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Egypt Shifts from Exporter to Importer as LNG Imports Strain Economy

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Egypt imports LNG to prevent summer energy shortages, signaling a shift from exporter to importer amid economic strains.

By Mackenzie Crow

4/4, 03:29 EDT
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Key Takeaway

  • Egypt begins importing LNG to prevent summer energy shortages, signaling a shift from its recent status as a fuel exporter.
  • The move strains Egypt's economy further, risking foreign currency reserves amid a $50 billion bailout and reduced Suez Canal revenue.
  • Declining local gas production prompts Egypt to reroute LNG imports through Jordan, highlighting challenges in meeting domestic demand.

Energy Challenges Ahead

Egypt, traditionally known as a fuel exporter, has taken a surprising turn by starting to import liquefied natural gas (LNG) to stave off potential energy shortages this summer. This move, as reported by traders familiar with the situation, signals a concerning shift in the country's energy dynamics. The decision to import LNG, especially this early in the year, hints at possible energy supply shortfalls that could severely impact electricity availability and factory output during the peak demand season.

Strain on Foreign Reserves

The necessity for heavy LNG imports comes at a precarious time for Egypt's economy. Following a $50 billion international bailout aimed at mitigating the country's worst economic crisis in decades, these additional expenditures on LNG imports could significantly deplete the North African nation's foreign currency reserves. This financial strain is further compounded by the decline in Suez Canal revenue, a critical source of income for Egypt, which has been adversely affected by attacks on commercial shipping in the Red Sea by Houthi militants.

A Shift from Exporter to Importer

The recent LNG purchases mark a significant departure from Egypt's status since 2018, when the discovery of the massive Zohr field enabled the country to boost domestic production and become an exporter of LNG. However, local gas output has since dwindled to its lowest level in years, a decline that Oil Minister Tarek el-Molla attributed to the natural depletion of its fields in February. This downturn in production has led to a halt in LNG exports during the hotter months of last year, a trend that may continue into this year. According to el-Molla, no LNG cargoes have been shipped out since March 11, with exports expected to cease until March or April as local consumption surges during the summer.

Routing Through Jordan

In a bid to address these challenges, the latest imported LNG cargo is expected to be processed through an existing facility in Jordan, according to traders. This logistical maneuver underscores the complexities and potential vulnerabilities in Egypt's energy supply chain as it grapples with the dual pressures of declining domestic production and increased summer demand.