The Egyptian presidential election is the most important political development flowing from the “Arab spring,” with enormous implications for the entire Middle East.
According to partial results on 25 May American-educated Mohammed Morsi, Egypt's Muslim Brotherhood Freedom and Justice Party candidate, won the most votes in a run-off election in Egypt's first genuinely competitive presidential election. A Mubarak appointee, former Prime Minister Ahmed Shafiq and Hamdeen Sabahi, regarded as a leftist and a supporter of the nationalist, socialist ideology of Gamal Abdel-Nasser, Egypt's president from 1956 to 1970, were contesting second place and a chance to run against Morsi in the run-off vote, to be held on 16-17 June, with the victor to be announced on 21 June.
The Muslim Brotherhood, which was suppressed under Nasser and illegal until last year’s toppling of Mubarak, is hoping for a presidential victory to cement its political power in Egypt, where it already holds nearly half of parliament after victories in elections held in late 2011.
The Muslim Brotherhood has promised a "renaissance" of Egypt, not only reforming Mubarak-era corruption and reviving decrepit infrastructure, but also bringing a greater degree of rule under Islamic Sharia law, which has unsettled moderate Muslims, secular Egyptians and the country’s Coptic Christian minority.
Whoever wins the presidency next month will be faced with substantial fiscal problems, as the Egyptian economy has suffered immensely in the 16 months since Mubarak’s ouster, with unemployment rising above 12 per cent and shrinking foreign currency reserves. Mubarak's government dodged making crucial reforms for years, such as reducing subsidies for energy and food, while analysts predict that rising gasoline prices and electricity shortages will most likely impact the Egyptian economy in the coming months.
Accordingly, energy will be one of the most immediate issues facing Egypt’s new president.
On the plus side, Egypt not only has the largest population in the Middle East, but is one of the Arab world's most diversified economies with oil and natural gas reserves, world-class tourist attractions and a strategic trading location between Europe, the Middle East and Africa, which explains why no major investors have left Egypt since Mubarak’s ouster. The new administration could improve Egypt's economic prospects should it prove to be less corrupt than Mubarak’s.
On the plus side of energy news, on 24 May Italy’s Ente Nazionale Idrocarburi (ENI) announced a major oil discovery in its Meleiha Concession in Egypt’s Western Desert, 180 miles southwest of Alexandria. ENI’s Emry Deep 1X exploration well, which led to the discovery, was drilled to a depth of 2.26 miles. During the production test, the Emry Deep 1X exploration well produced 3,500 barrels of high quality (41 ° API) oil per day (bpd) and about 28,000 cubic meters of associated gas per day.
ENI estimates that its Meleiha Concession could hold 150-250 million barrels of oil, to be determined by further appraisal drilling. The field’s full development foresees an early production phase from the current well to be followed by the drilling of other development wells in 2012 to reach a production level of approximately 10,000 bpd in coming months. ENI believes that the new discovery could be worth between $800 million and $1billion.
ENI, which has been operating in Egypt since 1954 through its subsidiary International Egyptian Oil Company (IEOC), owns a 56 per cent working interest in the Meleiha Concession, with Russia's Lukoil holding a 24 percent stake and Japan's Mitsui owning 20 percent. In Egypt's Western Desert ENI already produces about 36,000 bpd in five different development licenses.
And, unlike Egypt’s eastern neighbour Saudi Arabia, which has been nervous about the implications of the Egyptian revolution, Qatar, which was always more enthusiastic about Egypt's political changes, is focusing more on private-sector investment there, most notably when earlier his month, Qatar Petroleum engaged in “serious” talks about investing in an Egyptian oil-refinery project.
But these are long term –projects. Egypt’s new leaders, whoever they will be, will be facing more immediate expectations from their voters, such as the maintenance of fuel subsidies, the removal of which has been a key tenet of international lending institutions such as the World Bank and International Monetary Fund. If Egypt’s new rulers do not get it right out of the starting gate, then they could well be faced with renewed crowds surging yet again into Tahrir Square to voice their displeasure. Accordingly, the new administration’s agenda will require adroit juggling of the electorate’s expectations with finding the international fiscal assistance required to lift the country out of the economic doldrums, a tall order by any yardstick.
By. John C.K. Daly of Oilprice.com