Egypt pushes ahead with energy sector plans

23 February 2023

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Egypt is pushing ahead with plans in its energy sector amid challenging economic conditions and an ongoing currency crisis.

Cooperation with international energy companies in recent years has helped the country increase its natural gas production and boost revenues. This has enabled it to navigate a difficult economic environment.

Cairo has proved agile when it comes to negotiating exploration and production deals. 

Working with the Italian international oil and gas company Eni, the country has rapidly brought several major gas reservoirs and export facilities online.

This has helped Egypt ramp up production at a time when demand is surging as European countries attempt to find alternatives to Russian oil and gas due to the ongoing war in Ukraine. 

State-owned Natural Gas Holding Company (Egas) and Eni brought Egypt’s Damietta liquefied natural gas (LNG) plant online in 2021 after eight years of the facility being offline.

Earlier this year, Egypt’s oil ministry said that about 4 million tonnes of LNG were exported from the facility in 2022.

This is the largest volume of annual exports the plant has made since it was first commissioned in 2005. About 60 per cent of the exports from the facility went to Europe, according to Egypt’s oil ministry. 

The boom in Egyptian gas exports has given significant support to the wider economy.

In February, the Central Bank of Egypt reported that its balance of payments deficit had declined by 20.2 per cent to $3.2bn in the first quarter of its fiscal year, which runs from 1 July.

The bank said that an increase of $1.7bn in natural gas exports was a key factor in helping to shrink the deficit.

Further exploration

Egypt is continuing to advance its plans to further increase oil and gas exploration activities in the country.

On 1 February, Egypt’s cabinet approved 13 draft agreements between national oil company Egyptian General Petroleum Corporation (EGPC), Egas and several international oil companies. It is hoped that the cabinet approval will pave the way for the oil deals to be finalised.

Under the draft agreements, EGPC will be responsible for oil exploration in areas west of Wadi Natrun, east of Siwa, west of Magharra, west of Abu Gharadiq, east of Alam Saweesh and in the Gulf of Suez.

Egyptian Natural Gas Holding Company will be in charge of natural gas and crude oil exploration in the Mediterranean Sea areas, including north of Fayrouz and Rafah, Tiba and Tabiya, as well as northeast of Arish.

Share sales

The oil ministry is also pushing ahead with changes in other parts of its energy sector. Egypt is preparing to sell shares in about 10 state-owned energy companies, according to statements made by Tarek el-Molla, Egypt’s petroleum and mineral resources minister, earlier this year.

The plan to sell stakes in publicly owned energy companies comes after similar moves have been made by Saudi Arabia and the UAE.

Last year, Saudi Aramco Base Oil Company (Luberef) listed shares on the Saudi Stock Exchange (Tadawul) main market. The initial public offering (IPO) raised $1.3bn, making it the biggest share listing on the exchange in 2022.

Saudi Aramco itself listed in Riyadh in 2019 with a $29bn share offering, the world’s largest on record.

Earlier this year, in the UAE, Abu Dhabi National Oil Company (Adnoc) confirmed that it is planning to proceed with an IPO of a minority stake in Adnoc Gas on the Abu Dhabi Securities Exchange in 2023.

In June last year, Adnoc and Austrian chemicals company Borealis listed the petrochemicals joint venture Borouge on the Abu Dhabi Securities Exchange following the completion of Abu Dhabi’s largest-ever IPO and the Middle East’s biggest-ever petrochemicals listing.

The IPO raised gross proceeds of more than $2bn for the offering of 10 per cent of the company’s total issued share capital. It was the fourth consecutive time that Adnoc broke records with an IPO on the exchange.

If Egypt manages to replicate the successful IPO model that has been used in Saudi Arabia and the UAE, the planned share sales could generate billions of dollars that could be reinvested in the country’s energy sector.

Egypt’s management of its oil and gas sector over the past decade has put it in a position to be able to ramp up energy exports at a time of high demand, unlike other hydrocarbons-producing nations in North Africa such as Libya and Algeria, which have struggled to attract investment.

While Egypt is reaping the rewards of high energy revenues due to its effective management of the sector, future energy projects are under threat due to the plunging value of the Egyptian pound.

The weakness of the country’s currency has made it more difficult for the country to import materials and equipment for projects in line with existing budgets.

This has sparked concerns about delays and even the possible cancellation of major projects that are designed to boost the country’s upstream and downstream capacities.

While this is worrying, the impact of the country’s ongoing economic problems may well be minimised if Egypt continues to effectively manage its oil and gas sector in partnership with international players.

MEED's March 2023 special report on Egypt also includes:

> GOVERNMENT & ECONOMYEgypt faces up to economic reality

> CONSTRUCTIONEgypt's construction sector faces delays

> POWERCrisis dampens Egypt’s energy diversification

> WATEREgypt turns to private sector for water

> BANKING: Interesting times for Egypt’s lenders
Wil Crisp
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