a major electricity crisis to be expected in Egypt?

a major electricity crisis to be expected in Egypt?
a major electricity crisis to be expected in Egypt?

Zohr field development halted

Egypt’s natural gas production saw a significant decline last year, forcing the government to implement a “load reduction” plan to deal with power outages.

The situation worsened recently with the announcement by the Italian company Eni to withdraw its drillship Saipem Santorini from the Zohr field due to a $1.6 billion unpaid debt by the Egyptian government.

Context of Eni’s withdrawal

According to the American platform specializing in energy, Energy Platform, Eni’s withdrawal could halt development plans for the Zohr field, Egypt’s largest gas field. Although Eni has already received $270 million, there is still $1.6 billion to settle.

Since last year, Egypt had been seeking to increase production from the Zohr field by drilling and completing 20 wells, with five more planned starting in 2024, according to Egyptian Oil Minister Tarek El-Molla. Last August, Egypt targeted production of 2.2 billion cubic feet of gas per day from the field.

Impacts on production and the economy

An Egyptian Oil Ministry official confirmed the $270 million payment to Eni, but acknowledged that significant debts remain to be settled. Attempts by Oil Minister Tarek El-Molla to convince Eni not to withdraw the drillship have failed.

Last March, Egypt paid $1.5 billion, or 20 percent, of its debts to foreign oil and gas companies, and plans to pay another 20 percent in June. However, Egypt’s persistent lack of foreign currency led to the accumulation of debts, despite some reduction in arrears after the IMF deal and a devaluation of the currency.

Gas production in decline

Data from the Joint Data Initiative (JODI) shows a decline in gas production in Egypt from 6 billion cubic meters in February 2021 to 4.5 billion cubic meters in March 2023.

Production from the Zohr field has declined since 2022, a problem exacerbated by government decisions to quickly maximize gas extraction.

Importance of the Zohr field

  • Located 200 km off the coast of Port Said in the Mediterranean.
  • Discovered by Eni at a depth of 1,500 meters.
  • The field has reserves of 30 trillion cubic feet of gas, or 5.5 billion barrels of oil equivalent.
  • Represents 35% to 40% of Egypt’s daily gas production.

Electricity crisis in Egypt

Egypt experiences frequent power outages, exacerbated by a strategy to export more gas to earn foreign currency. The government also imported polluting fuel oil to keep power plants running.

Although authorities attributed these cuts to rising temperatures, they persisted even after summer 2023, despite gas exports ceasing to meet domestic demand.

Future prospects and challenges

Egypt aspires to become a regional energy exporter, with plans to sell electricity to Saudi Arabia and Libya, as well as connect electricity to Greece.

However, Egyptian President Abdel Fattah al-Sissi recently highlighted the dilemma between frequent power cuts and higher energy prices.

With the cessation of development of the Zohr field, the question arises: will the power outage crisis in Egypt continue?

The answer will depend on the Egyptian government’s ability to settle its debts to energy companies, restart development of the Zohr field and effectively manage the growing energy demand of its population of 106 million.

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