Tumultuous times post-Revolution disrupted tourism and investment, thus draining the country’s foreign currency reserves. FX shortages caused mounting arears to international oil companies (IOCs) that deterred new drilling and production investment, resulting in the worst energy shortages in a decade.
Securing the $12 billion IMF facility has led to the implementation of much-needed economic reforms, including those supporting the revitalization of Egypt’s natural gas sector. The government has developed a plan to clear its back payments to IOCs and raised the rates it pays for domestically produced natural gas. It has also begin to redefine its energy subsidy system, historically consuming c. 20% of the country’s GDP and hindering the state’s ability to pay IOC dues. Lifting energy subsidies and paying down debt as part of the IMF agreement, plus ever-increasing demand for natural gas, is bringing investors back to Egypt.
Egypt is the largest non-OPEC oil producer in Africa and the second-largest dry natural gas producer on the Continent. The country also has a strategic position in oil transfer as the operator of the Suez Canal and Suez-Mediterranean Pipeline. The Zohr discovery, the largest ever in the Mediterranean, could be transformational for Egypt’s energy industry, enabling the country to achieve natural gas self-sufficiency before 2020.
The Zohr field, discovered two years ago, began production in December 2017 that should soon begin to ease Egypt’s current shortage. Zohr holds the potential to significantly increase Egypt’s production of natural gas, allowing the country to cut back on imports and potentially emerge as the Eastern Mediterranean’s next energy export hub.