Egypt makes progress with energy diversification

23 February 2016

Cairo is moving ahead with major coal, nuclear and renewable energy projects

 One of the key messages emanating from the recent Egypt Energy Investment Summit in Cairo is that the government is committed to meeting its energy diversification targets.

At the event, representatives from the country’s key energy authorities outlined plans for renewable energy to represent a total of 29 per cent of Egypt’s power capacity in 2030, with coal and nuclear planned to contribute 15 and 4 per cent to the power mix respectively.

If the proposed targets are achieved, it would represent a significant depletion in the use of natural gas and dual fuel oil for power generation by 2030, to 49 per cent, with the fossil fuels currently contributing 70 per cent of fuel for power generation in Egypt.

A major reason behind Egypt’s energy diversification programme was to reduce pressure on gas resources. Egypt has turned from net gas exporter to an importer in recent years as progress with major projects stalled and demand for gas domestically grew at a rapid rate.

While the Ministry of Petroleum and Mineral Resources’ recent approval to develop the Zohr field, with first gas production expected in 2017, should dramatically boost Egypt’s gas supplies, the government is keen to divert much of this gas to its burgeoning petrochemicals industry, which will offer higher value returns than for the domestic electricity sector.

Egypt has made impressive progress with its energy diversification programme since it unveiled targets at the Egypt Economic Development Conference (EEDC) in March 2015. Since then it has concluded deals with Russia to build and finance its first nuclear power plant, and recently signed contracts with a Chinese contractor to develop its first major coal-fired power plant.

The key immediate challenge will be ensuring that it can resolve the concerns over currency risk for its feed-in-tariff renewable energy scheme. Once the first of these projects reach financial close, Egypt’s energy diversification programme will be well underway.

Andrew Roscoe

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