Second FSRU arrives in Egypt – Why did an LNG export country now have to start importing energy?

ENB Pub Note: The update from LNGPrime.com about Egypt’s new FSRU to help with seasonal imports of LNG. I have to ask why a country that was exporting LNG is now an importer. So I included that information above. This was an indication of an energy crisis, and I have found that countries experiencing an energy crisis are also often in a financial crisis. They typically reach this point by following climate change policies that promote renewable energy sources.

Egypt’s Energy Mix

• Natural Gas: Dominates Egypt’s energy landscape, accounting for approximately 79–84% of electricity generation in 2023, producing around 159.3–220.14 TWh. It constitutes about 55% of the primary energy supply. Natural gas is critical for power plants, industrial processes, and domestic use, such as heating and cooling.
• Oil and Fuel Oil: Contributes to 11% of electricity generation and a significant portion of the energy mix, particularly for transport (44% of oil consumption) and power generation. Egypt imported 255,000 barrels per day of high-sulfur fuel oil in September 2024 to compensate for gas shortages.
• Hydropower: Accounts for 7% of electricity generation, primarily from the High Dam in Aswan.
• Renewables (Solar and Wind): Contribute 5% of electricity generation in 2023, up from 1% in 2015, driven by projects like the Zafarana wind farm and Benban solar plant. Egypt aims for 42% renewable energy by 2035, though it recently scaled back its 2040 target from 58% to 40%.
• Coal: Minimal, at 4.8 Mt consumed in 2024, primarily for industrial use (89%), representing a small fraction of the energy mix.
• Nuclear: Emerging, with the El Dabaa Nuclear Power Plant under construction, but not yet contributing to the energy mix.

1. Declining Domestic Production:
   • Zohr Field Challenges: The Zohr gas field, discovered in 2015 by Eni and accounting for ~40% of Egypt’s gas production, has seen output drop from a peak of 3.2 billion cubic feet per day (bcf/d) in 2019 to 1.9 bcf/d in early 2024. Technical issues, such as water infiltration into the reservoir due to overly rapid development, have reduced extraction efficiency.
   • High Depletion Rates: Existing fields, including those in the Western Desert, West Delta Deep Marine, and Nile Delta, face high decline rates, with insufficient new discoveries to offset losses. Total gas output fell to a six-year low in May 2024, down ~25% from its 2021 peak of ~6.9 bcf/d.
   • Limited Investment: Insufficient investment in exploration and maintenance, compounded by government arrears of ~$4.5 billion to foreign oil and gas companies, has deterred new projects and slowed production.
2. Rising Domestic Demand:
   • Population and Economic Growth: Egypt’s population, now over 110 million, drives significant electricity demand, particularly for residential cooling during hot summers. The residential sector accounts for 37.6% of electricity consumption, higher than in many countries (e.g., India at 25.3%).
   • Heatwaves: Extreme summer temperatures increase air conditioning use, spiking gas demand for power generation. This led to power rationing and blackouts in 2023 and 2024.
   • Industrial Demand: Energy-intensive industries, such as fertilizer and cement production, consume large amounts of gas, though supply cuts often prioritize residential power plants.
3. Dependence on Imports:
   • Israeli Gas Disruptions: Egypt imports ~800 million cubic feet per day of gas from Israel, primarily for LNG re-export to Europe (90% of imports). The Tamar field’s shutdown during the Gaza conflict in October 2023 halted these imports, exacerbating shortages.
   • LNG Imports: Egypt has shifted from a net LNG exporter to a net importer, purchasing 32 LNG cargoes in 2024 (worth ~$1.2 billion) and planning 40–60 more by summer 2025 (up to $3 billion). This is due to insufficient domestic supply and export commitments.
4. Foreign Currency Shortage:
   • Egypt’s severe hard currency crisis limits its ability to fund LNG and fuel oil imports, with a $50 billion bailout in 2024 providing temporary relief. The government has relied on financing from Saudi Arabia and Libya for gas purchases. A 60% devaluation of the Egyptian pound since March 2024 further strains import budgets.
5. Export Commitments:
   • Egypt’s ambition to be a regional gas hub led to prioritizing LNG exports to Europe, especially after a 2022 EU-Israel-Egypt deal to replace Russian gas. In 2022, Egypt exported 8.5 million tons of LNG, generating $8.4 billion, but halted exports in summer 2023 to meet domestic demand, resuming only in November. Export obligations reduce available gas for domestic use.
6. Policy and Subsidy Issues:
   • Energy Subsidies: Heavy subsidies keep electricity and gas prices below market rates, encouraging overconsumption and straining supply. Plans to cut subsidies have been scaled back due to public resistance.
   • Lack of Diversification: Egypt’s slow progress toward its 42% renewable energy target by 2035 (currently ~5%) means continued reliance on gas. Delays in renewable projects and limited new gas discoveries exacerbate the shortage.

Summary

Source: LNGPrime.com

According to a statement by Egypt’s Ministry of Petroleum and Mineral Resources on Monday, the FSRU arrived at the Alexandria Port.

Karim Badawi, Minister of Petroleum and Mineral Resources, witnessed the arrival of Energos Power vessel at the Tahya Misr terminal.

The charter of the vessel is part of Egypt’s strategic plan to ensure stable energy supply during peak summer demand, the statement said.

Earlier this month, Germany’s Ministry for Economic Affairs and Energy confirmed to LNG Prime that it had signed a deal with Egypt’s state-owned EGAS to sub-charter the FSRU.

In February, private firm Deutsche ReGas announced that it had terminated the charter contract for the FSRU Energos Power, one of the two FSRUs operating at the Mukran LNG import terminal, with the German government.

The unit, with a regasification capacity of up to 7.5 bcm per year, is on a ten-year charter deal with the BMWK, which started in 2023.

Energos Infrastructure, a part of US asset manager Apollo, owns this FSRU.

Egypt shifted from being an LNG exporter to an importer early last year due to declining domestic gas production and rising demand for cooling amid multiple heatwaves.

The FSRU joins the 170,000-cbm Hoegh Galleon, which is located at the Sumed port in Ain Sokhna.

Norwegian FSRU player Hoegh Evi recently signed a new charter deal with Egypt’s EGAS to deploy a converted FSRU in Egypt.

Hoegh Evi will convert the LNG carrier Hoegh Gandria to a floating storage and regasification unit.

The FSRU Hoegh Gandria will be deployed in the fourth quarter of 2026 to the Port of Sumed and will supply up to 1,000 mmscf/day of peak LNG regasification capacity.

It will replace the FSRU Hoegh Galleon, which was deployed to Egypt in July 2024, on an interim charter from Australian Industrial Energy (AIE) and Hoegh Evi.

According to Hoegh Evi, Galleon will remain in Egypt for up to an additional year before deployment to AIE’s LNG terminal in Port Kembla, Australia in 2027.

In December 2024, Egypt’s EGAS also signed a deal with US LNG player New Fortress Energy to charter another FSRU.

Energos Infrastructure also owns Energos Eskimo, which is currently located in Jordan and is expected to arrive soon in Egypt.

Most recently, EGAS signed a charter deal with Turkiye’s Botas to deploy one of Turkiye’s operational FSRUs in Egypt.

The FSRU will work in Egypt for seasonal LNG imports.

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