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Egypt’s ‘Energy Hub’ Plagued With Power Shortages, Output Declines

Amid a heatwave, power shortages and ambitions to become a major energy hub, Egypt has seen its natural gas output drop to a three-year low in the first five months of this year, based on data from the Joint Organizations Data Initiative (JODI), Reuters reports. 

Between January and May 2023, Egypt’s gas production fell by 9% YoY, and by 12% over the same period in 2021. Egypt has had high hopes of becoming a regional energy hub. Those hopes gained further momentum with Russia’s invasion of Ukraine and Europe’s subsequent drive to find alternative energy sources. In 2015, Italian Eni discovered the giant Zohr gas field in Egypt, but discoveries have since tapered off. Zohr’s reserves are estimated at 850 billion cubic meters of gas. Production at Zohr is reportedly declining due to water infiltration issues, according to sources cited by Reuters. Zohr production accounts for an estimated 40% of Egypt’s total gas production. 

Egypt is also working to re-export Israeli gas as LNG, and started importing Israeli gas to that effect in 2020. The outlook in January was more optimistic, when data showed that Egypt had exported some 8 million tons of LNG in 2022, worth up to $8.5 billion due to a price rally. 

That same month, Egypt granted oil and gas exploration rights to Exxon for two offshore blocks in the outer Nile Delta. Presently, Egypt is experiencing a major heat wave that has pushed demand up for cooling. The country is also experiencing sporadic power cuts, which are not common, as temperatures exceed 100F (37.8C). This is Egypt’s hottest month on record, and pressure on the grid is mounting. While $300 million in heavy fuel-oil imports are said to be on the way, a timeline for balancing out the grid and power shortages has not yet been revealed. 

By Charles Kennedy for Oilprice.com

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