Fitch Raises Egypt's Gas Production Forecast

Fitch raised its forecast for Egypt’s gas production in the first quarter of this year following the resumption of drilling operations at the Zohr field and the Raven gas project, reflecting the country’s priority to exploit its gas reserves commercially.

The agency said it sees a 2.5% increase in gas production in Egypt in 2025, followed by an additional 1.0% growth in 2026, supported by the reactivation of drilling operations at the Zohr gas field, led by Eni, which aims to increase production by 220 million cubic feet per day.

Current production at the Zohr field is around 2 billion cubic feet per day, equivalent to 20.7 billion cubic meters per year, and represents around 35% of Egypt’s total gas production.

Eni had planned to invest around $160 million in the second half of 2024, but reports indicated that drilling plans were postponed due to the arrears owed by the Egyptian government to Eni and other international oil companies, which totaled around $6.1 billion by the end of June 2024, according to the prospectus for the Egyptian bond offering in international markets.

The company expected that Egypt's production of crude oil, natural gas liquids and other liquids would decline by 1.0% in 2025 and 2026, to reach an average production of 638,510 thousand barrels per day and 628,700 thousand barrels per day, respectively.

Fitch Solutions noted that the developments in the Zohr field come in parallel with BP's progress in the Raven gas project, the second phase of which includes drilling two new wells in the King field, and is scheduled to add 200 million cubic feet per day (about 2 billion cubic meters per year) to Egypt's production.

It expected that these initiatives would contribute to a slight recovery in gas production in Egypt, after a major collapse that continued over the past three years, as gas production last November reached its lowest level since November 2016, reaching 3.691 billion cubic meters.

However, it said that the medium- and long-term trend indicates a decline in production, due to the absence of confirmed new discoveries and the lack of projects close to the final investment decision (FID). It estimated that gas production would decline to 42.2 billion cubic meters annually by 2034.

Despite the decline in Egyptian gas consumption by 27.0% over the past three years, consumption did not change much in 2024, as it declined by about 0.4%, leading to a local energy crisis with the imposition of gas rationing policies since July 2023.

Gas consumption is expected to continue to grow at a rate of 2.0% annually, driven by consumption in the electricity sector and uses in oil fields, in addition to the expected economic recovery.

The company’s experts expect Egypt’s real GDP to grow by 3.9% in 2025 and 5.1% in 2026.

Egypt has been filling the supply gap over the past two years by importing gas from Israel and leasing a floating liquefied natural gas (FLNG) terminal from Jordan.

The Joint Energy Database for the period from January to November 2024 indicates that Egypt imported 3.9 billion cubic meters of LNG during this period, in addition to 9.2 billion cubic meters of pipeline supplies from Israel, which is equivalent to about 22.9% of total demand during that period.

However, these solutions have their operational limits, and if Egypt cannot achieve sustainable growth in domestic production over the next two years, the country will once again face pressures on supplies, which could exacerbate the energy deficit and prevent any realistic possibility of resuming LNG exports, which have been completely halted since March 2024.

Egypt exported only 854 million cubic meters last year, while it plans to export gas in 2027.

According to a recent report by Morgan Stanley, the oil trade deficit that began in fiscal year 2021/22 will continue until fiscal year 2025/26.

The government seeks to reduce natural gas consumption by introducing new renewable energy capacity, in addition to increasing production through incentive measures and paying off foreign partners.