Natural gas will be the driving force of Egypt's energy industry by 2030, reports Sherine Abdel-Razek With 1.9 trillion cubic meters of proven natural gas reserves Egypt is consolidating its position in the global gas market. As oil production declines the focus of the Egyptian energy sector has shifted to developing its abundant natural gas resources with several major liquefied natural gas (LNG) projects and the development of the transcontinental Arab Gasline. This month's World Energy Outlook Report, issued by the International Energy Agency (IEA), focussed on the MENA region and provided an overview of energy sectors up to 2030. The report predicts annual primary energy demand growth in Egypt of 2.6 per cent, reaching 109 million tonnes of oil equivalent (Mtoe) by 2030. Energy- demand growth will then slow as the economy matures and population growth becomes less. While the report suggests Egypt's energy mix will continue to be dominated by oil and gas which together will meet 95 per cent of primary energy demand in 2030, it notes that the natural gas will increase its market share: "Natural gas will overtake oil as the dominant fuel in the second half of the Outlook period and demand for natural gas will grow most strongly, with average annual growth of 3 per cent over the projection period to account for 48 per cent of demand by 2030." The increase in demand will be encouraged by government policies promoting fuel-switching for power generation and increased use of gas in petrochemicals, fertilisers and the cement industry. It is not only local demand that is expected to increase: the report expects gas exports to grow over the next quarter of a century to reach 28 billion cubic meters (bcm) by 2030. Egypt is currently the 21st biggest gas producer in the world, and the sixth largest in the MENA region. It began exporting gas in 2003, when the first phase of the Arab Gasline was inaugurated. With the completion of the line, which originates in Aqaba, Egypt, and stretches over 264 km to reach Jordan, in July 2003 Egypt began to export natural gas. There are plans to extend the pipeline to reach Syria and Lebanon, and eventually Turkey. The final capacity of the pipeline could eventually deliver three bcm a year. Two years later, in 2005, Egypt began exporting LNG, as two plants with a production capacity of 12 Mt/year came on line. LNG production is expected to reach 50 bcm by 2010 and over 90 bcm by 2030, the bulk of which will be exported. Egypt's oil production peaked more than a decade ago and has since been in decline. Production is expected to drop from 0.7 million barrel per day in 2010 to 0.5 by 2030. Future prospects for oil production are bleak, and the report stresses that the figure for proven reserves has not changed for a decade. The US Geological Survey estimates undiscovered oil at 3.1 billion barrels. In recent years increased local demand, accompanied with falling production, has resulted in a squeeze on oil exports which have fallen by 50 per cent in the past decade. Egypt, currently a minor oil exporter, will become a net oil importer by 2015, with net imports rising to around 510 thousands barrel per day by 2030. The reports also underlined that Egypt will need to invest heavily in electricity generation if the sector is to meet the growth in demand. By 2030, the report estimates, Egypt will need 19 GW of new capacity. If the electricity sector is going to meet this target it will require an estimated $36 billion of investment between now and 2030, with private financing likely to play an important role. Since 1996 Egypt has allowed the private sector to participate in power generation through build-own- operate-transfer (BOOT) projects. The law stipulates that independent power producers must sell electricity to the government-owned power company for a 20- year period and transfer all assets to it at the end of that period. IEA expects the generation of electricity to double from 92 Terra Watts per hour (TWh) in 2003 to 188 TWh by 2030. Most new power plants are expected to be gas-fired. Meanwhile, some existing oil-fired power stations are likely to be decommissioned during period studied as they reach the end of their operational life. New sources of energy will also be explored, as Egypt seeks to increase electricity generated by wind and solar power. It is estimated that wind farms in the Red Sea could generate 20 Gega Watts, while Egypt enjoys obvious advantaged when it comes to solar power. On the basis of current investment trends the report estimates that the cumulative investment in the energy sector over the projected period will reach $85 billion, with investment in the natural gas and electricity sectors accounting for the lion's share. The demand for investment is expected to be heavier in the second half of the projection period when, following the depletion of the more accessible reserves, extraction will become more costly. Investment in the gas sector, which the report estimates at a third of the total in the first decade of the projection period, will grow to nearly 45 per cent by 2030. The report highlights Egypt's strategic importance as a transit route for oil and gas exports from the Middle East to Europe. As the major oil consuming countries become ever more reliant on imports oil passing through Egypt via the Suez Canal and the Sumed pipeline linking Ain Sukhna on the Red Sea with Sidi Krir terminal on the Mediterranean, will assume greater political significance. The report predicts the Suez Canal will handle four per cent of global inter- regional oil trade by tanker and nine per cent of LNG trade by 2030, double its current share.
