Supplying the EU Natural Gas Market Final Report November 2010 Su2p650p48 lying the EU N1atura1 l P:\Croydon\EXC\ONG\OGC\Projects\265048 MVV Decon MED Ring\07 Documents (MML Generated)\Final Report\2nd Issue\Supplying the EU Gas Market 30 July 2010 Final Report November 2010 This document is issued for the party which commissioned We accept no responsibility for the consequences of this it and for specific purposes connected with the above- document being relied upon by any other party, or being captioned project only. It should not be relied upon by any used for any other purpose, or containing any error or other party or used for any other purpose. omission which is due to an error or omission in data supplied to us by other parties This document contains confidential information and proprietary intellectual property. It should not be shown to other parties without consent from us and from the party which commissioned it. M ott MacDonald, Mott MacDonald, Mott MacDonald House, 8-10 Sydenham Road, Croydon CR0 2EE, United Kingdom T +44(0) 20 8774 2000 F +44 (0) 20 8681 5706 W www.mottmac.com S upplying the EU Natural Gas Market Content Chapter Title Page Executive Summary i 1. Introduction 1 1.1 Objective__________________________________________________________________________ 1 1.2 Structure of the Final Report___________________________________________________________ 1 2. European Union Gas Demand 2 3. Gas Supply Analysis 6 3.1 European Gas Supply________________________________________________________________ 6 3.2 Country Overviews __________________________________________________________________ 6 3.2.1 Algeria____________________________________________________________________________ 8 3.2.2 Egypt____________________________________________________________________________ 10 3.2.3 Libya ____________________________________________________________________________ 12 3.2.4 Morocco _________________________________________________________________________ 13 3.2.5 Tunisia __________________________________________________________________________ 14 3.2.6 Jordan___________________________________________________________________________ 14 3.2.7 Syria ____________________________________________________________________________ 14 3.2.8 Lebanon _________________________________________________________________________ 15 3.2.9 Israel ____________________________________________________________________________ 15 3.2.10 Iraq _____________________________________________________________________________ 15 3.3 North Mediterranean ________________________________________________________________ 17 3.3.1 Spanish Demand and Bottleneck ______________________________________________________ 17 3.3.2 Italian Bottlenecks and Demand _______________________________________________________ 17 4. Technical Analysis 19 4.1 Existing State of Play on Gas Interconnections in the Southern Mediterranean including Iraq________ 19 4.1.1 Pipelines _________________________________________________________________________ 19 4.1.2 Pipeline system condition and quality ___________________________________________________ 19 4.2 Planned pipeline and LNG connections _________________________________________________ 22 4.2.1 Arab Gas Pipeline (AGP) ____________________________________________________________ 22 4.2.2 Trans-Saharan Gas Pipeline__________________________________________________________ 23 4.2.3 GALSI Pipeline –___________________________________________________________________ 24 4.2.4 Alexandria to Tobruk Pipeline _________________________________________________________ 25 4.2.5 Mellitah-Gabes Pipeline _____________________________________________________________ 25 4.3 Liquefied Natural Gas (LNG)__________________________________________________________ 25 4.3.1 Imports __________________________________________________________________________ 25 4.3.2 LNG Regasification Capacity _________________________________________________________ 26 4.3.3 Liquefaction_______________________________________________________________________ 28 4.3.4 Algeria___________________________________________________________________________ 29 4.3.5 Egypt____________________________________________________________________________ 30 4.3.6 Libya ____________________________________________________________________________ 31 4.4 Transport Corridor Options Summary___________________________________________________ 32 4.4.1 Introduction _______________________________________________________________________ 33 4.4.1.1 Assumptions ______________________________________________________________________ 33 Supplying the EU Natural Gas Market – Final Report November 2010 S upplying the EU Natural Gas Market 4.4.1.2 Methodology ______________________________________________________________________ 35 4.4.2 Egypt____________________________________________________________________________ 35 4.4.2.1 Impact of Jordan, Lebanon and Syria’s Growing Imports on the Arab Gas Pipeline________________ 35 4.4.2.2 Egypt Transportation Corridor Scenarios ________________________________________________ 35 4.4.3 Iraq _____________________________________________________________________________ 36 4.4.4 Algeria___________________________________________________________________________ 40 4.4.4.1 Moroccan Bottleneck on PDFG Pipeline_________________________________________________ 42 4.4.5 Libya ____________________________________________________________________________ 42 4.4.6 Trans-Mediterranean Ring ___________________________________________________________ 45 4.4.7 Qatar via Saudi Arabia and Iran _______________________________________________________ 46 5. Financial Analysis 47 5.1 Model Assumptions_________________________________________________________________ 47 5.1.1 Capital costs ______________________________________________________________________ 47 5.1.2 Project Schedule___________________________________________________________________ 49 5.1.3 Operating Costs ___________________________________________________________________ 50 5.2 Economic Assumptions______________________________________________________________ 52 5.3 Model Results _____________________________________________________________________ 52 5.3.1 Egypt____________________________________________________________________________ 53 5.3.2 Iraq _____________________________________________________________________________ 53 5.3.3 Algeria___________________________________________________________________________ 53 5.3.4 Libya ____________________________________________________________________________ 54 5.3.5 Mediterranean Gas Ring_____________________________________________________________ 54 6. Doing Business 55 6.1 Algeria___________________________________________________________________________ 55 6.2 Tunisia __________________________________________________________________________ 55 6.3 Libya ____________________________________________________________________________ 55 6.4 Egypt____________________________________________________________________________ 55 6.5 Jordan___________________________________________________________________________ 56 6.6 Syria ____________________________________________________________________________ 56 Supplying the EU Natural Gas Market – Final Report November 2010 S upplying the EU Natural Gas Market Tables Table 2.1: Additional Gas Imports, 2010-2030______________________________________________________ 5 Table 3.1: Gas Exports from Algeria, Egypt and Libya _______________________________________________ 7 Table 3.2: Algerian Supply and Demand Scenarios, 2010-2030 ________________________________________ 8 Table 3.3: Egyptian Gas Supply Projections ______________________________________________________ 10 Table 3.4: Libya Supply Scenarios _____________________________________________________________ 13 Table 3.5: Spanish Demand and Infrastructure ____________________________________________________ 17 Table 4.1: Current Existing Infrastructure in South Mediterranean and Iraq Connecting to Europe_____________ 21 Table 4.2: Current and Planned Infrastructure_____________________________________________________ 22 Table 4.3: Technical details of GALSI pipeline ____________________________________________________ 24 Table 4.4: EU imports from three South Med countries ______________________________________________ 26 Table 4.5: LNG import/regasification terminals in the EU ____________________________________________ 27 Table 4.6: LNG import/regasification terminals currently under construction in the EU ______________________ 27 Table 4.7: Algeria LNG liquefaction facilities ______________________________________________________ 29 Table 4.8: Egypt Results _____________________________________________________________________ 36 Table 4.9: Iraq Scenarios_____________________________________________________________________ 39 Table 4.10: Transmission Scenarios of Trans-Saharan Pipelines _______________________________________ 42 Table 4.11: Libya Export Infrastructure to Europe, Current - 2015 ______________________________________ 42 Table 4.12: Libya Transportation Corridor Options Summary __________________________________________ 45 Table 4.13: Completed Trans-Mediterranean Gas Ring ______________________________________________ 45 Table 5.1: Generic Capital Cost Assumptions _____________________________________________________ 47 Table 5.2: CAPEX for Egyptian Scenarios (€ millions)_______________________________________________ 48 Table 5.3: CAPEX for