Sources say that Egypt is in talks with foreign companies about buying LNG on a long-term basis

Three sources said that Egypt is in talks with U.S. and other foreign companies to buy liquefied natural gas (LNG) in bulk. This is because Egypt wants to reduce its reliance on buying LNG on the open market, which is more expensive, to meet its power needs.

The most populous Arab country is once again a net buyer of natural gas. It has bought dozens of cargoes this year and given up on its plans to become a seller to Europe because its own gas production has dropped so much.

According to the Joint Organizations Data Initiative, Egypt’s domestic stocks hit their lowest level in seven years in September. This was mostly because Zohr gas field production dropped and the country used more electricity.

Energy Aspects, a consulting firm, found that by the end of 2028, domestic gas production will have dropped by a further 22.5%. In the meantime, experts think that the country will use 39% more electricity over the next ten years.

“The ministry of petroleum wants to make sure there is enough supply for three or four years in case prices go up quickly.” “The government wants to include a flexibility clause because it thinks it might find gas sooner or not need that much gas,” a first source in the industry said.

The other two trade sources said that Cairo is mostly talking to U.S. companies and portfolio players that have U.S. off-take because they are more flexible than other suppliers.

There were no names given because the people were not allowed to talk about the problem in public.

Trading sources told Reuters in October that Egypt was planning to put out an offer for up to 20 LNG cargoes to meet its needs for the first quarter of 2025. Egypt paid an extra $1 to $2 per metric ton for the LNG it bought earlier this year.

Recently, market prices for LNG have gone up from about $12/mmBtu when Cairo started bidding for LNG to around $14.50/mmBtu. This makes it more expensive to ship new loads at a time when the country is short on foreign currency.

A first source said that Egypt is getting ready to receive gas in Ain Sokhna and Alexandria. Last month, Kpler, a data analytics company, said that Egypt was planning to put in a second floating storage regasification unit (FSRU) early next year.

According to Kpler’s ship tracking data, four LNG loads have been sent from Egypt to Europe since the beginning of November.

Monday, Karim Badawi, the minister of petroleum, said that by October 2024, gas supply would have gone up by 200 million feet. Meanwhile, he hopes that by the start of 2025, 420 million feet will be added every day from Zohr and Raven, two of the country’s biggest areas.

In addition to saying that temperatures were lower than predicted, the first source said that this also meant that less energy was being used and there was less loss in grid transfer.