Numbers released by the Joint Data Initiative (JODI) reveal that natural gas production in Egypt has dropped to its lowest level in three years during the first five months of 2023, raising questions about the country's efforts to transform into a regional energy hub. The country is currently facing an energy shortage as a heatwave has increased the demand for cooling.
From January to May, natural gas production decreased by nine percent year-on-year and by 12 percent compared to the same period in 2021. Egypt is experiencing rising gas demand from its population of 105 million and is also seeking to play a role in supplying the region with gas by selling its gas production and re-exporting Israeli gas in the form of liquefied natural gas to countries in the Middle East, Africa, and Europe.
The Egyptian market received a boost following the discovery of the giant Zohr gas field by the Italian company Eni in 2015, and Cairo began importing natural gas from Israel starting in 2020. However, since then, the number of large discoveries has dwindled, and increasing supplies from Israel depend on significant investments in infrastructure.
Last month, the government stated that the production from the Zohr field reached 2.3 billion cubic feet per day, down from 2.7 billion cubic feet per day in 2019. Analysts and a source in the gas sector indicated that production has decreased due to water leakage issues in the Zohr field, which is estimated to hold reserves of about 30 trillion cubic feet and has a production capacity of 3.2 billion cubic feet per day.
Olumide Ajayi, a senior LNG analyst at the London Exchange, noted, "The decline in production from the field will have a significant impact on gas production as the field provides about 40 percent of the country's total gas output." Both Eni and the Egyptian government denied last week that there are issues with production from the Zohr field. The government claims that well number 20 is currently being drilled in the Zohr field.
In July, the government announced the launch of a program worth $1.8 billion to drill gas exploration wells in the Mediterranean and Nile Delta, and to explore the Nargis offshore field, which is expected to hold reserves of about 2.5 trillion cubic feet.
The electricity outages this summer have also raised questions about gas supplies, which accounted for 77 percent of electricity generation in Egypt in 2022, according to BMI Research. In 2022, the Egyptian government announced a decision to rationalize electricity use to enable more gas exports but stated last month that it would suspend exports until fall to meet domestic demand.
