EGYPT'S AMBITIOUS OIL AND GAS PLANS

Oil-rich Egypt has big plans for the future of fossil fuel development, with several new auctions and major investments planned for the North African country.

A new $7 billion petrochemical complex and other major oil and gas investments are expected to revive Egypt's oil industry, although it may have to regain investor confidence after a disappointing financial year.

Egypt is a major African producer of fossil fuels and the second-largest non-OPEC producer of liquid fuels after Angola. In 2022, it also became Africa's second-largest natural gas producer, after Algeria. Egypt's expansion of gas production has been spurred by the start-up of several large offshore fields over the past decade, including the Zohr gas field. However, Egypt's gas production is expected to decline in the coming decades, as the Zohr field continues to develop and several recent exploration setbacks occur.

In February, Egypt signed a framework agreement with Britain's Shard Capital and Saudi Arabia's Al-Qahtani Group to build a $7 billion petrochemical complex in the northwestern city of New Alamein. The project will be overseen by a consortium that includes representatives from Shard Capital, Al-Qahtani Group and the United Arab Emirates' Royal Strategic Partners. Once completed, it is expected to produce 3.1 million tonnes of eight different petrochemical products per year.

Karim Badawi, Egypt's minister of petroleum and mineral resources, said the plant's design will integrate advanced technologies to reduce environmental impact. Badawi said the project is key to increasing the value of Egypt's natural resources. The complex is expected to significantly increase Egypt’s export capacity. It is also expected to help deepen ties between Egypt, the Gulf States and the United Kingdom.

In March, Egypt’s Ministry of Petroleum and Mineral Resources announced new investment opportunities aimed at expanding exploration and production activities. The ministry plans to offer seven undeveloped fields in the Mediterranean and six exploration areas in the Gulf of Suez and the Western Desert. Companies will be able to bid through the Egypt Upstream Gateway (EUG) over the next two months, until May 4, 2025.

The ministry recently completed the tender for 13 exploration blocks and mature fields, after receiving numerous proposals, which are currently being evaluated. The combined investment from the previous auction could yield more than $700 million.

The new auction offers seven undeveloped fields in two groups: the Aten, Merit and Rahmat fields and the Notus, Salamat, Satis and Salmon fields. This approach aims to increase return on investment, reduce production costs, and optimize development and production processes.

The government aims to improve Egypt's energy security by developing the country's oil and gas industry.

Untapped natural gas reserves in the Mediterranean are expected to help make Egypt more energy independent in the future, as energy demand in the country continues to grow. Egyptian President Abdel-Fattah el-Sisi sees the country as a hub for production and re-export to international markets.

Egypt, which will host the COP27 climate conference in 2022, has also pledged to expand its renewable energy sector. Before COP27, Egypt had committed to increasing renewable energy production to 42% of its total energy consumption by 2035, before moving that target to 2030. In June 2024, then-Electricity Minister Mohamed Shaker announced an ambitious target of 58% renewable energy by 2040.

However, in October the government revised its green energy target downwards to 40% of the energy mix. Oil Minister Karim Badawi said that natural gas would continue to be an important component of the country's energy mix for several years.

Opening the Mediterranean Energy Conference 2024, Badawi said: “This is a signal for all of us to work together to increase the number of discoveries and attract more investment through exploration tenders, targeting new discoveries in the region, which holds more wealth, especially natural gas.”

The Egyptian government is currently working to restore confidence in foreign companies after the 2024 energy crisis. After a sharp decline in gas production, Egypt was forced to import billions of dollars worth of gas last summer to meet its domestic needs. The Energy Ministry has been forced to resort to load shedding to keep the grid running, as gas supplies run low and demand increases. As Egypt faces a currency crisis, countries including Saudi Arabia and Libya have stepped in to help Egypt finance its much-needed gas imports.

Between March and September 2024, the Egyptian pound devalued by 60%. In addition, Egypt has accumulated a debt for gas and fuel supplies of about $6 billion. Now President Sisi and Energy Minister Badawi are trying to attract new investments through new oil and gas auctions and to reassure companies that already operate in Egypt.