Egypt has been in a seemingly endless financial crisis over the past decade, first due to political turmoil following the 2010 Arab Spring and then due to economic mismanagement. The recent Russian invasion of Ukraine has further exacerbated the complicated economic situation. However, Egypt recently signed a deal with the International Monetary Fund (IMF) to improve its economic outlook. And despite its financial woes, Egypt has continued to be a major international player in energy, with several exploration projects awarded in 2022, and new auctions now going ahead.
In November 2022, BP won two oil exploration blocks offshore the Nile Delta, in the Mediterranean Sea. The Northwest Abu Qir Offshore Area and Bellatrix-Seti East block were awarded to BP by the state-owned Egyptian Natural Gas Holding Company. BP owns an 82.75 percent stake in Northwest Abu Qir Offshore Area, with the rest belonging to Wintershall-Dea, and a 50 percent stake in the 3440km² Bellatrix-Seti East block, with 50 percent owned by Eni. BP was also awarded the North El Fayrouz offshore area, King Mariout Offshore Area, and the North El Tabya area extension in 2022.
Anja-Isabel Dotzenrath, BP gas and low carbon energy executive vice-president, stated of the acquisition, “Egypt has long been important for BP… We now look forward to an even more successful future, continuing to help meet Egypt’s growing energy needs by providing cost-competitive supplies of gas and supporting Egypt through the energy transition by exploring growth opportunities in hydrogen, for example.” BP has invested around $35 billion in its oil operations in Egypt over 60 years.
In late December, Egypt launched a new round of bids for oil and gas exploration rights in the Nile Delta and the Mediterranean Sea. The tender includes 12 blocks, with 6 onshore and the rest offshore. A deadline of April 30, 2023, has been set. The Minister of Petroleum and Mineral Resources Tarek El Molla said that the tender is being offered by Egyptian Natural Gas Holding Co. and is part of the ministry’s strategy to boost investment in oil and gas in Egypt. The strategy, established in 2016, aims to increase international interest and investment in the country’s energy industry. The tender will, once again, be managed online through the Egypt Upstream Gateway, making it easy for potential investors to access information about the blocks.
In addition, Egypt’s gas industry has seen huge success in 2022, with gas exports increasing to $8.4 billion, from $3.5 billion in 2021, as the world shifts away from Russian gas to other sources. The Ministry of Petroleum and Mineral Resources said Egypt announced in December that its natural gas exports rose by 14.3 percent in 2022, at around 8 million tonnes. Liquified natural gas prices have risen significantly over the last year, adding to this profit. Egypt has been self-sufficient in gas since 2018, producing around 64 billion cubic meters a year. The Ministry stated, “The petroleum sector succeeded in investing in the government's plan to rationalize electricity consumption to provide additional quantities of gas for exports.”
The Egyptian government established a plan in August to decrease gas and electricity consumption at the national level to be able to boost its exports to Europe, with a significantly increased level of demand for Egyptian gas due to a shift away from Russian gas.
While Egypt’s energy industry has been gradually expanding in recent years, attracting greater foreign interest in oil and gas, the country has faced a vast array of economic difficulties. Recent reports suggest that Egypt’s economic growth will likely decline to 4.5 percent in the fiscal year 2022-23, from 6.6 percent in 2021-22. This is largely due to the ongoing Russia-Ukraine conflict and the lingering effects of the Covid pandemic.
However, financial aid from the IMF has helped Egypt to create some stability during its ongoing financial crisis, and the recent deal is expected to help finally pull Egypt out of its financial turmoil. In 2016, Egypt was awarded a $12 billion loan from the IMF, for which Egypt devalued its currency, the Egyptian pound, to obtain the loan. However, most of this money went towards military and intelligence agencies, with many Egyptian citizens being plunged into poverty due to poor decisions from the government. Now, the IMF is offering Egypt a new agreement, providing a loan with stricter terms, which will require the government to establish a comprehensive financial reform plan for the next 46 months.
This financial support is expected to ease Egypt’s economic crisis and support the further development of its energy industry. The IMF will provide $3 billion in funding for the Egyptian government to stabilize its economy while developing a clear economic reform, which is expected to aim towards providing social security, encouraging private-sector-led growth, and boosting job creation.
While Egypt continues to face economic uncertainty, recent support from the IMF offers some hope. The country’s energy industry has continued to perform, despite the ongoing economic crisis, and greater economic stability will only boost the sector further.
By Felicity Bradstock for Oilprice.com
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