The Zohr pipedream: Egypt's enduring gas gap

Eni, the Italian energy company with several contracts in Egypt, announced in September that it will invest $8 billion in gas production and exploration over the next five years has renewed hopes of an output boom that could curb the record surge in imports.

However, a source in the company’s management, who asked requested anonymity, explained to Al Manassa that the investments are not aimed to discover a new field on the scale of Zohr, off the coast of Port Said. Neither will Zohr, inaugurated by President Abdel Fattah El-Sisi in 2018, return to its previous, exceptionally high production levels.

The source’s assessment aligns with expert expectations that the newly announced investments by gas producers in Egypt, while likely to boost local output, will not be able to move the country from deficit to surplus in the medium term.

Why Zohr won’t return to peak production

In 2019, Zohr allowed Egypt to achieve a trade surplus on the back of higher domestic production. Since 2023, however, domestic output has decreased, alongside reports that production at Zohr is also declining. Analysts suggested that delays in payments owed to Eni, which discovered the field, pushed the company to slow production as a form of pressure on decision-makers.

According to statements by Prime Minister Mostafa Madbouly, the government reached an agreement with foreign oil and gas producers to restructure overdue payments. Madbouly said in January that outstanding dues will fall to $1.2 billion by June, meaning the state will have repaid $5 billion over two years.

The Eni source did not deny that “the past four years have seen a kind of unannounced slowdown. It was not an explicit stoppage, but it came as pressure on the Egyptian government because of late payments.”

Yet, the source stressed to Al Manassa that production decline will continue, irrespective of the debt issue. “During the field’s first year, it produced about 3.4 billion cubic feet per day. Those were huge rates that caused successive collapses inside the field.”

Zohr has been exhausted by high output levels at the start of production, the source added. Returning to those levels in the coming period is no longer possible because it poses a risk to the field itself.

After early overproduction took its toll, the company cut output to about 900 million cubic feet a day, the source said.

Large offshore fields, the source revealed, are “not operated at maximum capacity for long periods because the speed of gas flow between rock layers can lead to geological instability and water intrusion into wells.”

Where will the new investments go?

The source at the Italian company said the announced investments will run from 2026 to 2032. They will include work at Zohr, alongside investments in other company areas such as the Nargis field—off the coast of Arish in Sinai—and, the Nooros field—off the coast of Damietta.

Eni announced a new gas well in the Greater Nooros area on the Mediterranean coast in 2020. That was followed in 2023 by the discovery of the Nargis-1 well in the Eastern Mediterranean.

But the new wells are far smaller than Zohr. The source said expected daily output from Nargis will be about 600 million cubic feet, and from Nooros about 100 million cubic feet.

The source noted they will not deliver self-sufficiency for Egypt, but they will offset the natural decline in production and reduce reliance on imported liquefied natural gas.

A discovery comparable to Zohr is not impossible, the source explained, but would be highly unlikely, given the well-understood geology of the Eastern Mediterranean.

Where do other companies stand?

Even if Eni cannot repeat the Zohr miracle, petroleum expert Gamal El-Qalyoubi said other companies have recently announced investment programs, and he hopes they will contribute to a tangible rise in gas production.

“BP recently injected $3.5 billion of investment, and the UAE’s Arcius Energy has another program worth $3.7 billion. These investments aim to expand drilling, exploration, and development operations,” El-Qalyoubi told Al Manassa.

He expects Egypt’s ability to attract these investments will grow as it pays down the largest share of overdue payments owed to foreign exploration companies.

While petroleum expert Ramadan Abul-Ela did not dismiss the role of companies operating in Egypt’s market in making several recent discoveries, he warned of their limited production capacity.

“Right now, discoveries are being announced in the range of 50 million or 100 million cubic feet per day. That is a very large gap that cannot restore balance to the market,” he told Al Manassa.

The latest petroleum discoveries include the North El-Basant-1 well, the Jumana-1, and Fayoum-6. Expected production from them will also be limited compared with Zohr’s output.

Abul-Ela warned against overstating what new discoveries can do to take Egypt back to the near self-sufficiency of 2021.

“Based on the information available right now, I do not see—in the near term—the possibility of a rapid return to self-sufficiency. You cannot build real optimism on limited discoveries that are being promoted in the media,” Abul-Ela said.

Egypt’s heavy investments in leasing floating regasification vessels for imported liquefied natural gas underscore that the economy will remain dependent on imports unless the Zohr miracle is repeated, something experts currently see as unlikely.