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Temporary LNG fix masks Egypt’s energy crunch

Blackouts are a common occurence across Egypt as the country wrestles with its energy crisis Suyuthiahmad/Shutterstock
Blackouts are a common occurence across Egypt as the country wrestles with its energy crisis
  • LNG exports curtailed since May
  • 20 LNG cargoes ordered in June
  • Need to align prices with costs

The first two liquefied natural gas cargos arrived at the Egyptian port of Ain Sokhna on the Red Sea this week, bringing hope of relief to a suffocating population trapped in the summer heat and suffering now daily blackouts.

However, this temporary fix is unlikely to resolve Egypt’s energy crunch in the long term. 

Falling output from the country’s largest natural gas field threatens the country’s energy future, experts say.



In addition to investing heavily in renewables and oil and gas projects, Egypt needs to align energy prices with costs. This is a challenge, given the economic and geopolitical crisis the nation is going through, they say. 

Egypt contracted for 20 LNG cargoes in June as an emergency contingency, making its biggest purchase of LNG in years.

Despite a severe debt crisis and shortage of foreign currency, the government has allocated nearly $1.2 billion for energy needs, prime minister Mostafa Madbouly said in June.

Also Egypt, the world’s 11th largest natural gas producer, has been forced to curtail all LNG exports since May to meet growing domestic demand exacerbated by a heatwave.

Egypt’s natural gas imports from Israel rose by around 40 percent last year to 8.6 billion cubic metres. Becoming a net gas importer is a turnaround for the most populous Arab country, which had positioned itself as an LNG supplier to Europe.

The country holds 2.1 trillion cubic metres of gas, the third-largest reserves in Africa, behind Nigeria and Algeria.

Egypt LNG energySIPA Asia via ZUMA Wire
60,000 tons of LNG from Egypt being unloaded in Nantong City, China. Since May, Egypt has stopped LNG exports

Zohr, the giant gas field discovered by Eni of Italy in 2015, has boosted Egypt’s gas ambitions, filling the government’s coffers.

In 2022 LNG exports climbed to 8.9 billion cubic metres, bringing $8.4 billion in revenues, according to the petroleum ministry. 

But in 2023 they fell, because of lower LNG prices and crimped gas output.

Zohr accounted for around 40 percent of the country’s total gas production, but its output is dwindling. The field currently produces less than 20 billion cubic metres of gas, which is about 40 percent below its design capacity, according to Facts Global Energy data. “Gas supply from other fields is also declining,” said FGE.

As a result, Egypt’s gas production fell 16 percent, from 67 billion cubic metres in 2022 to an estimated 56 billion cubic metres in 2024.

The petroleum ministry plans to increase gas output by around 8 percent in 2024-25. Still, “it is not enough to fill up the needs,” says Choeib Boutamine, CEO of Ranadrill Consulting, a training and consulting company based in Algeria.

Industry sources point to the natural depletion of wells and water infiltration issues in the Zohr field. Lack of investment in enhanced reservoir production and drilling of new wells hampers output, Bouamie says.

Overdue payments to Eni, which have reached $1.7 billion, may also explain the lower output, according to reports.

“The government doesn’t have enough money to invest or pay the companies,” says Bouamine.

Eni told AGBI that the production in Egypt and in Zohr was running “in line with expectations,” and “several production optimisation activities are foreseen and being implemented in the field.”

The spokesperson added: “Considering Egypt’s economic reform programme and the well-known financial contributions from the UAE, EU and IMF, we remain confident on the recovery of outstanding dues, in line with the discussion with the authority.”

Increasing renewables in order to free up gas for export is one option but expansion has plateaued since 2019, according to Egypt’s New and Renewable Energy Authority. 

Wind and solar power account for only 6 percent of Egypt’s energy mix, while hydropower represents 7 percent.

In the hydrocarbons sector, Egypt announced a new $1.8 billion gas exploration programme last year, consisting of drilling 35 new exploration wells by mid-2025 in the Nile Delta and the Mediterranean Sea.

The campaign will be conducted in partnership with companies such as Chevron, BP, Eni and QatarEnergy. However, it takes five to 10 years to develop a natural gas field, Bouamine says.

Reuters
President Al Sisi poses with his new cabinet including Karim Badawi, the tallest person in the back row, the minister of petroleum and mineral resources, who has his work cut out

Meanwhile, gas consumption rose to 66 billion cubic metres a year. Gas accounts for 65 percent of Egypt’s energy mix, and the power sector accounts for around 60 percent of the domestic consumption.

The root of the problem, as with other hydrocarbon-rich countries in the region, such as Libya and Iran, is heavy subsidies to consumers.

Carole Nahle, CEO and founder of the UK-based energy consultancy Crystol Energy, says: “Egypt’s domestic market is very large and local demand has been expanding rapidly, partly because of its large population and, most importantly, the inefficient pricing because of subsidies.”  

The government has encouraged the use of gas in industrial applications and power generation, she says. 

Egypt’s energy prices are among the lowest in the world. Subsidies cost nearly EGP200 billion ($4.2 billion) a year. 

The country raised electricity prices by 26 percent in January, as part of its strategy to phase out subsidies. However, president Abdel Fattah Al Sisi said that to keep the power on he would have to double or treble the price for citizens to match the true cost of electricity.

Nahle says subsidies were a “politically sensitive issue and hard to remove. They can cause social unrest and even lead to toppling of governments if their removal is not handled properly.” 

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