When it comes to powering Egypt’s daily life, fossil fuels dominate. According to EMBER Energy, a think tank, 88% of the country’s energy needs came from fossil fuels in 2023. That percentage is not declining, as “rising demand was predominantly met by fossil gas.”
The government is trying to lessen that dependency. “Egypt [is] following a systematic twin-track approach to ensure that ‘green’ and ‘growth’ go … hand-in-hand,” the Ministry of Planning, Economic Development and International Cooperation said on its website.
A March report from Egypt Oil & Gas Group (EOG), a think tank and publication, highlighted recent government efforts to increase fossil fuel exploration, reduce the carbon footprint and accelerate green energy investments.
Fossil fuels
Italian Eni, British BP, U.S. Chevron, French Total Energies and Dutch Shell are the major international oil and gas companies (IOCs) operating in Egypt. Meanwhile, the government owns and operates three specialized holding companies in oil, gas and petrochemicals, with each managing multiple subsidiaries.
Their oil output is processed in one of Egypt’s 11 refineries in Alexandria, Red Sea Governorate and Cairo. The last one went online in 2007.
In fiscal year (FY) 2023/2024, fossil fuel drilling and production accounted for 6.2% of Egypt’s GDP. “This marks a decline from previous years, primarily due to [lower] production levels,” the EOG report said. “The downturn is attributed to reduced foreign investments in new well discoveries and a slowdown in the development of existing wells.”
To overcome oil shortages, the government is promoting more excavations. In the first half of 2024, there were 145 active concession agreements for oil and gas exploration signed with 40 partners, the report said.
In the second half of last year, 95 crude oil wells were drilled, adding over 63,700 barrels a day. The increase countered production drops from the first half of the year, as “crude oil production in 2024 remained stable” at 194.2 million barrels, the report said. IOCs also drilled 10 natural gas wells, adding 271 million cubic feet of natural gas daily, bringing total production to 1.789 trillion cubic feet for 2024.
By 2030, MoPMR said, “586 exploratory wells are scheduled … with an estimated total investment of $7.2 billion.”
Securing funds to capitalize on those opportunities, five state-owned national oil companies floated between 20% and 35% of their shares on the stock exchange in 2022 and 2023. That raised nearly $30 billion through sales of state-owned enterprises and capital increases, the report said.
Meanwhile, the government is decarbonizing the oil and gas sector to attract eco-conscious fossil fuel investors. That includes making natural gas the fuel of choice, as it is the least polluting fossil fuel, the Egypt Oil & Gas report said.
Regional connections
Egypt has been working with Cyprus “in light of the growing discoveries [in] the Aphrodite and Korones fields and linking their production to Egyptian facilities [via] a marine pipeline,” the report said.
Meanwhile, the 2018 East Mediterranean Gas Forum continues to “establish a competitive regional gas market and optimize resource utilization,” the report noted. “[It] provides a platform for Egypt to work closely with member countries on energy trade, infrastructure development and policies that enhance mutual economic and environmental objectives.”
According to the EOG report, Egypt has energy alliances with the EU, United Sttes, Japan, Arab oil exporters, World Bank, International Energy Agency, World Petroleum Council and World Energy Council, among others.
Renewable energy
Alongside fossil fuels, Egypt is investing in solar, wind and hydropower. Ministry data shows clean energy capacity increased by 6.8 GW in FY 2023/2024, 7.9% more than in FY 2022/2023.
Hydropower from the Aswan High Dam and the Aswan Reservoir Dams accounted for 56.6% of Egypt’s clean energy capacity in FY 2023/2024. Wind energy came second with 23.4% from windmill farms in Gabal Al-Zait, Zafarana and the Gulf of Suez. Solar power was third, accounting for 20% of Egypt’s green energy generation. Nearly 90% of it came from Aswan’s Benban Solar Park. Other locations include the El-Kuraymat Power Plant and Kom-Ombo Park.
The private sector installed 35.6% of the new capacity; the rest was government investment. Over 76.4% of the former’s projects were solar energy, nearly 21% went to wind power, and 2.6% in bio-energy. Meanwhile, over 65.5% of the government’s added capacity was hydropower, wind energy was over 31.8%, and nearly 2.5% went to solar power.
Clean fuel
Producing hydrogen fuel from renewable sources (green hydrogen) has been on the government’s agenda since 2021. As of March 2024, the ministry had signed 23 memorandums of understanding and 15 framework agreements to produce green hydrogen.
In July, the Sovereign Wealth Fund of Egypt and Suez Canal Free Investment Zone Authority signed four green ammonia (used to fuel cargo freights) production agreements with international energy companies.
A month later, the state launched the National Low Carbon Hydrogen Strategy in cooperation with the European Bank for Reconstruction and Development. “This initiative will require around $60 billion in investments,” the EOG report said.
In September, Norwegian energy company Scatec said it would invest $900 million to build a green ammonia facility with a maximum annual capacity of 150,000 tons. Two months later, Polish energy company Hynfra announced it was “studying” the possibility of investing $1.6 billion in Egypt to produce 100,000 tons of green ammonia yearly starting in 2030.
By the end of 2024, Egypt’s green hydrogen output reached 15,000 tons, producing 90,000 tons of green ammonia for the year.
According to the report, the government plans to raise green hydrogen fuel production to 1.5 million metric tons annually by 2030. By 2040, output should reach 5.8 million tons annually, of which 3.8 million metric tons would be exported. That should equal 5% of the anticipated global tradable low-carbon hydrogen market.
The government also has made progress laying the groundwork for developing “sustainable aviation fuel,” the EOG report said. Meanwhile, biofuel has seen “accomplishments … but there is still yet more to be done.”
The ultimate target is for green fuel to be 42% of Egypt’s power grid by 2030, up from 20% in 2022.
Sustainable funding
In 2024, Egypt received more than $1.3 billion for green projects from German development bank KfW, the EU, IMF and Scatec, according to the EOG report. That money was used to upgrade power stations and renewable energy farms, increase green hydrogen projects, and promote environmental and climate policies.
Local sustainable financing came from green bonds, which fund eco-friendly projects. According to local media, Egypt’s first sovereign green bond issue was in 2020, raising $750 million.
Egypt also has a budding voluntary carbon market, where heavy polluters buy “carbon credits” from companies with small carbon footprints. It came online in August.
Lastly, commercial banks now require corporate borrowers to consider environmental, social and governance (ESG) guidelines to secure loans or other investment activities. Meanwhile, “The Central Bank (CBE) issued the guiding principles for sustainable finance in July 2021,” noted the Egypt Oil & Gas report. The CBE also announced several initiatives to promote financing for sustainable projects like renewable energy.
Ultimately, the government wants Egypt to become “a key player in the global energy transition,” the Egypt Oil & Gas report said. “By balancing traditional energy optimization with renewable energy expansion, Egypt positions itself as a model for sustainable energy development.”
