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Egypt lines up partners to accelerate decarbonization ahead of COP27

09 March 2022 Kevin Adler

Six multinational companies and financial institutions have signed a memorandum of understanding (MOU) with the National Bank of Egypt and Egypt's petroleum ministry to accelerate decarbonization of oil and gas operations and manufacturing facilities.

Egypt will be the host country for the COP27 Climate Summit, set to be held from 7-18 November 2022.

Baker Hughes, Bechtel, Enppi, GE Digital, Petrojet, and UK-based bank HSBC signed the MOU, according to a 23 February statement.

This type of partnership represents the country's ongoing recovery from a revolution in 2011 and regime change in 2013, said Egypt's Minister of Mineral and Petroleum Resources Tarek El Molla this week.

Speaking at the CERAWeek 2022 by S&P Global conference in Houston on 9 March, El Molla described how international oil companies (IOCs), service companies, and investors have been returning to Egypt since the government dedicated itself to restarting commercial projects paused by political turmoil.

Beginning in 2014, the government published a new energy roadmap "that was transparent with our IOC partners" aimed at returning the country to self-sufficiency in energy and rebuilding its industrial base. By 2018, Egypt was again a net exporter of natural gas and had installed new gas-fired power plants that ended blackouts, he said.

From 2014 to 2020, Egypt more than doubled its energy production capacity from 23 GW to 51 GW, according to the Ministry of Planning and Economic Development. This brought power to 99.7% of the population and created an energy surplus that could open opportunities for export.

Natural gas drives down emissions

Strengthening natural gas production and bringing more gas to the power sector is key to the country achieving environmental targets as well as economic goals, El Molla said.

The country submitted a nationally determined contribution (NDC) in 2017, in accordance with the Paris Agreement to seek to limit the global temperature rise to 2 degrees Celsius. However, Egypt's NDC does not set a target for emissions reduction, unlike more than 130 other nations.

Instead of cutting CO2 emissions, Egypt's NDC provides details on the country's energy strategy through to 2035, which focuses on expanding electricity access to the entire population, stimulating economic growth, and ensuring agricultural productivity at a time of drought and increasing environmental stress.

Today, natural gas provides 65% of the country's hydrocarbons, and it could provide 100% by 2055, El Molla said. "We are accelerating … the resource we have, which is natural gas," he said.

On top of that, the country is poised to build a considerable renewable power sector, El Molla continued. The nation targets 20% renewable power generation in 2022 and 42% of by 2035. For comparison, just under 9% of power in 2019 came from renewables, and three-quarters of that was hydropower, according to the International Energy Agency (IEA).

The planning ministry said in a report released last year, "2020 Voluntary National Review," that it is projecting renewables' share will be 32.5% in 2035, falling short of the longer-term national target.

On the renewables side, the biggest accomplishment in recent years is the Benban Solar Park, which opened in 2019. The International Renewable Energy Agency says that Benban is the fifth-largest solar park in the world, at 1.65 GW, and the largest outside of Asia.

Wind also is on the rise. On 1 March, Lekela Power's West Bakr wind farm in the Gulf of Suez was officially inaugurated after beginning operations in the fourth quarter of 2021. At 250 MW, West Bakr increased Egypt's wind energy capacity by 18%, according to the Global Wind Energy Council.

LNG exports

Egypt's LNG export trends also illustrate its energy security turnaround and contribution to reducing emissions, El Molla said. In 2016, while recovering from the turmoil earlier in the decade, the country began to import LNG and became one of the world's largest importers, he said. By the end of 2018, it had reopened its two export-oriented gas liquefaction facilities on the eastern Mediterranean Sea coast, and it was a net LNG exporter of about 12 million metric tons in 2021.

In the fourth quarter of 2021, Egypt's LNG export orientation shifted from Asia to Europe, where prices were soaring. "That's the beauty of being on the eastern Mediterranean," he said. "Our proximity … has given an edge to export to Europe." He said that "most if not all cargoes" recently have been going to Europe, and that's likely to remain that way while Russian gas flows are limited.

Looking further ahead, El Molla said that Egypt is working with Mediterranean neighbors Israel, Cyprus, and Jordan on supplying more gas and LNG to Europe.

In February, Egypt and Greece signed an MOU to study a possible subsea gas pipeline connection.

More investment needed

With more than 90% of Egypt's energy use coming from fossil fuels, the country has a near-term goal of reducing emissions from that sector—and that's where international expertise is critical. Egypt produces approximately 580,000 b/d of oil-equivalent, which ranks the country 27th in the world, according to the IEA.

The partners of the new MOU are now assessing onshore oil and gas facilities to target CO2 and methane emissions cuts and energy savings, said Scott Reese, CEO of GE Digital, in a press statement in February.

GE Digital spokesperson Kristen Kutz told Net-Zero Business Daily by S&P Global Commodity Insights last week that the partner organizations are starting with visiting sites for the first project.

GE's role will be to "bring software solutions" to the effort, she said.

Carbon capture, for which MOU partner Baker Hughes is an experienced operator, is another potential project, as the CO2 could be used for enhanced recovery in Egypt's oil fields.

Siemens Energy, not a party to the MOU, worked on the gas-fired power units installed in the last several years, and it's also doing its part to reduce the nation's emissions profile. Siemens said it's engaged in projects to replace compression units on pipelines in order to improve energy efficiency. At one compressor station, Dahshour, Siemens Energy said it will reduce CO2e emissions by 120,000 mt/year through new compressors and other equipment.

Needs for investment, equity

As the host of COP27, Egypt will have the opportunity to emphasize the need for application of promises made at prior climate meetings, El Molla said. "We will prioritize realistic, doable … outcomes and a just transition" to a net-zero world, he said.

Since the 2015 Paris Agreement, countries such as Egypt have said that they can't solve their emissions problems or adapt to climate change on their own. They need the world's wealthy countries to deliver on their promise to fund developing nations with $100 billion in climate finance, El Molla said.

With that type of support, Egypt can pursue its goals of providing reliable energy for its citizens and industry, while also reducing emissions, El Molla said. But it can go a step further, such as contributing to global decarbonization through LNG exports and even green hydrogen.

In 2021, Egypt's Ministry of Electricity and Renewable Energy and Siemens formed a pilot project to produce green hydrogen with renewable power.

El Molla said the country hopes to have details on a Mediterranean green hydrogen hub that it can announce at COP27. "We are blessed with good sun and wind [conditions]," he said, "and we think we can accelerate technology for green hydrogen."

Posted 09 March 2022 by Kevin Adler, Chief Editor

This article was published by S&P Global Commodity Insights and not by S&P Global Ratings, which is a separately managed division of S&P Global.


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