The sudden halt in gas flows from Israel’s Leviathan field triggered by the military escalations between Israel and Iran has deepened Egypt’s energy crunch, forcing emergency reallocations, and factory shutdowns as the country scrambles to stabilize power generation ahead of peak summer demand.

Israeli gas suppliers formally invoked force majeure and suspended exports, including those to Egypt — which reached around 800 mn cubic feet per day (mcf/d) last week — after Tel Aviv shuttered the offshore field as well as the Karish field in the wake of military strikes on Iranian targets and the Iranian retaliation. The Israeli Energy Ministry declared a state of emergency in the gas sector following the recent attacks, leaving no clear timeline for when pumping will resume, a government official told Asharq Business.

The sudden loss of Leviathan volume has deepened Egypt’s supply gap as the country heads into peak summer demand, putting added pressure on already stretched daily allocations. Egypt needs around 6.2 bcf/d, but domestic production only contributes roughly 4.4 bcf/d — the supply gap is also expected to widen in the summer months with demand expected to rise to around 7.0 bcf/d.

The strain on the system has already started to show, with the Oil Ministry only able to supply 135 mn cubic meters of gas of the 146 mn cubic meters requested by the Electricity Ministry to power the grid, an unnamed government source told Asharq Business. Making things worse is unseasonably high demand, hitting 32.7 GW on Friday night — up from a seasonal average of 28 GW — placing strain on the national grid and forcing fuel reallocation at the expense of industrial production, a government source told us. As of now, there are no plans to reintroduce blackouts, the source said. “The government is trying to avoid a scenario of electricity load-shedding, but if developments in the region force us to, we will. Hopefully, we won’t need to resort to that,” cabinet spokesperson Mohamed El Homsany told talkshow host Azza Mostafa last night (watch, runtime: 7:11).

Egypt has activated its gas emergency energy playbook and the Oil Ministry has begun rerouting some gas volumes to power stations and ramping up the use of alternative fuels. Plants are maximizing mazut consumption and shifting some units to diesel, per a statement from the ministry. Electricity Minister Mahmoud Esmat instructed affiliated companies to stay prepared, monitor the stability of power supplies, and ensure electricity is available for all, according to a statement.

Authorities have also temporarily reduced gas supplies to several energy-intensive sectors — including iron, fertilizers, petrochemicals, and aluminum — until further notice to prioritize power generation, a source told EnterpriseAM. Local fertilizer companies have suspended operations following the dip in Israeli natural gas imports, Reuters reports.

Work to get newly arrived regassification units ready to receive shipments has never been more important. As of now, three regasification ships have arrived in Egypt, the Oil Ministry confirmed in the statement. One vessel is currently feeding the national grid, while the remaining two are undergoing final preparations and port connection works. Work on the third unit, docked at Ain Sokhna port, is being fast-tracked for integration into the grid, with the oil minister inspecting the port to expedite the process. The second ship will be connected by 27 June, and the third in the first week of July, El Homsany said. The government aims to bring all three FSRUs online by early July, expanding total regasification capacity to 2.25 bcf/d — more than double last year’s 1 bcf/d capacity.

A fourth vessel will serve as a contingency unit, Prime Minister Moustafa Madbouly said during a meeting Friday evening with the electricity and oil ministers and the CBE governor. However, while Egypt has contracted four floating storage and regasification units — three of which we have already received — it will likely need a fifth to handle incoming LNG shipments and keep up with local consumption, a government source told EnterpriseAM. The statement echoes sentiments reported by Bloomberg earlier this month that the government is mulling a fifth unit to ease pressure on the grid and stave off a return to rolling blackouts.

In other news that would have otherwise led the story — or even issue — on a normal day, Egypt secured long-term agreements for up to 120 LNG shipments annually with six of the 14 suppliers that submitted bids to state-owned EGAS, a government source told EnterpriseAM. The agreement at a USD 0.70 premium over international prices secures 80–100 LNG shipments annually, with the option to ramp up to 120 cargoes per year if needed and is part of the state’s broader strategy to build a six-month fuel reserve and reduce reliance on pipeline flows.

What does it mean for electricity prices? While production costs may rise if regional escalations persist, a source at the Electricity Ministry told us any adjustment to electricity prices lies with the cabinet and that no decision has been made yet. A government source told us in March that electricity prices hikes for both residential and industrial sectors are set to take effect by July, but last month another source told us that the government could delay the hike thanks to the decline in global oil prices, a more stable EGP-USD exchange rate, and the Egyptian General Petroleum Corporation and the Egyptian Natural Gas Holding Company going after long-term contracts.

The draft budget for the fiscal year 2025-2026 earmarks EGP 45 bn to protect the state against fluctuations in commodity prices, another senior government official told EnterpriseAM, adding that a prolonged crisis could stretch those buffers. The budget sees Brent crude prices averaging USD 77 per barrel and the USD at EGP 50.

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