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Bousso: Mideast conflict highlights Egypt's weak energy spot

Israel stopped gas exports to Egypt following the start of the war with Iran

The exports resumed on the 23rd of June, but Egypt's gas challenges remain.

Egypt's gas production has declined dramatically in recent years and is unlikely to recover anytime soon

Ron Bousso

LONDON 30 June - Egypt is one of the worst economic losers in the 12-day Middle East war, after Israel cut off vital natural gas supplies to Egypt.

After Israel and Iran agreed on a ceasefire, President Donald Trump of the United States declared it on June 23. However, the incident highlights Egypt's vulnerability as well as the fading hope that the Eastern Mediterranean region could become a major exporter of gas.

In the 2000s, the discovery and development offshore gas reserves near Egypt, Israel, and Cyprus has transformed the energy landscape of the region, making it a major hub for production and attracting international companies.

Egypt was especially benefited by the surge in production. The rapid development of the Zohr gas field in 2017 and the discovery of the largest gas deposit in eastern Mediterranean in 2015 provided Egypt with vital energy for its internal market, as well as income from LNG exports, which will reach 7 million tons by 2022, or nearly 2% global supply according to Kpler's data.

Egypt's production started to decline rapidly in the early 2000s, especially at its flagship Zohr oil field. According to JODI, Egypt's production dropped from 6 billion cubic feet per a day (bcf/d), at the beginning of 2021, to 3.5 bcf/d in April 2025.

Martin Sherriff is an analyst with Welligence Energy Analytics. He predicts that production will average between 4.4 and 4.6 bcf/d in 2014. He added that it is unlikely to grow significantly in the future, given the limited success of the country's offshore gas exploration in recent years.

Egypt's energy problems were compounded due to the rapid population growth from 100 million people in 2015 to over 115 million people by 2023. Egypt's domestic gas production was not enough to meet its population's demands, so in 2020 it began to import gas from Israel. Israel had seen a boom in gas production over the past decade after the discovery of offshore resources. Israel's gas production increased by 70% between 2010 and 2024, reaching 2.5 bcf/d. Around half of this volume was exported to Egypt and Jordan.

Egypt will resume LNG imports for the first since 2018 due to the sharp decline in production. Egypt will import 160 LNG cargos in 2019 and 2020 at prices that are far higher than those it can produce or purchase from Israel where the export pipelines have already reached capacity.

WAR CASUALTY

Egypt's vulnerability to energy was brought into sharp focus by the recent conflict between Israel and Iran.

Israel and Egypt signed a peace accord in 1979, after years of conflict. Their interdependence increased as their gas trade developed.

Following the outbreak of violence on October 7, 2023, these gas flows were mostly uninterrupted. Israel's decision to stop operations at Leviathan and Karish offshore gas fields after launching a wave of airstrikes on Iran led to a suspension of natural gas sales.

According to Jodi, Egypt imported more than 0.9 bcf/d of Israel's total observed consumption in the first four month of 2025.

The drop in Israel's gas deliveries, just as the demand for electricity was approaching its peak during summer, threatened to be a serious blow to Egypt’s economy.

As part of an emergency plan by the Egyptian government to cope with a drop in Israeli gas supply, Egyptian fertilizers producers had to close their operations. Power plants in Egypt increased their use of fuel oil while others switched over to diesel in order to maintain the grid stability in a nation that has suffered from massive blackouts.

According to a calculation done on the back of a piece of paper, for every week that Israel's gas imports were disrupted, Egypt would need to purchase two additional LNG cargoes to compensate or find other fuel sources.

RELIANCE IS RISING

Israel has resumed its gas exports to Egypt, which is a relief for Cairo. This does not solve Egypt's fundamental problems.

Energy majors such as BP, Exxon Mobil Shell and Chevron are still exploring for new gas reserves in Egypt. If found, these resources could offset the natural decline of its existing fields.

The Israeli gas exports could increase to Egypt when the Leviathan field operated by Chevron expands its production from 12 bcm to 14 bcm by 2026. However, delays in expanding the pipeline capacity between Egypt and Israel could hinder that expansion.

For now, however, the outlook for the country's gas production is bleak. The nation also struggles with sluggish economic growth, and significant revenue loss from Suez Canal Transit Fees, due to the attacks of Iran-backed Houthi Rebels in Yemen.

The decline of Egypt's oil and gas industry has wiped out hopes that the Eastern Mediterranean would become a major LNG-exporting hub in coming years.

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(source: Reuters)