Egypt Oil and Gas Report Q3 2019

Figure 1: Egypt’s oil and gas fields

Source: Ministry of Petroleum

Egypt’s oil consumption overtook local production in 2010. In 2018, the country produced 670,000 barrels a day (b/d) of oil (including condensates and natural gas liquids), and consumed around 760,000 b/d, with the gap being plugged by imports. Output peaked in the mid-1990s and then entered decline as fields in the Gulf of Suez matured.

Figure 2: Egypts oil products vs consumption

Source: BP Statistical Review of World Energy

Egypt’s gas market has experienced fluctuating fortunes over the past 20 years, swinging from significant surplus to deficit and then recovering strongly to an almost balanced market in 2018.

Egypt became a gas exporter in the mid-2000s, through a pipeline to Jordan and LNG facilities at Damietta and Idku, but low gas prices acted as a disincentive for IOCs to continue their exploration efforts, especially in more challenging areas. Export volumes soon tapered as the producing gas fields depleted faster than expected, meanwhile domestic consumption grew strongly. In the chaotic aftermath of the 2011 revolution, a gas shortage developed as IOCs stopped investing in their assets. The government was forced to halt LNG exports and divert the gas to the local market, which was suffering from crippling power outages.

Gas production has recovered sharply since 2016 thanks to the government’s efforts to clear its debts and improve the terms offered to IOCs, which has incentivised foreign energy companies to invest in Egypt’s upstream sector again and to fast-track field developments. Previously, the gas price was set at $2.73 a million BTUs.

Output from Zohr and the West Nile Delta in particular have helped rebalance the gas market, and while exports remain a fraction of what they should be, Egypt has at least been able to cease LNG imports in 2019.

In 2018, Egypt produced 58.6 billion cubic metres of gas, while demand was a little higher at 59.6 billion cubic metres.

The power sector accounts for more than 60% of Egypt’s gas consumption, followed by industry (23%), petrochemicals (9%) and households (5%).

FIgure 3: Egypt’s gas production vs consumption

Source: BP Statistical Review of World Energy

Figure 4: Egypt’s LNG Imports

Source: BP Statistical Review of World Energy

Figure 5: Egypt’s LNG Exports

Source: BP Statistical Review of World Energy

Egypt has the most extensive gas pipeline network in Africa. As of the end of June 2018, the length of the national gas grid was more than 51,000 kilometres, with a capacity of some 240 million cubic metres a day. More than 8.8 million residential consumers have been connected to the grid since 1981.

Figure 6: Egypt’s National Gas Grid

Source: EGAS

Egypt’s proven oil reserves totalled 3.3 billion barrels at the end of 2018, accounting for 0.2% of the world total. Its gas reserves amounted to 2.1 trillion cubic metres, some 1.1% of the world total.

Egypt’s main oil and gas deposits are clustered in the Gulf of Suez, the Eastern and Western Deserts and the Nile Delta regions.

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.