LynAlden on Nostr: In one of my recent paywalled client reports, I had a section about Egypt's energy ...
In one of my recent paywalled client reports, I had a section about Egypt's energy shortage crisis, which applies to a lot of other developing countries too. I figured I'd post that specific portion of the report here on Nostr for those interested, as kind of a continuation of my Nostr-exclusive posts about Egypt.
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Egypt has been experiencing a natural gas shortage, which has been contributing to recurring rolling power outages.
Egypt consumes 1,094 TWh of primary energy per year as of 2023, which translates into 9,704 KWh per capita. This mostly includes a mix of coal, oil, and natural gas, but also includes some other sources of energy around the margins including hydroelectric, wind, and solar. Although total nationwide primary energy consumption is gradually increasing, it’s not increasing as fast as population growth, and so per capita energy consumption is declining under the current administration:
For context, Egypt’s 9,704 KWh per capita energy consumption is about 1/8th as much energy as the United States’ 77,028 KWh per capita energy consumption. So, while some wealthy high-energy developed countries have declining per capita energy usage due to greater efficiencies and industrial outsourcing, the fact that Egypt’s per capita energy use is declining from a low level is a more serious economic matter, indicative of a stagnation in genuine per capita development even as the country’s overall economy technically grows in size.
Out of that 9,704 KWh in annual energy consumption per capita, about 1,783 KWh is used for electricity, which has been on a trending decline in Egypt for the first time in modern history:
The vast majority of that electricity generation comes from burning natural gas. This chart below shows the nationwide levels rather than the per capita levels:
The monthly chart shows that electricity usage skyrockets during the summer for air conditioning, and then declines during less hot months. Grid operators have to design for those hot periods, and then figure out how to repurpose more of their capacity for the colder months so that it doesn’t go to waste:
And that’s the current source of the problem: Egypt has had significant gas shortages in summer 2023 and summer 2024. This is despite the fact that Egypt has historically been a gas exporter.
Egypt produces its own gas from large gas discoveries. In addition, it has built some of the only liquified natural gas or “LNG” facilities in the broader region (which are quite complex and expensive), and so if countries like Israel and Cyprus want to export surplus natural gas beyond the regions to which they have a pipeline, they can sell it over to Egypt via pipeline, where it can then be chilled and compressed into LNG and exported globally by Egypt for dollars. That’s a useful value-add for Egypt and for the region. It also makes it so that during the less-hot periods when Egypt is using less natural gas, they have something to do with their surplus domestic gas production: convert it and export it as LNG for dollars.
But the numbers have become imbalanced. Egypt’s gas production has been stagnating, while their population and total demand have been increasing. And so that combination has resulted in acutely insufficient natural gas for electricity during summer months, for two years in a row.
To deal with that, the government imposes scheduled power outages for certain neighborhoods across Egypt staggered throughout the day, since they can’t all have power at once. It used to be one-hour daily outage periods, then it crept up to two hours per day, and now it’s often three hours per day. Many of the upper class areas and coastal resorts are excluded from these outages, whereas many of the poorer rural areas have even more than three hours of daily outages.
A few years ago, Egypt partnered with Russia to build a nuclear power facility on Egypt’s north coast to generate more electricity for the country, but that won’t be operational until 2026 or later. Ideally, they should have started that power plant earlier and phased out the construction of their new cities more slowly, but top-down central planning often results in significant inefficiencies and suboptimal ordering of events like that. They were early to finance and direct the construction of entire new cities which are still mostly vacant, but were late to do the same for their power generation capabilities which are gravely needed. And after the power shortages of 2023, they should have prepared temporary responses for more issues in 2024 ahead of time, but didn’t do so.
As a result, there are people without power, while new buildings sit vacant in the desert, all financed with the accumulation of external debt and repeated currency debasement for the people that are currently without power.
Egypt’s government is playing catch-up and trying to temporarily resolve the issue by importing LNG now, but that’s expensive and comes with key limitations. For one issue, Egypt doesn’t have re-gasification infrastructure. If you import LNG, you need to be able to convert that imported LNG back into usable gas, which requires complex and expensive facilities to do. Egypt, being prepared mainly for exporting LNG rather than importing LNG, has liquification capability but doesn’t have re-gasification capability.
But there’s a fix for that. Egypt contracted with Hoegh Galleon, a massive Norwegian vessel that serves as a floating storage regasification unit (“FSRU”). Renting these types of ships allows a country to import LNG if they don’t have the regasification infrastructure in place, although naturally it’s expensive and these types of ships are limited. So Egypt will be importing LNG, and is renting the FSRU for at least the next year to be able to convert that imported LNG to the natural gas they need for their power grid.
