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Egyptian exploration: can a desert be green?

As the Egyptian economy continues to grow at speed, so too does the country’s appeal to foreign investors in oil and gas. Ordinarily this would be a good thing, and arguably is in the most part. But as Andrew Tunnicliffe reports, it is presenting the country’s leadership with a challenge that could fast become a real bone of contention with the international community. 

Egyptian exploration: can a desert be green?

The March 2021 blocking of the Suez Canal drew the world’s attention to the importance of the international trade route. According to figures from the Suez Canal Authority, in 2019 more than 51 vessels passed through the waterway each day, largely container ships and tankers servicing the world’s economy. The six-day blockage had supply ramifications lasting for weeks afterwards.  

With the Egyptian economy built mostly on agriculture and tourism, the country’s oil and gas industry can often be overlooked. However, according to data from the International Trade Administration (ITA), the sector accounted for 13.6% of GDP in 2018, and alongside the vital role the Suez Canal plays in the transit of oil and gas – enabling the government to generate significant funds – Egypt is investing tens of billions into oil and gas itself.  

Explorative endeavours 

At the end of 2017 the Zohr gas field began production. It is believed to be the “largest-ever gas discovery in Egypt and the Mediterranean”, according to operator Eni. The Italian oil major took steps to increase production in 2020, including the drilling of two additional wells linked to an onshore production facility and the optimisation and upgrade of the subsea facilities and an onshore treatment plant. The ITA estimates production to be in the region of 30 trillion cubic feet 

Other significant gas fields finds include Nooros in the Nile Delta and Atoll in the East Delta, producing 32 million and 350 million cubic meters per day, and 10,000 barrels of condensate, respectively.  

Late last year Eni announced it had made further new oil and gas discoveries in and around Meleiha in western Egypt, and in the last week of 2021, it signed a billion-dollar deal for oil exploration and exploitation in the Gulf of Suez and the Nile Delta. Announcing the news, Egypt’s Petroleum Minister Tareq el Mulla said the government’s strategy aims to “encourage partners to pump more investments into the field of oil and gas exploration and back the country’s proven oil reserves”.  

“A total of 295 [discoveries] were made, according to media analysis provider Al-Monitor, 197 in crude oil and 98 in natural gas.”

The Meleiha discoveries potentially represent 50 million barrels of crude oil, equivalent to 6,000 per day. The finding, Eni said, shows the company continues to “pursue its successful near field and infrastructure-led exploration strategy in the Egyptian Western Desert through Agiba, a joint venture between Eni and Egyptian General Petroleum Corporation, which allows a quick valorisation of these new resources”. 

As well as the significant discoveries there have been a few hundred others, of oil and gas reserves, in recent years. A total of 295 were made, according to media analysis provider Al-Monitor, 197 in crude oil and 98 in natural gas; 62 were discovered in 2020 alone according to the Ministry of Petroleum and Mineral Resources.

As a result, Egypt, its oil and gas sectors and its drive to become energy self-sufficient seem to have a bright future. The country says it hopes to be oil self-sufficient by early 2023 and has ambitions to be a regional energy hub, under its National Energy Efficiency Action Plan, having already signed agreements with several other nations on cooperation.  

It seems Egypt has a lot to offer in terms of oil and gas, both at a domestic and international level. Despite the pandemic, the country continues to enjoy significant sector growth, with reserve finds and international investment seemingly unabated in the most part. The government also believes there remains a lot left to discover. 

Local and international investment 

Egypt is actively seeking investment from international oil companies, boasting significant energy resources both in traditional fossil fuels and in renewables. “Egypt’s proven hydrocarbon reserves stood at 3.3 billion barrels of oil and 77.2 trillion cubic feet of natural gas at the end of 2018,” says the ITA in its 2021 Energy Resource Guide.   

The involvement of the international oil and gas community has, arguably, allowed Egypt to develop its domestic sector far quicker than it otherwise might have. More than 80 exploration deals have been signed by international players since 2013, and over the last decade the country has seen several significant reserve discoveries. 

“Egypt plans to use imported gas for domestic use and re-export to global markets through its liquified natural gas facilities on the Mediterranean coast.”

The ITA reports that in 2020, and as part of a deal estimated to be $20bn, US-based Noble Energy, Israel’s Delek Drilling and Egypt’s Dolphinus Holdings began pumping natural gas from the Tamar and Leviathan fields in Israel to Egypt. It added: “In addition, Egypt has concluded an agreement with Cyprus to build a subsea pipeline between the two countries. Egypt plans to use imported gas for domestic use and re-export to global markets through its liquified natural gas facilities on the Mediterranean coast.” 

Domestically, the country is investing heavily in its oil and gas infrastructure, including a $7bn package to upgrade its refineries and build seven new ones. The move is an effort to cut Egypt’s reliance on imported refined products as part of a Ministry of Petroleum and Mineral Resources plan. It also wants to become a major exporter itself, with natural gas – in which it is already self-sufficient– identified as a key market.

The country’s government is looking at markets in Asia, including China, India and Japan, supplied via routes across Europe, and to expand its presence in the European market, too. 

Climate change challenges 

However, Egypt faces a major challenge: how can its oil and gas sectors become the foundation of an economic revolution whilst the country attempts to be a key international player in the fight to address the increasingly grave issue of climate change? 

Announcing its National Climate Change Strategy 2050 at COP26 in Glasgow, the country said it has identified some key activates in fighting climate change. They include improving the efficiency of buildings and vehicles, lowering greenhouse gases, promoting good governance and encouraging climate investments, and supporting increased research into the field. Minister of Environment Yasmine Fouad said the strategy will address the effects and repercussions of climate change by adopting a flexible, low-emission approach.  

The country enjoys substantial natural resources, including wind and solar. At the end of 2021, two significant renewable projects were announced, both providing 500MW of capacity once operational within the next three years: a solar power plant planned at Kom Ombo in the Aswan governorate in the south, and a wind plant in Ras Gharib on the Red Sea coast. 

“Egypt possesses an abundance of land, sunny weather and high wind speeds, making it a prime location for renewable energy projects.” 

“Egypt possesses an abundance of land, sunny weather and high wind speeds, making it a prime location for renewable energy projects,” said the ITA in a 2020 report. It added the 2035 Integrated Sustainable Energy Strategy, which builds on previous strategies, emphasises the importance of renewable energy.

“Egypt intends to increase the supply of electricity generated from renewable sources to 20% by 2022 and 42% by 2035, with wind providing 14%, hydro power 2%, photovoltaic 22% and concentrating solar power 3% by 2035,” the report added. 

The work Egypt is doing in renewable energy and the fight against climate change is notable; however, it can often seem conflicted by the government’s push to promote its fossil fuels industries. It’s a point John Kerry, former US presidential candidate and now the country’s leading climate change diplomat, made on a visit to the North African state. 

Speaking to Quartz Africa he said: “It’s fair to say we would have some concerns about large-scale oil and gas deployment at this point in time because we know there are alternatives.” He urged the country not to over-invest in legacy fuels and praised the steps it had taken to promote the widespread use of renewable energy. However, Kerry said that although there was still some life left in fossil fuels, if Egypt wanted to be taken seriously in its commitments to fighting climate change, it had to lead by example. 

The country and its leadership have some very real issues to address in its economic and environmental strategies. How can its economy thrive and continue to make the most of the reserves it has below ground, whilst playing its part in addressing the changes taking place in the world above it? One thing if for certain, it is not on its own in contending with that dilemma. 

Main image: Aerial view of an oil production rig and boat in the red sea, Egypt, Africa.