Egypt energy sector at turning point after $3bn LNG deal: experts

Egypt signed $3 billion worth of agreements with Shell and TotalEnergies to secure 60 shipments of LNG for 2025. The deal was made sometime in late 2024, according to S&P Global Commodity Insights.

In line with the previous Egyptian deals, market players expect the current deal also to be on a floating price basis, linked to the Dutch TTF. However, unlike the tenders, which entailed extended payment terms of 180 days, this deal could have payment term flexibility ranging up to a year, according to market sources.

According to Platts’ assessment, “the East Mediterranean marker for February delivery averaged $13.851/MMBtu, and the price for January delivery averaged $14.279/MMBtu. EMM for March delivery was assessed at $16.096/MMBtu on February 6th, a 41.5-cent/MMBtu discount to TTF month-ahead and a 13.5-cent/MMBtu premium to Northwest European and West Mediterranean LNG markets.”

Egypt’s gas output fell drastically in 2022 due to a decline in production at the Zohr field and legacy Nile Delta fields. This was compounded by a challenging macroeconomic climate and limited exploration success, which has turned the country into a net gas importer again.

However, to meet domestic demand, Egypt increased its gas imports in 2024, both piped imports from Israel and LNG imports on the spot market.

Recently, the government partnered with drilling waste management company TWMA for a natural gas exploration project in Egypt. The project’s location in the Mediterranean Sea represents a significant milestone and highlights the expanding potential of Egypt’s natural gas reserves.

Egypt hopes to resume exporting gas in 2027 through a bail-out from international partners. According to data from Energy Aspects, a consultancy, the country’s domestic output is expected to drop further by 22.5% by the end of 2028. Meanwhile, analysts expect the country’s power consumption to increase by 39% over the next decade.

Omar El-Gammal, an engineer at Expro Egypt, a global energy company, told Gas Outlook that Egypt’s energy landscape is at a critical turning point. He said domestic gas production has faced some declines due to natural reservoir depletion and increasing technical challenges in mature fields, while power consumption is steadily rising due to industrial expansion, economic growth, and population increase.

“However, it’s important to recognise that Egypt has a strong foundation in the energy sector, with a well-established infrastructure, strategic regional positioning, and a dynamic approach to overcoming challenges.”

El-Gammal expressed strong optimism within the industry regarding Egypt’s potential to regain its position as a regional energy hub. He further said the Mediterranean remains one of the most promising frontiers for natural gas discoveries, and partnerships with leading global companies, such as TWMA, are expected to unlock new reserves.

“With advanced exploration technologies, improved data analysis, and continued investment in offshore development, Egypt has a solid chance of discovering substantial new gas fields. The industry believes that, with the right strategic moves, Egypt can not only reverse its net importer status but also strengthen its role as a key natural gas exporter in the region. The future is promising, and with Egypt’s resilience and forward-thinking approach, we remain confident that our energy sector will continue to thrive,” he added.

Long-term security

El-Gammal said the Egyptian government is taking proactive steps to secure long-term energy sustainability. He noted that there is a strong push for enhanced exploration and production (E&P) activities, with a particular focus on untapped deepwater reserves in the Mediterranean and the Red Sea.

“Additionally, Egypt is heavily investing in renewable energy projects, such as solar and wind farms, to diversify its energy mix and reduce reliance on gas-fired power plants. The country is also advancing energy efficiency programmes and modernising its gas infrastructure to optimise production and distribution.”

Dr. Ibrahim Kshanh, an energy and sustainability manager at Egyptian Petrochemicals Holding Company, told Gas Outlook that Egypt has made significant progress in renewable energy, yet short-term energy security must include LNG imports. He said the $3 billion LNG deal aligns with Egypt’s strategy to ensure stable energy supplies for power generation.

“Egypt’s energy security strategy extends beyond fossil fuels, with a comprehensive plan to establish itself as a regional clean energy leader. Scaling up renewable energy & grid modernisation, increasing wind and solar capacity to align with global net zero benchmarks (60% by 2030),” he added.

Net zero

El-Gammal stressed that while the recent $3 billion LNG deal underscores the importance of maintaining a stable energy supply, it does not contradict Egypt’s long-term net zero commitments.

The engineer said this instead reflects the reality of a transitional energy phase in which natural gas serves as a bridge fuel, supporting economic growth and energy stability while the country expands its renewable energy capacity.

“To align with its net zero targets, Egypt is actively investing in large-scale renewable energy projects, such as the Benban Solar Park and the Gulf of Suez wind farms. The country is also developing green hydrogen and ammonia projects, aiming to position itself as a regional leader in clean energy production. Additionally, Egypt is modernising its industrial sector by implementing energy efficiency programmes, electrification initiatives, and carbon capture technologies to reduce emissions.

“Furthermore, the government’s energy strategy focuses on gradually reducing fossil fuel dependence while leveraging its existing gas infrastructure to integrate cleaner alternatives. The LNG imports are a short-term necessity, but Egypt’s long-term vision remains firmly rooted in sustainability, with a clear roadmap toward a greener and more resilient energy future.”

Kshanh emphasised that to reconcile LNG reliance with net zero commitments, the Egyptian government must adopt a dual approach to accelerate renewable energy expansion. 

“Egypt aims to generate 42% of its electricity from renewables by 2030, up from 12% in 2023. In addition, Egypt aims to diversify energy sources and position Egypt as a green hydrogen hub, potentially reducing fossil fuel dependency. Moreover, it improves energy efficiency.

“Egypt is facing economic pressure due to geopolitical conditions and conflicts surrounding it from all directions. Additionally, it is not a major global contributor to GHG emissions. Therefore, to bear the costs of carbon neutrality plans and keep pace with ambitious global net-zero targets, Egypt must receive adequate support, whether through financing or technology transfer. This is essential given Egypt’s vast potential, which enables it to play a significant role in the energy transition both regionally and globally,” he concluded.