Are Renewables an Answer to Egypt's Energy Crisis?
Egypt is once again stuck in an energy crisis that it is struggling to get out of. The immediate priority has been to keep the lights on as it urgently seeks new gas import options while pursuing an upstream drive. The crisis is also prompting policymakers to reinvigorate low-carbon transition plans, easing the burden on gas production, and there is new leadership in the energy sector. But it is still unclear if Egypt can seize this opportunity to finally eliminate the boom-and-bust cycle of recent years that looked to gas discoveries, international finance and Gulf Arab state support to come to the rescue. Egypt's military, which plays an outsized role in the economy, also supports the status quo and could be a drag on any wider shift.
Cairo has responded to a surge in consumption amid a summer heatwave by expanding daily power cuts to three hours. In a bid to meet demand over July-September, state Egyptian Natural Gas Holding Co. issued a tender for 17 LNG cargoes in June, which later rose to 21. A medium-term tender for 2027-28 is also on the agenda. New Petroleum Minister Karim Badawi is considering another floating storage and regasification unit (FSRU) at Ain Sukhna on the Gulf of Suez in addition to its recent lease of an FSRU from Hoegh and its use of Jordan’s import facility at Aqaba. There is also a plan, outlined by Badawi last month, to use liquefaction plants at Idku and Damietta on the Mediterranean coast “in reverse.” Exports from both LNG terminals have been severely curtailed during the crisis, but repurposing them for imports could prove contractually complex. Idku operator Shell would not comment on the plans, while Eni at Damietta has yet to comment.
No immediate relief to ever-climbing domestic demand is available from domestic production. The ministry is allocating $1.2 billion to drill up to 110 oil and gas exploratory wells over 2024-25, and by 2030 it wants to drill 586 exploratory wells at a total cost of $7.2 billion. But industry sources calculate that even in the event of another Zohr-style, 30 trillion cubic foot discovery, bringing such a find on stream would take three to four years, at least. The only notable recent find, in early 2023, is Chevron’s 3.5 Tcf Nargis discovery, where the US major plans to drill a development well later this year.
Paying off debts to international oil companies (IOCs) is also part of Badawi’s broader upstream strategy to advance exploration, who recently admitted that arrears to IOCs had resulted in a “decrease in exploration and development plans.” This month, Cairo said it had repaid 20%-25% of the value of arrears due to foreign companies. Egypt took four years to repay the estimated $6 billion it owed IOCs amid a similar macroeconomic crisis in 2016.