The summer of 2023 served a cruel reality check to Egyptians. After almost a decade of reliable electricity supply, thanks to significant—and costly—investments in the nation’s power network, the government introduced rolling blackouts to cut costs. Officials assured the population the measures were temporary, a result of severe heat waves. After all, ending the electricity crisis was one of President Abdel Fattah El Sisi’s most celebrated accomplishments.
Then came the war in Gaza.
The halt of gas flow from Israel during the first weeks of the war exposed the vulnerability of Egypt’s energy security and impacted citizens’ daily lives even more. It came at a time when Egypt’s economy is in disarray, as authorities prioritize making good on more than $25 billion in debt service payments in 2024, while wrestling with a hard currency crunch. To make matters worse, the Houthis’ attacks in Bab El Mandeb since November 2023 have pushed Egypt’s Suez Canal revenues down by 40 percent. All of this raises energy inequalities among Egypt’s population.
This article sheds light on the war’s impact on Egypt’s energy balance and the social and behavioral changes it resulted as blackouts expanded. It also proposes some energy diversification options for the country in the medium to long term.
What has happened since the start of the war on Gaza?
Egypt’s economy had been already struggling under compounded crises even before the war on Gaza: a double-digit inflation, a depreciating local currency, and a mounting external debt, risking a default. Authorities turned again to the International Monetary Fund to increase its rescue program.
On the energy front, the war on Gaza has had a significant impact as Egypt has been dependent on increasing imports of Israeli gas since 2020. Only around 10 percent of Israeli gas imported are used domestically, while the remaining 90 percent are exported to Europe. On October 9, just two days after the war started, Israel decided to temporarily shut down the production from the Tamar offshore natural gas field operated by US giant Chevron. This was not the first time the platform shuts down—it was the case in May 2021 during the 11-day Israeli war on Gaza that followed the tensions surrounding the Sheikh Jarrah neighborhood in Jerusalem.
Only around 10 percent of Israeli gas imported are used domestically, while the remaining 90 percent are exported to Europe
This latest closure exacerbated the electricity sector’s challenges in Egypt, as it reduced the gas flowing from Israel to minimal quantities, before being halted totally on October 29.
The Egyptian government had already announced in July 2023 a power rationing program to limit consumption during an extreme summer heatwave as output from the Zohr field—Egypt’s largest gas field—alarmingly declined. It also halted the gas it exports to Europe in the form of Liquified Natural Gas (LNG) for the whole summer of 2023 period. After the production at the Tamar gas field, Egypt found itself obliged to double the country’s daily power cuts to two hours while importing its first LNG cargo to cover the deficit.
In mid-November, Israeli flows to Egypt started to rise again as Chevron resumed the Tamar field production. Egypt was planning to restart LNG exports to Europe in October after the ease of high temperatures, but this was delayed to November. Back in 2022, these LNG exports generated $8.4 billion of revenues to Cairo.
Egypt-Israel gas interdependency
Despite becoming a net exporter of LNG in 2019, Egypt’s imports of Israeli gas have also grown since 2020. This gas was then liquefied before getting exported to Europe. When Tamar flows stopped completely on October 29, the Egyptian government said its natural gas imports dropped to zero from 800 million cubic feet per day. The Russia-Ukraine war helped boost such imports as the European Union, Israel, and Egypt signed a deal in June 2022 to increase Eastern-Mediterranean gas exports to Europe—this was a first in allowing significant exports of Israeli gas to the continent. The deal complements the Israeli Energy Ministry’s announcement in February 2022 that a new route to export natural gas to Egypt via Jordan was approved.
In addition, in August 2023, the Israeli Ministry of Energy and Infrastructure approved a permit for additional natural gas exports to Egypt from the Tamar reservoir to bolster diplomatic ties between Tel Aviv and Cairo.
Egypt had years-long ambitions to become a regional gas hub in the Eastern Mediterranean, but it seems to have fallen into the trap of dependence on Israeli gas imports pushing the country to import LNG rather than exporting it, depleting its much-needed foreign reserves.
How are citizens coping with blackouts?
Sustained blackouts have profoundly disrupted people’s everyday lives and businesses since summer 2023. Rural areas and non-central governorates have been disproportionately impacted by these power cuts which lasted way longer than the officially announced durations. While the government announced that hospitals would be exempted from the blackouts, many doctors reported that they had to care for patients and deliver pregnant women using mobile phone lights.
