Egypt Amid Domestic Pressures and External Fluctuations: How Is It Redrawing the Gas Map?

SadaNews Economy - Egypt is currently implementing a multi-faceted strategy to secure its natural gas needs amid declining domestic production and increasing demand, particularly in the electricity and industrial sectors. The plan comprises four main alternatives aimed at reducing dependence on specific sources: accelerating gas imports from Cyprus, stimulating local production through new discoveries, expanding renewable energy sources, and importing LNG despite its high cost.

This comes at a time when the country recorded a record deficit in gas. Last year, Egypt consumed approximately 60 billion cubic meters of gas in 2024, while it produced 47.5 billion cubic meters, indicating a deficit of more than 12 billion cubic meters, according to data from the Energy Institute and the website of the Presidency of the Arab Republic of Egypt.

In 2023, Egypt recorded a gas deficit of about 3 billion cubic meters, after having recorded a surplus of about 4 billion cubic meters in 2022.

Importing Gas from Cyprus and Israel

According to Egyptian officials who spoke to "Asharq" earlier, the government is working on linking the Cypriot fields of "Chronos" and "Aphrodite" to the facilities of the "Zohr" field, with a total capacity of 1.3 billion cubic feet per day by 2028, starting to receive about 500 million cubic feet per day from the "Chronos" field before the end of 2027. Part of these quantities will be pumped into the national grid, while the remainder will be allocated for export.

Egypt is currently also importing about 1.1 billion cubic feet of gas per day through pipelines from Israel, with the quantity gradually increasing to 1.2 billion cubic feet per day starting January next year, under a revised agreement between the two sides signed in July 2025, which will last until 2040. The agreement includes an increase in total quantities of about 4.6 trillion cubic feet, conditional on infrastructure expansion.

LNG: An Expensive but Necessary Option

At the same time, Egypt plans to continue importing liquefied natural gas (LNG) until the fiscal year 2029-2030 to ensure the operation of power plants, given that local production has fallen to about 4 billion cubic feet per day, compared to needs reaching 6 billion cubic feet. The government has signed agreements with global companies including "Saudi Aramco," "Trafigura," and "Vitol" to import about 290 shipments of gas between July 2024 and 2028, and it is conducting similar negotiations with Qatar for long-term contracts.

Mohammad Youssef, former Vice Chairman of the Egyptian Petroleum Authority, noted in his remarks to "Asharq" that the cost of importing LNG ranges between $14 and $15 per million BTU, compared to about $7 to $8 for gas transported from Israel via pipelines, and about $4 to $5 for locally produced gas. Youssef considered that Israeli gas is currently the relatively cheaper option, but stressed the need not to rely on it as the sole source.

Youssef explained that Egypt is awaiting the announcement of the details of the commercial agreement with Cyprus to assess its economic feasibility, stressing that the matter is "primarily economic, not political," and that diversifying sources is the main guarantee for energy security.

Egypt currently uses three floating regasification vessels with a total capacity of 2.25 billion cubic feet per day, while a fourth vessel operates from the port of Aqaba, and a fifth vessel is expected to arrive at the port of Damietta. These vessels are a strategic element in securing supplies, providing flexibility in case flows from any of the partners are interrupted.

Former Egyptian Minister of Petroleum, Osama Kamal, stated that floating vessels represent a vital safety net for the energy sector, explaining that any potential disruption in supplies can be quickly compensated by LNG. He added that Egypt encourages foreign partners to increase local production and anticipates new agreements with the Cypriot side.

The Path Back to Exporting Begins with Paying Arrears

Egypt is expected to be able to return as a natural gas exporter in 2027, according to previous statements by Prime Minister Mostafa Madbouly. He said this week that it is expected that gas production in Egypt will reach 6.6 billion cubic feet per day by 2027 compared to current production of 4.1 billion.

The rate of gas production has started to increase from 3.2 billion cubic feet after the country began settling dues and debts to foreign companies, which accumulated during the dollar crisis in Egypt.

Madbouly acknowledged this, stating: "The increase in gas production began after those debts were settled with foreign partners."

