Sunday, June 24, 2012

Egypt's Petroleum Industry - A Point of Vulnerability

Updated August 2013

With turmoil in Egypt once again making headlines, I thought that it was time to take a brief look at one of Egypt's main sources of foreign exchange, its oil industry.  Since this is an important part of Egypt's economy, it could also be the focus of actions by various parties in any civil uprising.

Egypt, while not benefitting from the massive reserves of oil that its Middle East neighbours possess, has a remarkably old industry.  Oil was first discovered in Egypt in 1869 and production began in 1910.  A joint venture between BP and Shell called Anglo-Egyptian Oil explored for and produced oil from 1910 until 1964 when the Egyptian government nationalized its reserves.  Egyptian General Petroleum Corporation was founded by the Egyptian government in 1962 and is resposible for all sectors in the Egyptian petroleum industry, holding the sole rights to import and export all petroleum products.  As well, EGPC maintains a joint venture will all other foreign parties investing in Egypt's oil industry.  Egypt's government also created EGAS or Egyptian Natural Gas Holding Company in 2001 to manage foreign investment in exploration for natural gas and the use of LNG infrastructure.  One of EGAS's mandates is to prove additional natural gas reserves through intensive exploration.

Until 2009, Egypt actually exported much of its oil, however, that has changed as domestic energy demand has increased.  Here is a graph showing how much oil Egypt has produced in BOPD for the last 30 years ranking 26th place in the world:

Here is a graph showing how much oil Egypt has consumed in BOPD for the last 30 years:

Here is a graph showing how much oil Egypt has imported and exported over the last 30 years:

Lastly, here is a graph showing Egypt's proved reserves of oil in billions of barrels:

Notice how the proved reserves dropped markedly in the mid-1990s and have never really recovered as Egypt's production ramped up along with its consumption as shown above.

Egypt's energy growth story will be on the natural gas side of the business as shown in the following graphs.  Here is a graph showing Egypt's natural gas production pattern over the last 29 years:

Surprisingly, Egypt is actually the world's 12th largest natural gas producer and the growth in its production profile is not showing any signs of slowing down.   

Here is a graph showing Egypt's domestic natural gas consumption pattern over the last 29 years:

Here is a graph showing Egypt's natural gas imports and exports since 1999 showing how natural gas exports are growing:

Egypt exports most of its natural gas to Lebanon, Jordan and Syria through the Arab Gas Pipeline and to Israel through the Arish-Ashkelon pipeline addition.  As well, Egypt is the world's 13th largest exporter of liquified natural gas (LNG).  Egypt exports LNG to the United States (160 BCF in 2009), representing 35% of U.S. imports of LNG and 35% of Egypt's LNG exports.  Other recipients of Egypt's LNG are Canada, France, Spain, Mexico and Asia.  Egypt's largest LNG partnership is partially foreign-sponsored by Petronas and Gaz de France and construction of the LNG facilities has brought in $2 billion worth of investment into Egypt's economy.

Lastly, here is a graph showing Egypt's proven natural gas reserves and how they have grown over the past three decades:

Egypt's natural gas reserves now rank 19th in the world.  Most of Egypt's natural gas reserves are found in the  Natural gas now provides 49 percent of Egypt's total energy consumption, more than oil which provides 45 percent.  Natural gas is used to produce 70 percent of the country's electricity generation needs with the remainder being supplied by hydro-electricity.

One of the most critical aspects of Egypt's oil and gas industry is its control of both the Suez Canal and the Sumed Pipeline.  Total petroleum transit volume through the Sues Canal reached 2 million BOPD or five percent of all seaborne oil transports in 2010.  The Sumed Pipeline, an alternative to the Suez Canal, has a capacity of 2.3 million BOPD and flows across Egypt's Western Desert from the Red Sea to the Mediterranean coast.  If political issues were to result in closure of both of these transportation bottlenecks, oil from the Middle East would have to travel an additional 6000 kilometres around the southern tip of Africa to reach markets in Europe and the Americas.  This would prove problematic although not unsolvable.

Only time will tell how quickly and quietly Egypt solves its ongoing political crisis.  It is interesting to see that Egypt's oil and natural gas industry is a major part of its foreign trade; an aspect that could prove to be a point of vulnerability for Egypt's next government if civil strife erupts.


  1. On the bright side I saw some great deals on hotel rooms in Cairo recently... ;)

  2. Apparently, Egypt's tourism revenue was down 30 percent in 2011. Oops!

  3. The whole of Upper Egypt do not use natural gas as well as all of the many slums of Cairo and major cities of the Delta. Poor people fight over gas cylinders which price has significantly risen.