Whither Egypt and its nearly 4.4 billion barrels of proven oil reserves and 77 trillion cubic feet of natural gas? Well, it’s never been a cakewalk, getting energy-starved Egypt’s development projects off the ground and its hydrocarbons out of the ground. We think it’s actually going to get easier now, courtesy of a military coup that any Egypt-watcher had to know was coming sooner rather than later. It certainly wasn’t going to happen under President Mohamed Morsi and the Muslim Brotherhood who took power last year, post-revolution, and lost it in a 3 July military coup.
Beyond these reserves, if you don’t think what happens in Egypt is that important on the energy scene—think again.
As much as 12% of all international trade goes through Egypt’s Suez Canal—10% on average—and 22% of the world’s total container traffic. As Juan Cole points out in a recent article, if the Suez Canal were to be closed, it would affect the many commodities. Cole also notes that while Egypt is not a major fuel exporter, the Suez Canal and Egyptian pipelines handle a lot of oil and gas (over 2 million barrels a day of petroleum destined for Western markets). The Suez Canal also handles a lot of LNG shipments, with the UK, Belgium and Italy receiving over 80% of their LNG from here in recent years, while other countries, including the US, Turkey and France receive about 25% of the LNG from this transit point. Further afield, those entrepreneurial spirits looking to export US natural gas eventually to gas-starved Asia will need the Suez Canal to make it work.
Egypt’s Energy Woes
Egypt’s energy woes are serious. There is a long list of grievances, and we’re not entirely sure where to even start here.
Long lines at fuel stations for short-supply subsidized gas that sells for about $0.26 a liter (all told, a whopping one-fifth of the state budget is spent on subsidies of one kind or another)
Domestic demand for energy continue to rise along with the population. At present, demand is higher than oil and gas production in the Nile Delta and the Western Desert.
The Gulf States have been gifting Egypt oil and gas, but only in small amounts, and the country isn’t even logistically capable of handling liquefied natural gas (LNG) imports. The story of the LNG import terminal itself is illustrative of the larger problem. Amid the chaos that was post-revolutionary…