Egypt paid about $1 billion of foreign oil companies' dues last July as part of a plan to settle arrears. The paid amount raises Egypt's total payments of overdue amounts to foreign oil companies operating in oil and gas exploration and extraction to $8.5 billion since June 2024 until now.

The current dues amount to $2.5 billion following the latest payment, according to previous statements by an official.

Gamal El-Qalyoubi, a professor of petroleum and energy engineering, pointed out that Egypt seeks to achieve self-sufficiency as soon as possible by encouraging foreign companies to increase production, and that expanding into renewable energy will help reduce pressure on natural gas. He told "Asharq" that increased reliance on solar and wind energy will assist in reducing gas consumption at power plants.

According to El-Qalyoubi, Egypt aims for renewable energy to represent 42% of total electricity capacity by 2030, distributed as follows: 22% for solar energy, 14% for wind energy, 4% for solar thermal energy, and 2% for hydropower.

El-Qalyoubi emphasized that diversifying gas sources is extremely important given regional changes, saying that relying on a single source for supplies could expose the country to risks, noting that Cairo seeks to increase shipments from multiple countries such as Cyprus and Qatar, alongside boosting local production, and continuing cooperation with current partners in the region.

Infrastructure and Egypt's Regional Role

Egypt possesses advanced infrastructure for re-exporting and storing gas, as the return to full operation of liquefaction plants enhances the country's ability to interact with market changes, according to Wafaa Ali, an energy economics professor. She noted that "the existence of liquefaction facilities gives Cairo political and economic weight in the Eastern Mediterranean region."

The Prime Minister considers the country a regional energy hub in the area. He stated this week: "We have substantial infrastructure from the liquefaction plants in (Idku) and (Damietta)."

She pointed out that Egypt's resort to using floating vessels was due to declining domestic production, and that this step represents a strategic solution that enhances the country's ability to overcome fluctuations, whether technical or political, affirming that gas investments must be built on a long-term economic foundation.

According to Bloomberg data, Egypt's bill for LNG and petroleum products imports rose by about 60% in 2025 to reach $20 billion, compared to $12.5 billion in 2024, reflecting the magnitude of the pressures facing the country.

Egypt resumed exporting LNG in 2019 after years of inactivity, thanks to production from the giant "Zohr" field; however, it shifted back to being a net importer in 2024 after production fell below 4 billion cubic feet per day, the lowest level since July 2016.

Atiya Atiya, Dean of the Faculty of Energy and Environmental Engineering at the British University in Egypt, emphasized the importance of diversifying sources of imports and not relying on a single party, noting that the country bears significant financial burdens to provide gas, but it seeks to maintain national energy security and cover local market needs.

Amid rising temperatures and increased reliance on air conditioning, Cairo finds itself facing a difficult choice: to continue exporting gas or ensure local power plants are fed domestically. Recent developments show that the government tends to prioritize securing local consumption over exports while maintaining balanced relations with all regional energy partners.

Market Analysis and Strategic Options

The gas scene in Egypt is illustrated by Bashar Al-Halabi, an oil and energy market analyst at "Argus". He told "Asharq" that the biggest challenge before the country lies not only in declining production but also in the cost structure and distribution of supply sources. He explained that "gas transported through pipelines, such as that imported from Israel, remains cheaper compared to LNG, but local production is the more economically sustainable option in the long run, provided that investments are secured."

Al-Halabi considered that continuing to rely on a single source exposes the state to political and economic risks, stressing that diversifying partners and sources of gas should be a "foundational pillar in energy policy," especially given the geopolitical changes in the region.

He indicated that Egypt's possession of floating regasification units is a "vital safety net" that enhances the country's flexibility in facing any emergency in supplies, providing the government with a time and options without falling under the pressure of emergency procurement or market fluctuations.

Al-Halabi added that returning to exports is conditional on a stable investment environment, saying that "the step to settle the dues of foreign companies has begun to bear fruit by stimulating exploration operations and gradually increasing production," which enhances the chances of achieving self-sufficiency and returning to being an exporter by 2027.

Regarding renewable energy, he stressed that it is not a climate luxury but an economic priority, as it helps reduce gas consumption in electricity, allowing surplus production to be directed toward industry or export.

Source: Asharq