by high prices. With Iran sharing access to the
gigantic South Pars/North Field with Qatar, rapid development into the LNG
space is not out of the question if government changes hands.