Egypt’s energy sector is experiencing a renaissance thanks to a series of exciting gas discoveries and the government’s long-overdue reform of the sector. It is a remarkable turnaround for the African nation, which had to halt gas exports and begin imports in 2015, amid rolling electricity blackouts, as fields declined faster than forecast and domestic demand soared, while political instability deterred international oil companies (IOCs) from investing in their upstream assets.
The dramatic change in fortunes has come as a result of the government tackling long-standing issues affecting the energy sector, namely initiating a phase out of fuel subsidies; reducing payment arrears to IOCs to just $1.2bn at the end of 2018, the lowest level seen since 2009/10 (arrears peaked at $6.3bn in 2011); improving the terms of production sharing agreements; and overhauling key legislation.
Egypt has held seven oil and gas licensing rounds since 2013, ending a three year hiatus and leading to a major step up in exploration and development activity. The big breakthrough came with discovery of the Zohr field in 2015 – the biggest ever find in Egypt and the Mediterranean Sea. Its fast-tracked development has helped Egypt reduce its gas shortage and its $250m monthly gas import bill, and has boosted the appetite for exploration in Egypt among foreign energy companies.
In its current licensing round, Egypt is opening a new frontier by offering exploration blocks in the Red Sea for the first time. The country is also working on plans to become an energy hub for the East Mediterranean and has opened up its gas market to competition. All this activity makes Egypt is one of the most exciting energy markets in the Middle East and North Africa.
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