Alarmingly, those blackouts pushed many hospitals to close down dialysis units, neonatal intensive care units, or to refuse to even receive patients altogether during the power cuts. The food industry, particularly frozen meats and vegetables, was also particularly hit by these extended “electricity load shedding,” as the government calls them, leading to huge financial losses. In addition, many families reported the loss of their expensive electric appliances as a result of the electric current fluctuation.
Rural areas and non-central governorates have been disproportionately impacted by these power cuts which lasted way longer than the officially announced durations
By fall 2023, Egyptians had high hopes that the power outages would systematically decrease with the ease of high temperatures. Not only did the government continue its rationing plan, but it also extended the blackouts durations from one to two hours. The only exception to this plan was the election week in December; the blackouts resumed right after polls closed. Another adjustment came in January 2024 when the government decided to restrict the power outages to morning hours to cater for the students’ midterm exams. This seemingly thoughtful decision came hand in hand with raising electricity prices by 7 to 20 percent. Currently, Egyptian officials promise to solve the energy problem by March 2024.
In the meantime President Sisi uses Gaza as a cautionary tale where people do not have access to basic necessities, asking Egyptians to endure the consequences of Egypt’s economic crisis.
As the electricity crisis lingers, people are adjusting their study and business schedules according to the blackouts. One of the most overlooked consequences of the power cuts is the reduction of street lighting. This electricity rationing plan is disproportionately impacting women’s safety in the streets and public spaces at night while also hindering the mobility of elderly and more vulnerable people.
More drilling, more renewables?
There is little room to overcome the current challenges on the short run, other than hoping that the ease of national electricity demand due to colder temperatures will decrease gas consumption and allow more flexibility for LNG exports again, knowing that Egypt is not too far again from the spring and summer seasons when temperatures will be on the rise again.
Following the war on Gaza, Egypt seems to be actively working on alternatives that might help to diversify the country’s energy mix rather than relying on Israel only. Earlier in September, Egypt awarded four new blocks in an oil and gas exploration bid round in the Mediterranean and Nile Delta to Italy’s ENI, British Petroleum (BP), QatarEnergy, and Russia’s Zarubezhneft. In parallel, it launched an international bidding round for exploration in 23 open blocks, with a deadline set for February 25, while also strengthening energy cooperation with countries of the East-Mediterranean region, particularly Greece. Accelerating the exploration activities and pushing international oil companies to speed up these processes would benefit Egypt in the medium and long run to increase domestic production and minimize reliance on Israeli gas.
On the other hand, Egypt hopes to increase renewable capacity to 10,000 megawatts by 2025 including wind and hydrogen. The country has already set a target to reach 42 percent of the electricity generated from renewable energy sources by 2030, and 60 percent by 2040, when it is currently at about 20 percent.
These efforts cannot be seen outside of the context of the current economic crisis and the government’s attempts to use energy and renewable energy projects to attract hard currency
Yet, these efforts cannot be seen outside of the context of the current economic crisis and the government’s attempts to use energy and renewable energy projects to attract hard currency by signing long-term deals with companies linked to big regional players, including Gulf countries, the financing of which usually comes in the form of loans. An additional challenge would be the long-term impacts of such contracts, when companies and investors repatriate their profits abroad, reversing the hard currencies’ flows.
Over the past couple of years, the government has signed several agreements for potential renewable energy projects. On wind, two important agreements were signed with Norway’s Scatec (in July 2023) and the UAE prior to COP27 (in November 2022). On the solar front, the financial closure of Kom Ombo solar farm with Saudi-backed ACWA Power (in August 2023) and a memorandum of understanding with the Chinese company China Electric Power Equipment and Technology Co. (in December 2023) were also signed. Discussions around an undersea export cable between Egypt and Europe have started too.
For all the above to materialize and to enable the environment for investments, several conditions need to be met. First, geopolitical stability must be prioritized, especially in Gaza. Second, a clear economic outlook for Egypt is needed. And third, there should be proper discussions on the questions around the lock-in effect of such projects, binding the government with long-term payments to foreign companies based outside of Egypt.
While the world debates ceasefires and humanitarian pauses in Gaza, the threat of wider regional confrontation and escalation remains high. Energy security of the region will be influenced by whether the war will expand even further. This is an indication of how Israeli and Egyptian gas interdependence entails a fragile balance between national and energy security. It is also another indication that the reliance on the East-Med to replace Russian gas through increased energy diplomacy efforts has not been fruitful so far, and that the region remains very vigilant to the spread of conflicts. Egypt could turn out to be hit even more if the war in Gaza extends for more weeks and months.
Marc Ayoub is a Nonresident Fellow at TIMEP focusing on climate and energy in the Middle East and North Africa region.