Natural Gas in Egypt – Continuous Challenges


Egypt was able to position itself on the gas exporting countries map in the Middle East. But the challenge that faces decision makers now is the possibility of enhancing the exporting situation between gas exporters in the region in light of the continuous growth of the domestic consumption of energy.


Integrated Strategy for Petroleum Sector

The integrated strategy of the petroleum sector included the achievement of the maximum benefit from the oil and natural gas wealth. For this purpose, the petroleum sector in Egypt has been restructured to allow the free movement for all the activities of gas and its related industries along with its exports. Accordingly, the Egyptian Holding Company for natural gas was constructed, followed by concerted efforts towards natural gas through the establishment of export projects to achieve the optimal economic exploitation of this source.

In order to meet economic development and climate goals, in the next 20 years, Europe’s demand for natural gas imports will increase and will necessitate new projects offering diverse energy suppliers, sources and supply routes for gas delivery.

Record Success in Gas Sector

The success of the petroleum sector in the implementation of this strategy hit a record, where the natural gas proven reserves increased to reach 77.3 trillion cubic feet while reserves of crude oil and condensates still around 4.4 billion barrels. This coincided with the increase in the domestic consumption of natural gas, together with the beginning of its export. There is no doubt that the increase in Egyptian natural gas exports has contributed to attracting international companies to increase their investments and gas research and exploration activities in way that supports gas reserves in Egypt in the end. Egypt has appeared as a promising natural gas producer in the previous decade; as it has developed gas reserves rapidly, mostly from offshore fields in the Mediterranean Sea, and its was able to export its first LNG shipment in early 2005 and then strengthened its sales abroad through the Arab Gas Pipeline .

Local Demand to Curtail Gas Exports:

The petroleum sector continues its efforts in providing energy requirements for the local market in the light of a high population rate which reached 1.4 million people in the recent years in the light of the continuing shift from oil to natural gas. During the previous years the sector succeeded in delivering natural gas to dozens of cities in addition to the major provinces to which natural gas was delivered, in addition to the growing activity of fueling cars with natural gas. The sector also succeeded in modifying gas prices in export agreements and in determining gas prices for the intensive energy industries. In the light of the expectations related to the domestic demand growth by up to 8% at least annually, the additional production which was allocated for export may be finally directed for usage in houses, factories and power stations in Egypt. Therefore, any new deals to export gas have been frozen since two years in order to protect the gas supply for the domestic market. The conservative prospects regarding gas exports are not likely to improve, especially with the governmental keenness to give priority to local needs, especially for the electricity sector with its growing demand rate of 11.5% annually, considering the running of new power stations to increase power generation capacity by about 3 times by the year 2027.

European Hopes towards Egyptian Gas

These developments came naturally thus against the European countries aspiring to the surplus of gas from the neighboring countries, including Egypt, as a means to diversify its supply sources and reduce the dependence on the unstable Russian gas supplies. These countries were looking forward to the flow of Egyptian gas to them after connecting the Arab Gas Pipeline to Nabucco Pipeline which will extend to Europe via Turkey. However, the government is decided to reconsider its decision to freeze new deals to export gas with time in response to new developments.

Mutually beneficial partnerships at all levels of gas chain require market-based transactions, including on transit.

Last summer, Egypt had signed a deal worth $9 billion with (BP) and (RWE Dea) companies for developing two fields offshore Alexandria based on terms which make drilling in the area more attractive in commercial basis. BP estimates noted that the gas reserves in both fields reach about 5 trillion cubic feet. These developments have raised hopes of a significant change in the Egyptian gas exports to European markets hungry for gas. The deal is expected to speed up the extraction of gas from the deep waters in the Mediterranean; a process slowed in the past five years as the companies bored with the contract terms that do not provide adequate incentives to ensure accepted revenues for the operations of developing high cost offshore fields

Introduction of innovative technologies at all levels of the gas chain.



Hard Mission For Petroleum Leaders

The petroleum sector in Egypt was able to attract international investments estimated at $3500 million for the construction of three gas liquefaction complexes from which liquefied gas exports started by the beginning of 2005 and increased continuously after that. The strengthening of Egyptian gas exports will largely depend on some factors of which the rate of new discoveries so that Egypt can continue exporting without switching to a net energy importer, the balance between increasing local energy needs and the urgent needs to obtain foreign exchange, and the balance between the immediate energy needs for managing foreign exchange without neglecting the needs and the future of coming generations.

South East Europe has a strategic location, linking producers – Russia, countries in Central Asia, the Caspian sea region, the Middle East and North Africa, the transit countries of the Black sea region and the Caucasus, with the European energy markets.

These are the difficult tasks that confront the petroleum sector leaders and its policies planners in Egypt. There is no doubt that the future includes big challenges requiring further rationalization of the domestic consumption of energy resources, the exertion of the utmost efforts in the areas of exploration and development to add significant amounts of proven reserves of oil and gas, and the continuing to encourage international companies to invest in oil and gas activities and provide facilities and the right climate to do that.

LNG terminals and ship-based re-gasification in this region should be available to all interested countries, either directly or through other states on the basis of a solidarity arrangement.