Italian oil firm #Eni's Aug. 30 announcement that it has discovered the largest known natural gas deposit in the Mediterranean in Egyptian waters means Egypt could re-establish its energy independence with natural gas supplies, ending several challenging years for the country's energy sector.
Good News for Egypt's Energy Sector
For most of the past decade, international energy producers have been able to earn only $2.50 to $2.65 per mmbtu for the natural gas that they sold to EGAS, the Egyptian domestic natural gas company. This pales in comparison to most global natural gas prices, which at times have exceeded $15 per mmbtu. (Under the terms of the deals by which international oil companies operate in Egypt, Cairo can force them to sell at below-market rates.) Making matters worse, Cairo has struggled to pay international oil companies. By late 2013, Egypt owed energy firms an estimated $6 billion to $7 billion, prompting the firms to hold off on numerous exploration projects. Reduced investment resulted in lower Egyptian production as older fields and wells saw production declines. Between 2012 and 2014 alone, Egyptian production fell from 61 billion cubic meters to 49 bcm.
After his 2014 re-election, President Abdel Fattah al-Sisi carried out reforms in the energy sector, including reducing energy subsidies that had accounted for 25 percent of the government's budget. It allowed Cairo to begin repaying foreign oil companies, lowering its outstanding debt from more than $6 billion in late 2013 to $3.5 billion at the end of June 2015.