A recent report issued by Capital Economics said that Egypt’s gas sector is expected to play a key role in boosting the economy in the few coming years.
Last week, Egypt’s President Abdel Fattah Al-Sisi inaugurated the Zohr gas field which, combined with the onset of production from a number of other fields, will provide a sizeable boost to GDP growth over the next few years and also help to rein in the country’s large twin budget and current account deficits.
That said, investment into the gas sector will need to be raised further if these gains are to be sustained beyond the next five years.
The inauguration of the Zohr gas field followed the announcement late last year by Italian energy company Eni that it had commenced initial production from the field.
The start of production from Zohr, combined with that from the Atoll field at around the same time and from the West Nile Delta development earlier in 2017, marks another milestone in the turnaround of Egypt’s energy sector over the past couple of years.
Historically, Egypt has been an exporter of gas, but the sector had struggled in recent years as a
confluence of factors deterred international oil companies from investing in Egypt.
In turn, faltering production meant the country became a net gas importer in 2015.
At the same time, insufficient gas supplies resulted in electricity benefits from the start of production from Zohr, preventing blackouts that hampered economic activity.
The start of production at Zohr and the West Nile Delta will bring substantial economic benefits to
Egypt.
This is likely to play out through a number of channels. First, a rise in natural gas production will
directly boost GDP growth.
Initially, output from Zohr is likely to be around 0.35bn cubic feet per day, the report noted.
“By our estimates, that will translate into a 2.8% increase in the level of Egypt’s real GDP over the next three years. Most of the boost is likely to come this year, particularly if the government manages to persuade Eni to accelerate production from Zohr, followed by a smaller increase in 2019-20,” the report concluded.
Egypt will be a net gas exporter this year for the first time since 2014.
Petroleum Minister Tarek El-Molla stated the country has already started to scale back its gas imports and hopes to bring them to a halt by the end of this year.
