As reported by Bloomberg, Egypt’s Natural Gas Holding Company (EGAS) has recently finalized the acquisition of at least one LNG shipment scheduled for delivery in the forthcoming month, with ongoing efforts to secure additional consignments. The LNG will be imported through the Aqaba terminal in Jordan following the expiration of its previous agreement with the BW Singapore floating storage and regasification unit in 2023.
This proactive initiative aligns with Egypt’s overarching strategy to guarantee a consistent and reliable gas supply, vital for mitigating the impact of its sweltering summers, where temperatures soar up to 122°F (50°C). The susceptibility of residential and commercial infrastructures to power outages underscores the critical nature of this endeavor.
With Egypt teetering on the edge of a $50 billion international bailout aimed at alleviating its most severe economic crisis in decades, the country is gearing up to increase its imports. However, there’s a downside: extensive purchases may deplete foreign currency reserves, especially with dwindling Suez Canal revenues due to Houthi attacks on shipping in the Red Sea.
In a significant shift from 2018, when domestic production surged from the Zohr field, Egypt has resumed LNG imports. This shift from exporter to importer is driven by a sharp decline in local gas production, attributed to the natural depreciation of fields, as explained by Oil Minister Tarek El-Molla in February. Additionally, disruptions in gas supply, such as Chevron's shutdown of production from the Tamar gas field offshore Israel during the Hamas-Israel conflict, have further strained Egypt's gas imports and exports.
According to Ziad Daoud, Bloomberg Economics' chief emerging-markets economist, while Egypt awaits a substantial bailout, it still faces financial obligations. The bailout will address import backlogs, settle international corporation arrears, and ease capital restrictions but also adds to the financial strain of transitioning to an importer.
The state-run entity plans to lease a natural gas import terminal from providers of FLNG units while working to secure a five-year contract, with the possibility of extending it, to address Egypt's increasing demand for gas. Egypt's move into the LNG market coincides with decreased prices from the 2022 record highs, with European gas prices down by 20% due to a mild winter and reduced industrial consumption, leading to ample supplies.
Considering last year's halt in LNG exports during peak heat, similar measures might be necessary this year, as indicated by El-Molla, with no shipments since March 11. He previously stated exports would continue until March or April before local consumption rises in summer.
In February 2024, Egypt secured a landmark investment commitment of $35 billion from the United Arab Emirates (UAE), which represents the largest inward investment in the country’s history. This deal was part of a broader strategy to address Egypt’s foreign-exchange crisis and included plans for the development of Ras El-Hekma, a coastal area west of Alexandria.
Following this, the International Monetary Fund (IMF) approved an augmentation of its loan program for Egypt, increasing the total bailout package to $8 billion. This move is aimed at supporting Egypt’s economy, which has faced challenges such as a foreign currency shortage and soaring inflation.
Additionally, the European Union announced an $8 billion aid package for Egypt, which includes both grants and loans over the next three years5. This package is part of the EU’s efforts to support Egypt in fortifying its borders, especially with Libya, and to assist in hosting Sudanese refugees fleeing conflict.
The World Bank, along with other international entities, is also expected to provide financial support, although specific details on the World Bank’s contribution were not found in the search results.
To manage its economic challenges, Egypt has begun utilizing these funds to settle arrears with foreign oil companies operating within the country. The government has initiated a plan to clear 20% of its debt to these companies as a first step. This action is part of a broader effort to rebuild confidence and attract further foreign investment in Egypt’s energy sector.
