Egypt is set to reduce its contracted LNG shipments for January from commercial suppliers by over 50% — down to six or seven shipments — compared to 14 to 16 shipments in January of last year, a senior government official tells EnterpriseAM. This move comes amid sufficient strategic reserves and a dip in domestic demand thanks to cooler temperatures this winter.

Contractual flexibility: Egypt benefits from a “flexibility” clause (±10%) in its contracts with foreign suppliers, the source tells us, allowing it to postpone or cancel non-essential shipments without incurring hefty penalties. Flows are expected to return to normal by March, but with a greater focus on addressing actual gaps.

At the same time, the government is looking to diversify import sources through a new strategic partnership with Doha. Oil Minister Karim Badawi and his Qatari counterpart Saad Sherida Al Kaabi signed an MoU yesterday to boost cooperation in LNG sales and imports.

What’s on the table? As part of the agreement, state-owned Egas and QatarEnergy will supply Egypt with up to 24 LNG cargoes for the summer of 2026, to be delivered at Ain Sokhna and Damietta ports. Talks on a longer-term supply agreement are also underway. QatarEnergy — which currently holds interests in six offshore blocks — plans to launch a new drilling campaign and has appetite to invest in energy here over the next five years.

Taken together, this is good news if you’ve been concerned about twin problems: The spectre of rolling blackouts (thanks to poor supply) and the high cost to the state of imports. The Madbouly government has, over the past year, been working to get out of “emergency mode” and rebuild a long-term supply of natural gas rather than scrambling to secure cargoes.

Reducing shipments and locking in fresh supply from Qatar on a long-term contract will save hundreds of mns in FX and reflects policymakers’ confidence in the stability of flows from the East Gas Pipeline (the agreement we inked with Israel last month) as well as an uptick in domestic natural gas production.

Where did it go wrong in the first place?

Playing catch-up: The current slowdown in E&P activity is the direct result of a multi-year underinvestment cycle triggered by the FX crisis. The government prioritized securing immediate fuel imports over settling arrears with international oil companies, allowing outstanding dues to balloon to a peak of USD 4.5 bn by early 2024. Big players like Eni and BP scaled back drilling and development programs, causing natural gas production to slip to a seven-year low. While the government has since cleared much of the backlog — paying out over USD 5.5 bn since June 2024 — the lag time between capital injection and new production left Egypt a net LNG importer.

Lots of new exploration in the pipeline

Incentives recently launched by the Oil Ministry appear to be bearing fruit. An industry source tells us that oil majors including Shell, BP, and Eni have already begun deploying new investments based on the results of recent seismic surveys. The government plans to extend drilling licenses for approximately 480 exploratory wells over the next five years, with investments estimated at USD 5.7 bn, which reinforces the Oil Ministry’s target of reducing total imports by 30% by 2026. These efforts are expected to add 1-1.5 bcf/d of natural gas to our domestic production.

And there’s more to come: The Oil Ministry plans to launch ten exploration and development tenders, our source says, adding that the first phase of an extensive seismic survey of the Mediterranean Sea will kick off soon.

A regional energy hub once again?

Officials are talking up the new agreement to sell natural gas to Lebanon. An agreement to supply Lebanon with gas via Jordan and use regasification units at the port of Aqaba will bolster Egypt’s role as a logistics provider in the energy sector, our source tells us. Egypt will receive a “regasification commission” for managing these flows to neighboring countries, a competitive price that positions Egypt among regional gas suppliers.

And the market is in our favor: As a result of settling arrears, suppliers are now competing to offer Egypt prices that are approximately USD 2 lower per mn British thermal units compared to last year, our source tells us.

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