Egypt has recently witnessed significant developments in the energy sector (whether based on conventional or renewable sources) and has successfully transformed itself in few years into an electricity and natural gas export hub.
Electricity and Renewable Energy
In the electricity sector, Egypt adopted a new law in 2015 allowing the active contribution of private businesses in the sector. The law created two parallel markets: a regulated one for retail customers and a competitive market where private investors can use local distribution networks to sell at negotiated prices. The new amendments have given further regulatory roles for government agencies on tariffs, licensing, and dispute resolution. Adding to that, an amendment to the law regulating the New and Renewable Energy Authority was issued in 2014.
These regulatory reforms have partly contributed to the increase of direct investments from major multinational players in the industry, including Siemens, Total Eren, Schneider Electric, Engie and others. Meanwhile, Egypt jumped to the 77th position in 2020 from the 144th in 2016 in the Getting Electricity sub-index of the World Bank’s Doing Business, reflecting the progress achieved in the electricity sector.
The Integrated Sustainable Energy Strategy illustrates Egypt’s long-term plan to broaden its energy mix. The strategy targets the production of 20% of electricity from renewable sources by 202210, 55% by 2035 and 61% by 2040. Additionally, Egypt is currently exploring with Siemens and a number of other companies the feasibility and prospects of green hydrogen production project.
The potential of solar and wind farms in Egypt is therefore very promising and investment opportunities are multiplying. This follows several policies encouraging renewable energy: (1) the promulgating of a law to stimulate investments in renewable energy including the feed-in tariff mechanism in 2014, (2) the allocation of more than 7600 km2for wind farms, (3) the amendment of the law establishing the New and Renewable Energy Authority to allow it to establish companies by its own or in partnership with the private sector to build and operate renewable energy projects.
Such reforms are attracting investments from the private sector as illustrated by Egypt's $2bn landmark 1465-M.W. Benban Solar Park which was recognized as the top World Bank project and the best infrastructure project by the Arab League. The project spans 36 km2 of desert and is developed by over 30 companies from 12 countries including EDF, CHNT, Total Eren, Acciona, and Enerray. The new law also supported the emergence of independent power producers such as TAQA Power in distributing power generated from renewable sources to large-scale users. Similarly, Karm Solar was the first private solar integrator in Egypt to obtain a license from the Egyptian Electricity Regulatory Agency. These reforms drove Egypt to become one of the top countries in renewable energy in MENA region according to the 2020 Solar Outlook Report.
Such developments allowed Egypt to be considered an export hub for electricity with production surplus, offering various investment opportunities to the private sector notably in terms of regional electrical interconnection across the three continents, notably with Cyprus, Jordan, Libya and Sudan.
Oil and Natural Gas
In 2012, Egypt’s production of natural gas was about 80 percent less than today’s level and power stations consumed around 80% of Egypt daily needs. Due to the energy shortage, Egypt began importing liquified natural gas (LNG) in 2015. Starting 2019 and thanks to the encouraging policies that stimulated the exploitation of local natural resources, Egypt turned into a net exporter of LNG and exported USD 1.24 billion-worth of LNG, marking a nearly 150% year-over-year increase.
This shift was partly due to the Oil Sector Modernization Project launched in 2016 where a number of structural reforms were implemented to keep pace with global and local volatilities in the oil industry, stimulating private-sector exploration, reinforcing the long-term gradual liberalization of the sector and other procedures to encourage robust public-private partnerships (PPP).
Consequently, more than 295 oil and natural-gas discoveries were made possible, including Egypt’s Zohr gas field, the largest in the country and the Mediterranean according to Eni.
In January 2019, a meeting of Oil Ministers was held in Cairo between the Eastern Mediterranean Countries including: Cyprus, Egypt, Greece, Israel, Italy, Jordan and Palestine aiming to strengthen the cooperation and initiate a systematic dialogue on the region’s policies related to natural gas, in order to lead the development of a regional gas market. The meeting paved the way to the subsequent establishment of the Cairo-based international organization “EastMed Gas Forum” with the aim to develop the region’s gas market, lower infrastructure costs and secure competitive prices for gas from the region.
In the same line of thought, the government plans to achieve self-sufficiency in gasoline and diesel by the year 2023. Therefore, private-led potential projects in developing Egypt’s petrochemical and oil refining and processing are plenty. For example, the Egyptian Refining Company’s $4.3bn Mostorod refinery inaugurated in September 2020 is one of the biggest public-private partnership infrastructure projects in Egypt and Africa in the field producing around 4.7 million tons of petroleum products of various kinds annually. The refinery leads to an increase in the production of diesel and gasoline by 30 and 15 per cent, respectively and hence enhances local production capacities.