Within the dynamic North African landscape, Egypt is a key player, both as an energy provider and an investor, with total oil and gas expenditure expected to reach $63.5 billion between this year and 2030

Hydrocarbon production and investment in the upstream oil and gas sector in the Middle East and North Africa are projected to see substantial growth over the next decade, driven by the region's surging energy consumption, economic expansion and energy transition requirements. Within the dynamic North African landscape, Egypt is a key player, both as an energy provider and an investor, with total oil and gas expenditure expected to reach $63.5 billion between this year and 2030. Marked by a flurry of activity and a surge in recent exploration block offerings, Egypt is aiming to strategically position itself to consolidate its hydrocarbon resources and establish the country as a leading exporter of natural gas in the coming years.

Egyptian gas sector: Precarious but hopeful

Egypt's oil and gas industry has long been a cornerstone of the country's economy, playing a pivotal role in its development and generating substantial revenue. With its vast hydrocarbon reserves and strategic location, Egypt has emerged as a key player in the regional energy landscape. In recent years, however, production at Egypt’s brownfield assets has been falling and the country’s offshore crown jewel, the huge Eni-operated Zohr gas field, has faced declining output due to water infiltration, attributed to poor reservoir management due to complex fractured geology. With rising local gas consumption and an overreliance on gas imports, the Egyptian government has accelerated the offering of offshore exploration blocks in an attempt to remain a leading gas exporter and major hub for liquefied natural gas and pipeline gas operations.

Evolving dynamics and shifting priorities

The discovery of the Zohr field in 2015 marked a turning point for Egypt's oil and gas sector, catapulting the country into the ranks of global gas exporters. This discovery has attracted substantial foreign investment from Italy’s Eni and encouraged other international oil companies (IOC), such as Chevron, Shell and BP, to bid for blocks offered across Egypt’s onshore and offshore concessions. The four IOCs combined are investing around $22 billion between 2015 and 2030 in Egypt, which accounts for over 70% of their total investments across North Africa in the period.

The Egyptian government has recognized the importance of maintaining production and throughout this year awarded several exploration blocks to the four IOCs as well as several others, including TotalEnergies, QatarEnergy and Russian player Zarubezhneft. The offered blocks are concentrated in the onshore and offshore sectors of the Nile Delta Basin.

These exploration wells are reflected in Rystad Energy’s well trend in Egypt, where we forecast a stable profile for exploration wells in the country from 2024 to 2030. We estimate around 180 exploration wells will be drilled during the period; however, if we account for a high oil price scenario, this could rise to as many as 220.

Egypt’s development wells paint a bleaker picture as mature assets are depleting and we expect the development well count to drop more than 60% from 218 wells next year to 86 in 2030. Even in a high case scenario, projections show an approximate 50% drop from 224 wells next year to around 114 in 2030. In our base case scenario, we expect oil country tubular goods (OCTG) demand in Egypt to shrink around 50% between 2024 and 2030, reaching approximately 86,000 tonnes at the end of the decade.

Unlocking the potential: Challenges and opportunities

Despite the declining production from Egypt’s mature onshore assets, there remains hope that the country’s exploration campaigns will yield tangible returns in terms of discoveries and reserves. The Nile Delta Basin has historically generated positive returns for investors and there has recently been increased appetite from independents expanding their footprint in the Egyptian market. One example is private player Apex International Energy acquiring assets from Eni’s local subsidiary, International Egyptian Oil Company (IEOC), which led to the buyer’s production capacity increasing by around 4,000 barrels per day (bpd) of liquids to 11,000 bpd. PICO Cheiron Group has also been driving independent offshore exploration activity in Egypt with joint ventures in the Gulf of Suez alongside Kuwait Foreign Petroleum Exploration Company (KUFPEC) and in East Damanhur, where gas production began in late September this year, in collaboration with Germany’s Wintershall Dea.

Considering exploration block awards, a rise in the number of exploration wells drilled and the recent gas discovery by Chevron in the Nargis offshore concession, there has been a slight increase in rig demand, with 3% growth between the second and third quarters of this year and a total of 115 active rigs, comprising 62 drilling units and 53 workover rigs. If Egypt’s exploration blocks yield positive commercial results and under-development assets start producing, we expect them to contribute around 300,000 barrels of oil equivalent per day (boepd) to the country’s production. Furthermore, if Brent crude oil prices rise above $100 per barrel, Egypt may see close to 380,000 boepd in additional volumes.

Given offshore exploration has proven lucrative for Egypt, the country can be reasonably confident in finding untapped resources to alleviate its reliance on gas imports and potentially become a consistent net exporter in the years to come.