Over the past six weeks, developments have been particularly promising, with Egypt agreeing last week with Cyprus to receive gas from its largest fields, the Cronos, off Cyprus’s southwest coast, and the Aphrodite, to the southeast.
The gas will be transported by pipeline to Egyptian waters and then transferred to Egyptian liquefaction facilities at Idku and Damietta before being re-exported as liquified natural gas (LNG) to Europe.
The deal is advantageous to Egypt as it will have the Right Of First Refusal (ROFR), allowing it to decide whether to purchase gas liquefied in local plants or sell it on, according to Osama Kamal, a former Oil Minister.
“Egypt can use this gas to cover part of the deficit in local supply. More importantly, the gas transferred through the pipelines is less expensive than importing LNG and then changing it back to the gaseous state to pump it into the local network. Moreover, Egypt will be getting a fee for liquefying and then exporting the gas to Europe,” Kamal noted.
However, this will not happen immediately, as while discoveries have been announced by Cyprus since 2013 they have lacked the needed infrastructure to transfer and sell it, he added.
“There was a breakthrough when Cyprus agreed with Chevron to undertake the development process and link its fields with our network very close to the Zohr Field, from where we would transfer it to liquefaction units in Damietta and Idku,” he said.
The problem has been that the costly process of developing these fields might take six months or even 18 months, depending on development plans, which are still unclear, Kamal said.
The government has plans to cover domestic needs for gas until then.
The Cyprus deal came a few weeks after the resumption of drilling in the Zohr Field. In October, Petroleum Minister Karim Badawi said the government planned to increase production at the field by 220 million cubic feet per day (cf/d) through drilling new wells.
Starting operations in 2017, the Zohr Field was the main reason Egypt became a net exporter of gas, with production peaking at 2.8 billion cf/d in the third quarter of 2021. However, technical problems related to water filtration as well as a stop in drilling activities due to delays in paying arrears to Eni, the field’s developer, led to a decline in production to below two billion cf/d in the first half of 2024.
A report by the Middle East Economic Survey (MEES) pointed out that Egypt’s gas production dropped to an eight-year low in 2024 to reach 4.87 billion cf/d. The output of the offshore Mediterranean fields, where the Zohr and other smaller fields are located, dipped by 18 per cent through the year to reach 3.54 billion cf/d, its lowest in six years.
In addition to plans to increase imports, the government is now giving foreign explorers incentives to encourage them to increase production. This includes paying arrears, with the government paying $1 billion of arrears in January after setting a schedule to repay all the $6.5 billion accumulated dues up until June 2025.
It also includes increasing production-sharing ratios with foreign companies in exchange for new investments as well as giving them the green light to export some of their production.
Exploration contracts in Egypt give foreign partners 25 to 30 per cent of a field’s production. The government also uses the right to buy gas from them rather than let them export it. The delay in paying its dues has accumulated, with the arrears pushing some foreign companies to slow down the exploration processes, leading to last year’s energy crunch.
Egypt is also pursuing the possibility of increasing its imports of gas from Israel by 58 per cent during the summer months, according to an unnamed government official quoted by Asharq Business.
If agreed upon, this will mean Egypt will import 1.5 billion cubic feet of Israeli gas per day. “As in the case of the Cypriot gas, this is a good bargain, as this is piped gas which is much cheaper than the imported LNG alternative,” the official said.
He explained that the price of the piped gas was $4 for each Mobile Treatment Unit (mtu). Importing gas in the LNG form would add an extra $4 to $5 per mtu, representing the cost of the liquefaction, transport, insurance, and regasification, making the overall cost around $9 per mtu.
Egypt started to import Israeli gas in 2020. The original plan was to receive the gas through a pipeline, liquefy it, and export it to Europe. However, with the drop in local production, Egypt started to depend on Israeli gas to cover increased domestic demand.
The flow of gas was suspended for a while shortly after the fighting escalated with Hamas in Gaza, an incident that raises fears about the future of these supplies in case bilateral relations turn sour in the future.
Kamal said Egypt was well prepared for such a scenario.
All Egypt’s power stations use dual fuel technology, which enables them to switch from one form of fuel to another. This means that the stations can switch from gas to Mazut seamlessly during operations without loss of power, he said.
Over and above the power-generation sector, the largest consumer of gas locally, the government has also introduced plans to control the waste and theft of electricity.
Kamal said that before these plans were implemented, the theft and waste of electricity resulted in losing 25 to 38 per cent of generated power. The amount of generated electricity per day hovers around an average of 36 Gigawatts (GW), which means that around eight to nine GW were being wasted.
“Cutting these losses means that the demand for gas and thus gas imports will be reduced,” Kamal noted.
Expected additions to the energy produced in Egypt during the coming years will make it less vulnerable to any disruptions in imported gas. There are new agreements for the production of solar and wind energy that will lead to the addition of five to six GW to the national grid starting in June.
In addition, Egypt’s first-ever nuclear-generated power from the Al-Dabaa Plant will enter the grid in 2027-2028, with another five GW being added to the national network.
“The strategy to increase the renewables share in the energy mix to 42 per cent by 2030 or 2035 will lead to balancing the energy demand and supply forces,” Kamal said.
In parallel, Egypt is trying to secure more LNG imports. According to the CNN Business Arabic Website, the government will launch a tender for LNG shipments to meet heightened summer demand. This comes after finalising agreements totalling $3 billion in December to purchase 60 LNG shipments in 2025.
The increase in LNG imports has necessitated Egypt’s renting more floating regasification units, making the total number of units rented reach four or five, according to different sources.
* A version of this article appears in print in the 27 February, 2025 edition of Al-Ahram Weekly
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