Egypt aims to be a Mediterranean energy hub

Energy demand in Egypt has been rising in recent years. Yet, oil production in Africa’s largest non-OPEC producer has been declining. Natural gas consumption and production, however, has been constantly increasing, thanks to increased electricity demand and to a huge natural gas find offshore Egypt in the Mediterranean.

Egypt is currently a net importer of crude oil because its domestic production is not sufficient to meet crude oil demand. In natural gas, the country became self-sufficient in the latter half of 2018, as production from recently discovered fields—led by the giant Zohr discovery in the Mediterranean—ramped up. Egypt stopped importing liquefied natural gas (LNG) in September 2018 and is now vying to play a key role in the new energy transport corridors in the Mediterranean. The African country aims to become a vital energy hub in the Eastern Mediterranean.

Oil and gas majors operating in Egypt have recently discovered more oil and natural gas, reshuffled concession interests, and advanced oil and natural gas projects in the country. BP, Shell, Eni, and Apache Corporation are the key operators of oil and gas fields in Egypt, while companies from Russia and the Middle East also hold minority stakes in various producing concessions onshore and offshore Egypt.

As of early 2018, Egypt was Africa’s largest oil producer who is not a member of OPEC and it was also the third-biggest dry natural gas producer on the continent after Algeria and Nigeria, according to data from the US Energy Information Administration (EIA).

In 2017, Egypt’s petroleum and other liquids production averaged 666,000 barrels per day (bpd), while its crude oil consumption averaged 802,000 bpd.

As of the end of 2017, Egypt’s total proved oil reserves were 3.3 billion barrels, while total proved natural gas reserves were 62.8 trillion cubic feet, according to the BP Statistical Review of World Energy 2018.

According to BP estimates, natural gas consumption in Africa rose by 6.8 percent to a record 142 bcm in 2017, driven by growth in Egypt. Algeria and Egypt accounted for 67 percent of Africa’s consumption.

Egypt reached an important milestone in its domestic natural gas supply-demand equation at the end of 2018—it became self-sufficient in natural gas production. The country saw its gas production rise significantly over the past year, thanks to recent discoveries, especially the giant Zohr discovery in the Mediterranean. Eni, the operator of Zohr, said in September that the huge gas field was already producing 2 bcfd, equivalent to around 365,000 boed.

“The latest achievement reinforces the exceptional development path of the Zohr project, one of Eni’s seven record-breaking projects, which is playing a fundamental role in supporting Egypt’s independence from LNG imports,” the Italian oil and gas major said on September 8.

Egypt did become energy-independent from LNG imports, its Petroleum Minister Tarek El Molla said at the end of September 2018. The final LNG cargo imported to Egypt had arrived the previous week and the country stopped importing the super-chilled gas, El Molla noted.

Egypt plans to further boost its natural gas production—to 7.8 billion cubic feet per day in the 2019-2020 financial year, up from the current production of 6.6 billion cubic feet per day, an official at natural gas holding company EGAS said in December 2018. The higher production would come from increased output at the Zohr field and from North Alexandria fields, among other projects.

After it stopped importing natural gas, Egypt now aims to become an energy hub of the Eastern Mediterranean. In early January 2019, the government said that a committee had drafted a strategy to advance Egypt’s ambition to be an energy hub in the region.

The government, through the Petroleum Ministry, is also discussing potential foreign interests in its oil and gas industry. Minister El Molla discussed in December ways to boost Egyptian-Spanish cooperation in oil and gas projects in Egypt. Spain’s Ambassador to Egypt, Ramón Gil-Casares, said during the meeting that Spanish companies Repsol and Cepsa were interested in bidding in the bid rounds for oil and gas exploration in various onshore and offshore regions, the Egyptian Petroleum Ministry said on December 3.

A week later, El Molla also held talks with the UK Trade Commissioner for Africa, Emma Wade-Smith, discussing BP and Shell’s oil and gas operations in Egypt.

In one of its latest investments in Egypt, BP said in December that it would buy from Eni a 25-percent participating interest in the Nour North Sinai concession area offshore Egypt.

Eni, for its part, announced in July a new oil discovery in the Faghur Basin in the Western Desert. The discovery confirms the high exploration and production potential of deep geological sequences of the Faghur Basin, the Italian company said. In August, Eni announced a gas discovery in the Obayed concession in the Western Desert. Eni has begun studies to develop these gas reserves which, together with the gas potential of the Melehia concession, can help raise gas production from the Western Desert Basin.

Oil majors continue to explore Egypt’s onshore and offshore areas and to raise production from the recent gas field discoveries. Thanks to those finds, Egypt now aims to become an energy hub of the Eastern Mediterranean.

- By Tsvetana Paraskova