Egypt has played a leading role in the global energy market for several decades, as a major producer of both oil and gas, as well as a vital transportation hub for energy products. Despite disruptions, caused mainly by national political unrest and geopolitical challenges in recent years, Egypt remains a major energy power in Africa. The government recently announced ambitions to expand its exploration activities for national gas, as well as continue financing an increase in the country’s renewable energy capacity in the coming decades.

Egypt is a major African fossil fuel producer, with the second-largest output of liquid fuels of a non-OPEC country in 2023, after Angola. It was also the second-largest producer of natural gas in Africa in 2022, after Algeria. The expansion of Egypt’s gas production has been supported by the launch of operations at several major offshore fields over the past decade, including its Zohr field. Egypt’s gas production has been forecast to fall in the coming decades as Zohr matures, as well as due to several recent exploration failures.

The North African country remains a key player in international energy due to its leading role in energy transportation. It operates both the Suez Canal and the Suez-Mediterranean (SUMED) Pipeline, which are vital for connecting international energy markets, primarily joining the Persian Gulf with Europe and on to North America. It is also the only country in the Eastern Mediterranean region with operational LNG export capacity, as well as the only country in the region that can import natural gas from other countries, which contributes to its reputation as an LNG hub.

In terms of a green transition, Egypt announced a renewable energy goal of 42 percent ahead of the COP 27 climate summit, which it hosted in 2022. This goal was increased to 58 percent by 2040, in June 2024. However, this October, Egypt’s Petroleum Minister Karim Badawi announced new plans to reduce the country’s 2040 renewable energy target from 58 percent to 40 percent to instead focus more closely on expanding Egypt’s natural gas sector.

“This is a message to all of us to work together to increase discoveries and attract more investments through the bids being offered for exploration, aiming to achieve new discoveries in the region, which holds more wealth, particularly natural gas,” Badawi stated at the inaugural session of the Mediterranean Energy Conference 2024.

Many international oil and gas companies cut ties in recent years with Egypt due to hard currency shortages in the North African state, which led to Egypt owing billions of dollars. Now, Badawi aims to rebuild these relationships, having held several meetings with major oil and gas players since becoming Petroleum Minister in July. Italy’s Eni has already announced plans to begin drilling additional wells in the Zohr field in early 2025 to boost output.

Nevertheless, several ambitious renewable energy projects are already underway in Egypt, which point to a greater diversification of the country’s energy mix over the coming decades. In September, AMEA Power announced plans to develop the largest solar photovoltaic (PV) project in Egypt to date. The project will expand AMEA’s total wind and solar energy capacity in Egypt to 2 GW, alongside 900 MWh of battery energy storage systems. The firm plans to invest $800 million in two major green energy projects in Egypt – a 1 GW solar PV plant and a 600 MWh battery storage project in the Benban area in the Aswan Governorate. Egypt is in the global ‘sun belt’, which means it experiences an average of 9 to 11 hours of sunlight a day, with few cloudy days. This puts it in the optimal position for solar energy production.

Another key focus for Egypt is green hydrogen. In March this year, the Egyptian government set an aim to achieve $40 billion in investment in the green hydrogen and clean technology sectors over 10 years and signed seven memoranda of understanding with several international players. The projects are set to be located in the Suez Canal Economic Zone, with $12 billion in investment for the pilot phase and an additional $29 billion to support operations, according to Egypt’s Planning Minister, Hala el-Said. 

Egypt aims to establish itself as a green hydrogen and renewable energy hub, supported by its strategic position between Asia, Africa, and Europe. Several countries are investing heavily in the development of green hydrogen projects as they explore the potential use of clean fuels as an alternative to fossil fuels. Many countries without green hydrogen production capabilities will likely seek to import the fuel in the coming decades to help decarbonize hard-to-abate industries in line with a green transition. With its abundant solar power potential, Egypt could become a major producer and exporter of the clean fuel.

Egypt is expected to expand its natural gas exploration activities in the coming years, supported by both public and private funding, according to Egypt’s Petroleum Minister. This has led the North African country to reduce its renewable energy targets. However, with great potential to expand its green energy capacity and several projects already underway, Egypt is expected to greatly diversify its energy mix in the coming decades.

By Felicity Bradstock for Oilprice.com

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