Egypt is one of the leading producer of oil and natural gas in the African continent (US energy information association 2013). Oil and gas industries are supporting the Egyptian economy since 1980. Egypt has some of the biggest oil producing regions; Suez with a capacity of 70% oil production, Western region 17%, Sinai 7% and Eastern delta 6%.Natural gas producing regions are located near the Mediterranean Sea, western region and the Nile delta (US energy information association 2013). Energy is considered as main driver for economic development of Egypt (ENG.M.I.TAWILA 2004). Oil and gas production account for 20% of the Egyptian GDP. It enables the Egyptian government to enhance their people’s standard of living by providing them different services like education, employment, transportation, residence, hospitals, etc.
However, having such importance in the economy, Egypt suffering with instability in the growth of oil and gas industry since the last few years. Industries are showing many fluctuations in the growth of production and export. Industry’s annual contribution to the GDP has dropped from 5.1% in 2010 to 1.8% in 2011 (US energy information association 2013). The decrease in contribution to the GDP is caused by intense increase in domestic consumption due to extensive use of oil and gas in the production of electricity, CNG, LPG, petrochemicals, fertilizers, transportation etc.(ENG.M.I.TAWILA 2004).
A comparative study of the oil and gas industry
On the production level crude oil reserve in 2013 had 4.4 billion barrels where in 2010 it accounted for 3.7 billion barrel reserve. However this progressive growth has shown only since 2010. In 1999 the reserve was estimated at 3.6 billion barrels which has declined by 2.9 billion barrel between 2000 and 2002 (Algarhi 2005). On the other hand, Egypt has a large reserve of natural gas. The natural gas reserve is growing every year with the help of new technology like hydraulic fracturing. Large international oil companies are now focusing on natural gas production due to technical expertise of hydraulic fracturing in extracting shale gas (Anon, 2013).
On the consumption level demand of oil has been increasing from 1996 to 1999. At this stage production was outpaced by consumption due to the economic growth in late 1990s’ (ENG.M.I.TAWILA 2004). Natural gas is also having high rate of consumption because the Egyptian government has converted its power plant to run on gas, which resulted in increased the domestic demand.
Advantages in production of natural gas
Production of natural gas is having many benefits as compared to oil. These benefits create differentiation between oil and gas producing industries. Natural gas is considered cleaner than oil because the production process of gas generates less emissions; however oil’s production process creates heavy air and water pollution. To avoid this, the Egyptian government has shifted its focus on gas production. Natural gas is more affordable, accessible, inexpensive and environment friendly. On the other hand oil is expensive and due to high prices it is not affordable for everyone (ENG.M.I.TAWILA 2004).
Export of natural gas by Egypt
Export is another dimension of differentiation between oil and gas industry. The export rate of oil was on its peak from 1990 to 1995 but the oil export market is weakening since 1999. However rate of natural gas has increased due to high rate of production. Egypt started export of gas in 2003 and reached at its utmost level in 2006 (Algarhi 2005). However from 2009 to 2012, due to repeated sabotage attacks, Egypt could only export most of its gas to Jordan and Israel which resulted in export drop down (Algarhi 2005).Challenges in Natural Gas production.
Although natural gas is having many advantages over oil, it is also associated with some risks and challenges. Some of them are:
- Global economic challenges.
- Coal dominance as green energy.
- High competition.
- Increase in domestic gas demand.
- Political instability and unconventional gas development may harm water in supply and disposal (ENG.M.I.TAWILA 2004).
Despite of these challenges the Egyptian government is searching for new technologies to overcome challenges and enhance natural gas production.
- Algarhi, A.S., 2005. Oil and Natural Gas in Egypt. THE AMERICAN UNIVERSITY IN CAIRO DEPARTMENT OF ECONOMICS, p.20. Available at: http://kenanaonline.com/files/0074/74819/wpEgy_oil&gas.pdf [Accessed June 4, 2014].
- Anon, 2013. Egypt Crisis in the energy sector, Available at: http://economic-research.bnpparibas.com/Views/DisplayPublication.aspx?type=document&IdPdf=23025 [Accessed June 11, 2014].
- ENG.M.I.TAWILA, 2004. SUSTAINABLE DEVELOPMENT AND EGYPTIAN NATURAL GAS MARKET LE DÉVELOPPEMENT CONTINUEL ET LE MARCHÉ DU GAZ NATUREL EN EGYPTE. BY. , p.1 to 9. Available at: http://webcache.googleusercontent.com/search?q=cache:http://www.worldenergy.org/documents/congresspapers/tawilam0904.pdf [Accessed June 11, 2014].
- Rasazi, H., 2010. The Arab Republic of Egypt Power Sector in Brief – 2010, Available at: http://www.afdb.org/fileadmin/uploads/afdb/Documents/Publications/ENERGY mpa ENG Power Sector Emer.pdf [Accessed June 4, 2014].
- US energy information association, 2013. Egypt, Available at: http://www.eia.gov/countries/analysisbriefs/Egypt/egypt.pdf [Accessed June 4, 2014].
- Vega, F.F. de la, 2010. Impact of Energy Demand on Egypt’s Oil and Natural Gas Reserves. Deutsche Gesellschaft für Technische Zusammenarbeit (GTZ) GmbH, p.71. Available at: http://www.jcee-eg.net/download.asp?path=library/EGYPT%20Scenarios%20until%202030.pdf [Accessed June 4, 2014].