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Egypt’s natural gas production has dropped to the lowest in more than six years just as a scorching summer boosts demand for the fuel.
The North African nation’s output in May was near the weakest since February 2018, according to figures from the Joint Organisations Data Initiative. The decline is a sign that Egypt will struggle to replicate the gas export boom it saw two years ago, and is likely to become more reliant on imports of liquefied natural gas.
Once a supplier for Europe, Egypt is no longer able to produce enough gas to keep its own electricity systems afloat during the summer. The most populous Arab nation is now buying large amounts of the fuel to cope with air-conditioning needs as it grapples with blackouts and periods of idled industrial production.
President Abdel-Fattah El-Sisi’s government has promised to end scheduled power cuts that can last for up to three hours a day starting Sunday. It’s a key challenge for the administration to prevent widespread public discontent after it agreed to a $57 billion international bailout package earlier this year that’s given the state access to funds.
The country’s daily power consumption has exceeded 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 help bridge the gap and reduce energy imports, he added.
While gas supplies most of Egypt’s grid needs, the government wants to get 58% of its electricity from renewable sources by 2040, from 20% now. Yet the country needs funding to update and extend its grid to the sites of renewable projects.
The nation recently received five out of 21 LNG cargoes it sought for the summer and allocated $1.18 billion for extra energy imports. It has said more may be required depending on the severity of the summer heat.
“We expect the recent increase in Egypt LNG imports to extend through the 2025 summer,” Samantha Dart, who leads natural gas research at Goldman Sachs Group Inc., said in a note this week.
Higher demand from Egypt is one of the factors tightening the global gas market this summer, along with more appetite from some Asian nations and outages at some production facilities. As a result, Europe’s seasonal imports of the super-chilled fuel fell below levels seen in the past two years, data from network operators compiled by Bloomberg show.
Egypt’s Petroleum Minister Karim Badawi said this week that oil and gas production has dropped by as much as 25% in the past three years. He said part of the reason was an increase in arrears to foreign oil companies that has slowed down exploration and development programs. The country is working on clearing that backlog, he said.
In addition, production at its massive Zohr gas field has dropped by about a third since 2019, according to Eni SpA, which has stakes in the field. While Egypt hasn’t described any output issues, concerns have been raised that it’s declining amid water infiltration problems.
