Since Russia’s invasion of Ukraine on February 24, 2022, liquefied natural gas (LNG) has emerged as a crucial energy supply worldwide. Its advantage lies in the relatively quick and cost-effective infrastructure needed compared to pipeline energy transport. As LNG becomes essential for global economies, it has also turned into a political tool for major buyers and suppliers, all seeking to strengthen their positions in the competitive LNG market.
The United States has made significant strides in LNG production, rising from zero exports in 2016 to becoming the world’s largest exporter by 2023. In contrast, China, lacking substantial recoverable gas reserves, has pursued long-term agreements with key producers globally, particularly in the Middle East and Russia. For the U.S. and its allies, forming new long-term LNG supply relationships has proven challenging, but Egypt stands out as a promising option. Efforts are underway to address Egypt’s current financial issues to support broader Western energy strategies.
Egypt is viewed as a vital ally for the West in the Middle East and North Africa for two main reasons: energy resources and geopolitical influence. In addition to modest oil reserves of around 3.3 billion barrels, Egypt is estimated to hold approximately 1.8 trillion cubic meters of natural gas. It is the only nation in the Eastern Mediterranean with operational LNG export capabilities, making it a key regional export hub. Geographically, Egypt controls the Suez Canal, a major global shipping route that handles about 10% of the world’s oil and LNG, along with the Suez-Mediterranean Pipeline, which provides an alternative route for oil transport from the Persian Gulf to the Mediterranean.
The Suez Canal’s significance is further emphasized by its status as one of the few major transit points not controlled by China. China has considerable influence over the Strait of Hormuz due to its agreement with Iran, which has also granted it control over the Bab al-Mandab Strait. This strategic positioning allows China to control crucial shipping routes in the region.
Geopolitically, Egypt has been seen as a leader in the Arab world for decades, promoting the idea of Pan-Arab unity, a vision famously championed by former President Gamal Nasser from 1954 to 1970. By strengthening ties with Egypt, the U.S. and its allies aim to mitigate the geopolitical impact of losing Saudi Arabia to the China-Russia bloc.
In recent years, particularly after February 2022, many Western firms have rushed to secure deals in Egypt. Chevron has played a pivotal role, announcing in December 2022 the discovery of at least 99 billion cubic meters of gas at its Nargis-1 exploration well in the eastern Nile Delta. Following this, Chevron and Italy’s Eni identified a significant offshore gas field in the Red Sea, further expanding their footprint in the Eastern Mediterranean.
In July, Eni revealed plans to drill two new wells in the massive Zohr field in late 2025, with an estimated investment of $160 million. Other major companies, including Shell and BP, have also committed to investing heavily in Egypt’s gas sector. BP plans to invest $3.5 billion in exploration and development over the next three years, potentially doubling that amount if new discoveries are made. Meanwhile, Shell is advancing its development of the West Delta Deep Marine concession, which includes multiple gas fields.
However, this surge in investment has led to increased financial strain for Egypt, which owes Eni over $1.25 billion due to its energy development costs. The country has faced a significant devaluation of its currency, complicating its ability to settle these debts. Nevertheless, Egypt remains a critical partner for the U.S. and its allies in both energy and geopolitical arenas. In March, Egypt was allowed to expand its $8 billion IMF support package, with additional financial aid options from the World Bank and the EU.
On September 19, Prime Minister Mostafa Madbouly announced plans to restore normal production at Egypt’s natural gas fields by next summer. In a bid to strengthen its role as a regional energy hub, Egypt’s Ministry of Petroleum announced on September 23 that it is working to expedite the development of gas and oil fields in collaboration with Eni. Recent discussions have focused on connecting the Cronos Gas Field in Cyprus to Egyptian facilities, enabling gas transport to international markets.
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