In less than two years, Egypt has slashed its arrears to international energy companies by over 88%, hoping to encourage exploration amid the Iran war spillover, which is making its gas deficit harder to sustain.
Drilling more wells is providing much-needed supply. But whether new gas discoveries could once again turn the country into a gas exporter is unclear. A chronic financial crunch, aggravated by Russia’s invasion of Ukraine in 2022 and ensuing supply chain disruptions, left Egypt struggling to pay its dues, which piled up and slowed much-needed energy investments in the country.
A $57bn global bailout, including a mammoth $35bn deal that saw Abu Dhabi sovereign wealth fund ADQ acquire development rights in a vast Mediterranean area, threw a lifeline to the Middle East’s most populous nation in early 2024 and enabled it to better fulfil its obligations. Later in the same year, the government implemented a system to repay arrears to foreign energy companies on a monthly basis, and it has evidently paid off.
The outstanding payments stood at $714mn by the end of April, down from $6.1bn in mid-2024, Egypt’s Minister of Petroleum and Mining Resources, Karim Badawi, said in early May. Egypt aims to completely wipe out this debt by the end of June, he added in a statement.
“Continuing to pay their debts to producers is likely the most important factor” for Egyptian authorities to increase gas production through more discoveries, JP Lacouture, a principal analyst specialising in natural gas and liquefied natural gas at commodities data and analytics firm Kpler, told Al Majalla.
Growing consumption
Fitch Solutions expects Egypt’s annual gas production to rise 8% year on year in 2026 to reach 46.6 billion cubic meters. Should it be achieved, the amount would still be considerably below the country’s domestic consumption, estimated at more than 60 bcm annually. Power generation accounts for the largest share of gas consumption in Egypt, at nearly 60%, but the plan to rely more on renewable sources of electricity has yet to bear fruit.
Alongside sprawling urban expansion and population growth, heatwaves have increased Egypt’s electricity demand over the past decade, with the rising use of air conditioners adding to the country’s gas import bills. As a result, Egypt has intermittently implemented power rationing measures in recent years, including dimming streetlights and cutting electricity supply periodically during the summer.
“Egypt imported a record volume of LNG in 2025, highlighting its growing energy needs as it faced a domestic gas production decline and less reliable supply from Israel amid its ongoing tensions with Hamas,” S&P Global said in January, referring to the Gaza war that erupted in October 2023.
“The country imported a total of 9.01 million metric tons of LNG last year, equivalent to 129 cargoes, data from Platts, part of S&P Global Energy, showed, with 90.9% of this from the US.”
Iran war impact
The Egyptian government has been further squeezed since the Strait of Hormuz, through which around a fifth of the world's oil and natural gas passes, was virtually blocked during the ongoing Iran war. The conflict, which broke out in late February after the US and Israel attacked the Islamic Republic, sent energy prices soaring and sent Egypt’s pound plummeting, compounding the country’s financial woes.
For several weeks after the war, Egypt implemented early shop closures, even though the summer season was still months away, but this was later stopped because it saved only a negligible amount of power. The government also raised fuel pump prices by up to 17% and ramped up gas prices for some energy-intensive industries.
Egypt had previously implemented similar gas price increases for the industrial sector—its second-largest consumer of domestic gas, accounting for nearly 20% —while grappling with insufficient supplies and tight finances.
Such power-saving measures are widely seen as a double-edged sword: while they alleviate financial pressures, they take a toll on the wider economy by accelerating inflation, slowing down manufacturing, widening trade deficits, and hampering businesses across different sectors. To stave off these negative effects, the government is hoping that international energy companies’ drilling operations will restore higher gas production rates.
