Months of political turbulence - which has not abated since the election of the Muslim Brotherhood's Mohammed Morsi as president - has undermined policy as it relates to the country's most significant economic sector. With Morsi acting as president, domestic needs are taking priority over exports, as the decision to end gas supplies to Israel confirms, and the supply of gas to Jordan and Spain was disrupted. This will inevitably impact the pricing climate for international oil companies operating in Egypt's gas sector, potentially making it more difficult to secure internationally competitive rates when selling gas.
We highlight the following trends and developments in Egypt's oil and gas sector:
- BMI expects Egyptian oil production to decline from 713,700 barrels per day (b/d) in 2012 to 648,300b/d in 2021. At the same time, consumption is expected to rise significantly, from 709,200b/d to 945,700 b/d over the same period, quadrupling Egypt's oil import bill.
- Despite several proposals to increase capacity, we do not see refineries advancing over our forecast period. With refining capacity set to remain flat, imports of refined products are set to rise from 83,000b/ d in 2011 to over 370,000b/d by 2021.
- Although gas production is expected to grow from 61.1 cubic metres (bcm) to 82.1bcm in the 2012-2021 period, consumption will rise at an ever more rapid pace, from 52.0bcm to 76.9bcm. Net gas exports, especially through LNG, will fall over the forecast period as Egypt's consumption increases sharply.
- Although disturbances have reduced exports to Jordan to 16% of the contractual agreement, we expect trade links to persist.
- Egyptian General Petroleum Corporation (EGPC) and Egypt's other state companies will continue to push their own licensing rounds, hoping that political challenges will not ensnare investment in upstream hydrocarbons projects. Results of the EGAS 2012 licensing round are expected to come throughout H113.