Egypt’s Energy Dilemma: A Balancing Act Amidst Supply Disruptions

By: Suzan Nour

Cairo on July 7, 2024

In a recent development that has sent ripples through Egypt's energy sector, the temporary closure of the Israeli gas field in Tamar for maintenance has compounded the country’s existing challenges in maintaining a stable gas supply.

With the duration of the closure lasting for 10 days, Egypt finds itself grappling with a further reduction in an already strained gas reserve.

The delicate equilibrium between fuel supply and escalating demand in Egypt has been tilting towards jeopardy in recent years. Despite producing 67 billion cubic meters of gas in 2023, the nation had to resort to importing approximately 8.6 billion cubic meters from Israel to meet its consumption needs.

With natural gas constituting a substantial 60 percent of Egypt’s energy mix, any disruption in the supply chain has far-reaching implications for the country's energy security.

The repercussions of this supply shortage reverberated beyond the gas sector, as the ministries of petroleum and electricity declared an extension of scheduled power cuts due to “regional network maintenance.” This decision, resulting in three-hour power outages across the country, points to the mounting challenges faced by Egypt in balancing its energy demand with available resources.

Moreover, the government’s struggle to manage energy finances adds another layer of complexity to the situation. With significant outstanding payments amounting to billions owed to foreign oil companies involved in gas exploration and extraction, Egypt's energy management is under immense strain.

Despite partial payments being made following a financial boost from the Ras al-Hikma deal, the government’s failure to fulfill its recent commitment to settle overdue payments further underscores the financial constraints plaguing the sector.

And, despite plans to increase natural gas production from the Tamar field, this highlights the importance of this offshore resource in meeting Jordan and Egypt's energy requirements.

As summer approaches and electricity consumption rises, exacerbated by high temperatures, Egypt is bracing for an increase in power outages to relieve pressure on its energy resources. The government plans to import more liquefied natural gas from Qatar and Algeria to replenish its dwindling supply, with 13 shipments on the way.

Egypt has ordered a Floating Storage and Regasification Unit (FSRU) from H?egh LNG Holdings Ltd., which is scheduled to arrive in Ain Sokhna in June.

This strategic move aims to increase the country's gas storage capacity while also addressing the immediate supply shortage caused by the closure of the Tamar gas field.

The recent disruption caused by maintenance work at the Tamar field is not an isolated incident, demonstrating Egypt's energy landscape's vulnerability to external factors.

In conclusion, Egypt’s struggle to navigate through the intricate web of energy management challenges highlights the imperative for proactive measures to fortify its energy infrastructure and ensure a sustainable supply chain.

As the country deals with the consequences of supply disruptions and financial constraints, concerted efforts are required to improve energy efficiency, diversify energy sources, and ensure stable, long-term solutions for a resilient energy future.