6 days ago
Govt cuts industrial gas supplies after ‘inaction' to offset planned drop in Israeli imports
The government temporarily reduced natural gas supplies to state-owned petrochemical plants, particularly fertilizer producers, by around 50 percent starting May 17, according to seven sources who spoke to Mada Masr — two from the petrochemical industry, four from fertilizer companies and a former Petroleum Ministry official.
The decision came to mitigate a temporary widening of Egypt's natural gas deficit after Israel cut gas exports to the country for the third time in less than two years, due to planned ten-day maintenance at the Leviathan megafield, a government source told Mada Masr on condition of anonymity.
Egypt's domestic production of natural gas has dropped dramatically over the past three years amid steadily rising demand, increasing the government's reliance on Israeli gas imports, LNG shipments, and mazut to meet electricity generation needs.
Egypt was notified of the maintenance work in December, according to the source and an informed economic consultant who spoke to Mada Masr.
After that, the petroleum and electricity ministries held three meetings to discuss the matter, which would see inflows from Israel drop by around 480 million cubic feet per day, the government source said. They agreed to secure 35,000 tons of mazut per day during the disruption as an alternative — a plan that ultimately fell through, forcing the government to cut back gas supplies to the industrial sector.
According to the government source, the Petroleum Ministry had flagged the maintenance at Leviathan in a March report detailing plans for May, which included preparations to supply mazut (fuel oil) as an alternative energy source.
As the Leviathan maintenance period approached in early May, the Petroleum Ministry began sourcing only 20,000 to 25,000 tons of mazut per day, according to the source. To prevent power outages in the residential sector, the government opted to scale back gas deliveries to industrial users.
In mid-May, the state-owned Egyptian General Petroleum Corporation issued a tender to purchase two million tons of mazut for delivery in May and June, according to Bloomberg.
Cutting supply to industry was ultimately a political decision, a source at a state-owned nitrogen fertilizer company told Mada Masr, noting that the government chose to risk the petrochemicals and fertilizers sectors rather than jeopardize the stability of the national power grid.
Prioritizing natural gas for electricity generation over industrial use is an effort to avoid a repeat of last summer's public backlash over widespread power outages, the fertilizer company source and a parliamentary source in the House Planning and Budget Committee separately told Mada Masr.
Electricity generation accounts for about 60 percent of Egypt's natural gas consumption, while around 20 percent of the country's gas goes to the petrochemical industry, particularly fertilizer plants, according to Hafez Salamawy, former head of Egyptian Electric Utility and Consumer Protection Regulatory Agency.
The government source dismissed media reports suggesting the May supply cuts were prompted by Israeli pressure on Egypt to raise the price it pays for imported natural gas. Instead, the source said that in their view, the disruption to industrial supply was 'a result of the government's failure to take timely action.'
Egypt and Israel are currently holding negotiations under the periodic review of their gas export agreement. Cairo is seeking to increase its daily imports of Israeli gas to 1.5 billion cubic feet, up from the current cap of 900 million cubic feet per day, according to both the government source and a former Petroleum Ministry official.
In exchange, Israel is demanding a price increase of around 25 percent, the two sources said.
Both sources anticipated that Egypt would likely accept the price hike. To avoid further rolling power cuts, the government has chosen to absorb the financial burden of securing multiple shipments of liquid natural gas and renting regasification units to feed those supplies into the demand. According to the sources, even with the proposed price hike, Israeli pipeline gas would still be cheaper than LNG alternatives.
In 2024, Israeli gas made up 72 percent of Egypt's total gas imports, but only accounted for 58 percent of the overall import bill. While the average cost of 1,000 tons of LNG stood at US$685, the same quantity of Israeli gas cost $338. Egypt's total gas import bill for the year reached $4.7 billion, according to CAPMAS foreign trade data.
Egypt's domestic mazut production, meanwhile, stands at 17,000 tons per day, enough to cover around 12 percent of the country's electricity generation needs. Power plants nationwide are equipped to handle around 35,000 tons of mazut daily, a potential 24 percent of national generation per day. If these quantities were directed toward electricity generation, Salamawy said, Egypt would require additional import volumes of mazut.
The reduced gas supplies for industry are expected to last around two weeks, according to the former ministerial official and a source in the petrochemical industry.
Meanwhile, a source at the Chemical and Fertilizers Export Council told Mada Masr that no exact timeline has been set, but that the government informed the council that the supplies will remain limited until LNG shipments reach Egypt in the coming weeks.
The gap between domestic gas production and demand has widened over recent years to represent nearly a third of Egypt's total demand. While the country currently requires between 4 and 6 billion cubic feet of gas per day, local production has continued to drop to around 4 billion cubic feet, according to an informed private sector source, the former official and the MP from the House Planning and Budget Committee. Data from the Joint Organisations Data Initiative confirms that, showing that output reached 4.1 billion cubic feet per day by the end of March, 2025.
Cairo began requesting increased imports from Israel during the summer of 2023, prompting production companies operating in Israel's major gas fields to boost investments and ramp up output, reassured by Egypt's reliability as a buyer.
The cuts in the Israeli supplies due to maintenance this May represent the third time that Israeli gas flows to Egypt have been interrupted since the outbreak of the war on Gaza in October 2023. The sharpest cut came that same month, when imports plummeted to a record low of 357 million cubic feet per day — a 51 percent drop from the previous month — as Israel shut down production at the Tamar field, citing security concerns in the wake of Operation Al-Aqsa Flood. Another drop occurred in June 2024, when daily imports fell to 728 million cubic feet per day.
