Arab Gas Pipeline Primes Lebanon Branch
BMI Industry Insights - Oil & Gas, Middle East & Africa, 04.09.2009
Egypt will begin supplying Lebanon with gas in mid-September via a branch of the Arab Gas Pipeline (AGP) that currently runs from the Sinai coast to the Syrian city of Homs. Egypt has been gradually expanding its gas pipeline network along the east Mediterranean coast in order to open up new markets for its rapidly growing gas production. Following the completion of the Lebanon branch, Cairo has ambitious plans to extend the AGP to Turkey and onwards to Europe.
Under an agreement signed by the energy ministers of Egypt and Lebanon on September 2, a test pipeline run between Homs and the Lebanese city of Tripoli will take place on September 8, with full-scale service expected to commence shortly afterwards. Although the contracted supply volumes were not immediately available, the Lebanese Minister of Energy and Water Alain Tabourian stated that the gas would be used to address electricity shortages in the north of the country.
At the time of its conception, the AGP was designed to take Egyptian gas to the East Mediterranean bypassing Israel, although the thaw in Cairo-Tel Aviv relations later on led to Israel's indirect inclusion in the project. So far, the AGP extends to Jordan and Syria, with operational branches to Israel, and imminently, Lebanon. Commercial operations of the first phase to Jordan started in July 2003, enabling Egypt to export its natural gas for the first time, pre-dating the subsequent development of its liquefied natural gas (LNG) export capacity. The Egypt-Jordan section currently has capacity of 10.3bn cubic metres (bcm) of gas per annum.
The extension of the pipeline to Syria was agreed in early 2001. The Jordan-Syria section runs from El Rehab in northern Jordan to the capital Damascus and from there to the al Rayan gas compressor near Homs. Broader AGP expansion plans exist, with a planned Syria-Turkey connection and speculative extensions to Iraq, Cyprus and Eastern Europe. Considering the security situation and the political tensions in the area, however, it remains to be seen whether and at what rate these extensions are agreed, constructed and launched.
A Syria-Turkey interconnector is the most likely to go ahead, with a Memorandum of Understanding (MoU) on the extension of AGP to the Turkish border city of Kilis signed in early 2008; Turkey expects to buy 2-4bcm of gas per annum from the AGP. In October 2008, a US$171mn construction contract for the Homs-Kilis branch was signed with Russian company Stroytransgaz, with the pipeline expected to come onstream by 2011. From southern Turkey there are plans to connect the AGP to the giant planned Nabucco project, which would provide Egypt with direct pipeline access to the European gas market.
