But now, despite new discoveries in the Western Desert, most of Egypt’s oil fields are in “middle age,” with their output in decline. Combined with rising local demand, this has made Egypt a net importer, with imports expected to rise further in the years ahead.
Natural gas is a another story. While fields in the Nile Delta area have been producing small amounts for local consumption since the early 1980s, accelerating discoveries at offshore, deep-water sites have put Egypt on the world map as an up-and-coming producer.
Exporting gas, however, demands heavy investments in exploration, production, transport and downstream infrastructure. At this point, Egypt has yet to export any of its gas. Yet with more and more being found each year, gas – rather than oil – has come to be seen as the best prospect for generating large amounts of badly needed hard currency.
According to official estimates, Egypt’s proven reserves of natural gas now exceed 58 trillion cubic feet, up from 35 trillion at the end of 2000 and 12 trillion in 1991. With two major projects under construction to export Liquefied Natural Gas (LNG) to European markets, Egypt – now ranked number six in the world in terms of reserves – can look forward to becoming a major exporter of natural gas in the next three to five years.
“The gas is there, and everyone knows it’s there. But it requires investment, and it takes time to get it out of the ground in commercial quantities,” the anonymous energy executive said. “It will come together in 2004 or 2005, when the supply of gas and the LNG infrastructure projects will be matched up.”
European markets are hungry for Egypt’s LNG output. “There will never be a saturation point for gas,” the executive said.
Massive oversubscriptions for the recent EGPC loans indicate huge confidence among foreign investors in the future of Egypt’s petroleum sector. Even if the loans were taken out of desperation, the executive said, the move implies increasing maturity on the part of the government.
“There’s no shame in borrowing,” she said. “In the past, the practice has been to put money under the mattress against future projects and payment obligations. But by borrowing on the international market, EGPC has started to act like a real business – as it should.”
Bankers, she added, had been pressing the government to take the step for some time.
The risk to Egypt, meanwhile, is limited. “The worst-case scenario is that the government defaults. The financial risk is all on the lenders,” the executive said.
But will gas exports be enough to make Egypt prosperous? With a population reaching 69 million and still growing at nearly two percent a year, the answer is a qualified yes. “There are fundamental economic and developmental problems,” the executive said. “But LNG will bring dollars, or other hard currency, into the country.”