Egypt Confirms Drone Caused Fire On 2 Gas Vessels At Damietta

A drone caused the fire that engulfed two gas vessels at Egypt's Mediterranean port of Damietta, the Egyptian cabinet said on Thursday, confirming that the blaze which erupted a day earlier was the result of an attack rather than an accident.

No party has claimed responsibility for the incident which happened not far from the Suez Canal that has become the last safe evacuation route for Saudi oil to global markets.

Authorities were continuing their investigations and taking necessary measures to protect Egypt's national security, the cabinet added.

British maritime security firm Ambrey said on Wednesday that a drone had hit a U.S.-owned gas storage tanker at the port, in an initial assessment that raised concerns about a further spread of conflict across the Middle East.

Three trading sources familiar with the incident said the drone hit floating storage tanker Energos Winter, causing a fire that spread to another vessel, Gaslog Salem.

The Energos Winter was reportedly struck on its starboard side, causing a fire that was extinguished, British maritime risk management group Vanguard said.

Egypt's petroleum ministry said in a statement on Wednesday that the fires at the port were dealt with immediately by firefighting and security teams and caused no injuries or fatalities. Petroleum Minister Karim Badawi went to the site to oversee response efforts, it said.

The drone strike occurred shortly after Iran carried out a missile attack against U.S. forces in Jordan, and Washington and Saudi Arabia struck Iran-backed paramilitary groups in Iraq.

U.S. President Donald Trump threatened to retaliate against Iran and Yemen's Houthi group declared a naval blockade on Saudi Arabia, apparently spreading the conflict to its widest since the U.S. and Israel started bombing Iran in February.

The Energos Winter is a floating storage and regasification unit owned by U.S.-based firm Energos Infrastructure. Its technical, safety and commercial operations are managed by Wilhelmsen Ship Management, a Singapore-based subsidiary of Norwegian company Wilhelmsen Group.

HOW WILL THIS AFFECT EGYPT'S GAS MARKET?

The incident comes at a sensitive time for Egypt's gas market. Egypt became an LNG exporter following the development of the giant Zohr offshore gas field, but declining domestic production and rising demand have forced it to return to international markets as a major LNG buyer.

Any prolonged outage would be closely watched by LNG traders for its potential impact on demand and spot prices.

The vessels are expected to remain out of service for some time, two sources told Reuters, with one saying that a tank at the Energos Winter was breached, potentially prolonging repairs.

The Energos Winter has regasification capacity of about 450 million cubic feet per day, equivalent to roughly 7% of Egypt's daily gas consumption and 16% of the country's total LNG receiving and regasification capacity, according to Egyptian consultancy ElAdl Studies.

"The outage is not expected to create an immediate supply gap because Egypt has alternative import facilities and fuel options available, but it would reduce spare capacity in the system at a time of peak summer demand," an ElAdl note said.

Some of the options, it said, include maximising other regasification units, increasing use of fuel oil as backup fuel, tapping renewable energy capacity, and, as a last resort, temporarily reducing gas supplies to some industrial activities.

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