Egypt has secured 60 cargoes of liquefied natural gas (LNG) for 2025 through agreements with Shell and TotalEnergies valued at approximately $3 billion, Reuters reported on Thursday.
Egypt, the Arab world’s most populous nation, reversed its position on natural gas trade in the past year.
Due to a significant decline in domestic natural gas production, Egypt shifted from being a potential gas exporter to Europe, as previously planned, to becoming a net importer of the commodity.
This shift led to the country purchasing numerous shipments of natural gas to meet its domestic demand.
Decline in domestic gas supplies
Egypt’s domestic gas supplies experienced a significant decline in September 2024, reaching their lowest point in seven years.
This decrease, as evidenced by data from the Joint Organisations Data Initiative, was primarily attributed to a combination of factors.
The Zohr gas field, a major source of domestic gas production, saw a reduction in its output during this period.
Simultaneously, the country experienced a surge in power consumption, placing additional strain on the already limited gas supplies.
This confluence of lower production and higher demand led to the substantial drop in domestic gas availability, raising concerns about Egypt’s energy security and potentially impacting various sectors reliant on gas for their operations.
The country’s demand for the year would be mostly covered by the 60 cargoes, according to sources who spoke on the condition of anonymity to Reuters.
Long-term contracts
In November, Reuters reported that Egypt was engaged in discussions with companies based in the US and other foreign countries.
The objective of these talks was to secure long-term contracts for the purchase of LNG.
This strategic move by Egypt aims to reduce its dependence on the spot market for LNG procurement, which is known for its price volatility and can result in higher costs.
During the peak summer season, the demand for gas surges significantly due to the extensive use of air conditioning.
To address this heightened demand, Egypt had to procure numerous LNG cargoes from the spot market.
This spot market, characterised by its immediate delivery and fluctuating prices, often requires buyers to pay a premium.
In Egypt’s case, this premium amounted to an additional cost of $1 to $2 per unit of gas, according to the report.
This additional expenditure highlighted the challenges countries face in securing energy resources during periods of high demand, and the financial implications of relying on the spot market for urgent supplies.
Rise in prices added to woes
The increase in LNG spot prices from roughly $12/mmBtu to over $14 per million British thermal units (mmBtu) in 2025 has added to the financial burden of Egypt, a country already grappling with a foreign currency shortage.
This price surge has occurred since Cairo began its LNG tendering process.
Egypt issued a tender in January seeking four LNG cargoes for delivery between February and March.
Depending on demand, market conditions, and prices, Egypt may issue another spot tender later this year, Reuters reported.
Data from consultancy Energy Aspects found that domestic gas output is expected to fall by 22.5% by the end of 2028.
At the same time, analysts expect the country’s power consumption to rise by 39% over the next decade, according to the report.
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