Egypt: Gas production falls by strong 17.5% y/y in December – JODI database
Metodi Tzanov
Helping finance professionals understand what is going on in Emerging and Frontier Markets
Gas production fell by a strong 17.5% y/y to 3.79bn standard cubic meters (scm) in December, following a sharper drop of 20.4% y/y in the preceding month, according to data released by the Joint Organisations Data Initiative (JODI). While production bottomed out from the lowest level in more than six years, it remains weak and insufficient to meet Egypt's gas demands. Production has been trending downwards since early 2021 due to water infiltration issues at the country's massive Zohr gas field, high depletion rates at the fields, and weak investment plans. On a positive note, Eni announced recently it plans to invest USD 160mn in Zohr's expansion and BP has just completed the drilling of two new gas wells in the Raven Field. Further, Egypt's oil ministry has paid off USD 4.5bn in arrears to foreign energy companies - the accumulation of these arrears and FX shortages dragged on foreign investments in recent years. A new schedule to settle the remaining arrears had been agreed with the energy companies, and repayment will run from February through June 2025. The government also said it plans to drill 46 exploratory wells with a total investment of USD 748mn in FY 2024/25, as part of a broader push to drill 110 exploratory wells by 2030. International oil majors expressed their interest in expanding investment in oil and gas projects during the just concluded EGYPES 2025 conference, including a deal for the import of Cypriot gas, its liquification and export as LNG to Europe. Egypt expects that gas production will start to recover this year, which will save the country about USD 1.5bn a year in lower gas imports going forward.
Exports plummet, imports rise sharply due to rising energy needs
November marked the 20th month in a row when Egypt recorded a deficit in the gas trade balance. In cumulative terms, gas export volumes fell by sharp 72% y/y to 1.4bn scm in 2024, driven by a sharp decline in LNG exports (-81% y/y), which were partly offset by higher pipeline exports (+19% y/y), albeit from a low base. Meanwhile, gas imports surged by 70% y/y last year. Egypt had to stop LNG exports and redirect gas towards its gas-fired power plants during the summer heatwaves of 2023 and 2024 to meet soaring domestic demand for electricity amidst rolling black-outs. Egypt had earmarked USD 1.2bn to import 21 shipments of LNG and mazut in the 2024 summer in order to ease the black-outs and address Egypt's natural gas shortage crisis. Egypt later announced it would import additional 20 LNG shipments for the winter season at an expected cost of USD 907mn, bringing the total cost to USD 2.1bn last year. We remind the oil merchandise balance recorded a deficit of USD 8.8bn in Jan-Sep, and we think that the full-year deficit may be three times larger than the USD 4.4bn deficit recorded in 2023.
Egypt, which faces growing demand for gas from its population of 106mn, has been trying to set itself as a regional gas hub, selling its own gas and re-exporting Israeli gas as LNG to the Middle East, Africa, and Europe. However, there have been few large discoveries since Zohr, which coupled with the natural depletion of the field have resulted in falling overall gas production. Meanwhile, infrastructure capacity limits the amounts of gas imports and exports through the existing pipelines, while payment arrears dragged on investments in the oil and gas sector. Oil majors such as BP and ENI had committed USD 13bn in exploration in production over the medium term, but Egypt's growing demand for electricity is likely to see the country remaining a net importer of gas this year. The gas shortages have dented the private sector's competitiveness and have put additional financial burdens on consumers.