Egyptian gas production nears 6-year low

Egypt’s natural gas production has fallen to its lowest level in more than six years, as a scorching summer boosts demand for the fuel.

The North African country’s output in May was nearly the weakest since February 2018, according to figures from the Joint Organisations Data Initiative. The decline is a sign that Egypt will struggle to match the gas export boom of two years ago and is likely to become more dependent on imports of liquefied natural gas.

Once a supplier to Europe, Egypt can no longer produce enough gas to keep its own electricity systems running in the summer. The most populous Arab country is now buying large quantities of fuel to meet air conditioning needs as it struggles with blackouts and periods of idle industrial production.

The government of President Abdel-Fattah El-Sisi has pledged to end planned power outages that could last up to three hours a day, starting on Sunday. It is a key challenge for the government to avoid widespread public discontent after it agreed to a $57 billion international rescue package earlier this year that gave the state access to funds.

The country’s daily power consumption has surpassed 37 gigawatts, up 12% from last year, leaving a deficit of 4 gigawatts, Prime Minister Mostafa Madbouly said on Wednesday. The government will accelerate renewable projects to close the gap and reduce energy imports, he added.

Although gas supplies most of Egypt’s grid needs, the government aims to get 58% of its electricity from renewable sources by 2040, up from 20% today. However, the country needs funding to upgrade its grid and expand it to the sites of renewable projects.

The country recently received five of the 21 LNG shipments it wanted for the summer and allocated $1.18 billion for additional energy imports. It has said more may be needed depending on the severity of the summer heat.

“We expect the recent increase in Egyptian LNG imports to continue through summer 2025,” Samantha Dart, who heads natural gas research at Goldman Sachs Group Inc., said in a note this week.

Higher demand from Egypt is among the factors tightening the global gas market this summer, along with higher demand from some Asian countries and outages at some production facilities. As a result, seasonal imports of the super-chilled fuel into Europe fell below the level of the past two years, according to data from grid operators compiled by Bloomberg.

Egypt’s Petroleum Minister Karim Badawi said this week that oil and gas production has fallen by as much as 25 percent in the past three years. He said part of the reason was a growing backlog of foreign oil companies, which has slowed exploration and development programs. The country is working to close that gap, he said.

In addition, production from the vast Zohr gas field has fallen by about a third since 2019, according to Eni SpA, which has interests in the field. While Egypt has not reported any production problems, concerns have been raised that output is falling due to water infiltration issues.



Reader-generated comments do not reflect the views and opinions of Rigzone. All comments are subject to editorial review. Off-topic, inappropriate, or offensive comments will be deleted.


MORE FROM THIS AUTHOR



Bloomberg