Eni’s Zohr field to begin production soon

Bloomberg

Pilot production at Egypt’s Eni SpA-operated Zohr natural gas field will begin “in the coming few days,” the oil ministry said, as the country nears its goal of commercial output from the biggest gas discovery in the Mediterranean Sea by the end of this year.
Gas is being pumped from the national distribution system to test pipelines in preparation for output from the offshore field, Oil Minister Tarek El-Molla said in an emailed statement. Production will start before year-end at about 350 million cubic feet per day, he said. Output will rise to some 1 billion cubic feet per day by mid-2018 and reach 2.7 billion by the end of 2019, the ministry said December 1 by email.
Zohr marks a turning point that would spell an end to the tenders that suppliers from Glencore Plc to Trafigura PTE Ltd. have won in past years. Once it starts producing, the field will help end Egypt’s reliance on imported liquefied natural gas next year and may eventually enable the North African nation to export gas, El-Molla said last month in an interview. Gas from Zohr will also help ease pressure on the economy of the most populous Arab nation.
Zohr, which Eni discovered in August 2015, has an estimated reserve of about 850 billion cubic meters of natural gas in place.
ECONOMY REBOUNDS
Egypt’s headline inflation rate rose at its slowest pace in nearly a year in November while the current account deficit fell by more than 65 percent in the first quarter of the fiscal year, offering the latest evidence that the economy is rebounding 12 months after the currency flotation.
Urban consumer prices rose 26 percent in November compared to 30.8 percent a year earlier, according to the official statistics agency. The month-on-month inflation rate eased to 1 percent compared to 1.1 percent in October. Food and beverage prices, the single largest component of the basket, rose by 32.3 percent. Separately, the central bank said the current-account deficit had fallen to $1.6 billion in the first quarter of 2017-18, partly due to a rise in travel receipts between July and September to $2.7 billion from $767.7 million a year earlier. The overall balance of payments surplus rose to $5.1 billion from $1.9 billion.
“The economy is turning a corner: 2017 was a very difficult year and 2018 is probably going to be a better year and the recent data backs that up,” said Simon Kitchen, head of strategy at EFG-Hermes, Egypt’s largest investment bank. The cheaper pound has made exports more competitive, growth
in imports has slowed and tourism is recovering, he said. “Looking ahead to next year you’ve got the gas story coming through as well,” he said, referring to Egypt’s plans to begin gas production at the giant offshore Zohr field.
Egypt floated the pound in November 2016 to ease an acute foreign-exchange shortage that crippled trade and stymied investment. The move unleashed foreign investment into Egyptian treasury bills and bonds. The pound halved in value, however, fueling soaring inflation in a country where more than half the 95 million residents live on or near the poverty line.
Officials have said the move was a necessary, if painful, pivot point for an economy that had struggled to rebound following the 2011 ouster of President Hosni Mubarak. The central bank had forecast that inflation would ease from highs in near 35 percent as the base effects of the currency flotation begin to wear off. Economists said they expected the central bank to start
cutting interest rates in the first half of 2018. EFG-Hermes expects a reduction of some 400 basis points through next year. Reham El Desoki, senior economist at Arqaam Capital in Cairo, forecast a 500 basis-point reduction overall.