That’s good, but the problem is that it’s expensive and requires the expenditure of globally-acceptable external currencies like dollars. Egypt has a structural trade deficit, meaning they import more things overall than they export, so dollars are not so easy to come by at scale. As a result, they need to get dollars mainly from external investment and loans. Thanks to the IMF and UAE injections of dollars earlier this year, Egypt now can afford this LNG and FSRU temporarily, but within a couple of years they are likely to run into more dollar shortages, which ultimately puts their energy security at risk.
For the next year and beyond, Egypt plans to increase production from their gas fields, but it remains to be seen if they’ll be successful at that or not. By 2026 or later, their nuclear facility will come online and could boost their nationwide total electricity generation by up to 15% or more. And in theory, Egypt should be a decent place for large-scale solar installations, since they have long hours of desert sun and their biggest electricity shortages occur on hot and sunny summer days. However, solar panels are energy-intensive to produce, and so China produces the vast majority of them, and thus importing solar panels could further hurt Egypt’s structural trade deficit unless they can find more ways to reliably get their exports up (including tourism revenues).
This example of a natural gas shortage and overall energy shortage represents a challenge that a lot of developing countries face. It shows the importance of establishing a balance of trade and acquiring globally acceptable money. If Egypt is going to be a net energy importer, it needs to export more things, which in Egypt’s case can include better manufacturing numbers or can include better tourism numbers.
It also shows how interconnected energy systems are for both developed and developing countries. Most types of energy are not very fungible; they need to be converted, refined, compressed, transported, and so forth. Countries often need to work together to either monetize a surplus for one of them, or fill a deficit for another one of them, both in terms of the type of energy itself and the infrastructure to make use of it. And as previously described, some countries import raw forms of energy (natural gas via pipeline, or barrels of oil via pipeline or via ship, or uranium via ship), and then refine it, compress it, or do whatever value-add process that the particular type of energy requires, so that they can export it as a more readily transportable or usable form.
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Egypt has been experiencing a natural gas shortage, which has been contributing to recurring rolling power outages.
Egypt consumes 1,094 TWh of primary energy per year as of 2023, which translates into 9,704 KWh per capita. This mostly includes a mix of coal, oil, and natural gas, but also includes some other sources of energy around the margins including hydroelectric, wind, and solar. Although total nationwide primary energy consumption is gradually increasing, it’s not increasing as fast as population growth, and so per capita energy consumption is declining under the current administration:
For context, Egypt’s 9,704 KWh per capita energy consumption is about 1/8th as much energy as the United States’ 77,028 KWh per capita energy consumption. So, while some wealthy high-energy developed countries have declining per capita energy usage due to greater efficiencies and industrial outsourcing, the fact that Egypt’s per capita energy use is declining from a low level is a more serious economic matter, indicative of a stagnation in genuine per capita development even as the country’s overall economy technically grows in size.
Out of that 9,704 KWh in annual energy consumption per capita, about 1,783 KWh is used for electricity, which has been on a trending decline in Egypt for the first time in modern history:
The vast majority of that electricity generation comes from burning natural gas. This chart below shows the nationwide levels rather than the per capita levels:
The monthly chart shows that electricity usage skyrockets during the summer for air conditioning, and then declines during less hot months. Grid operators have to design for those hot periods, and then figure out how to repurpose more of their capacity for the colder months so that it doesn’t go to waste:
And that’s the current source of the problem: Egypt has had significant gas shortages in summer 2023 and summer 2024. This is despite the fact that Egypt has historically been a gas exporter.
Egypt produces its own gas from large gas discoveries. In addition, it has built some of the only liquified natural gas or “LNG” facilities in the broader region (which are quite complex and expensive), and so if countries like Israel and Cyprus want to export surplus natural gas beyond the regions to which they have a pipeline, they can sell it over to Egypt via pipeline, where it can then be chilled and compressed into LNG and exported globally by Egypt for dollars. That’s a useful value-add for Egypt and for the region. It also makes it so that during the less-hot periods when Egypt is using less natural gas, they have something to do with their surplus domestic gas production: convert it and export it as LNG for dollars.
But the numbers have become imbalanced. Egypt’s gas production has been stagnating, while their population and total demand have been increasing. And so that combination has resulted in acutely insufficient natural gas for electricity during summer months, for two years in a row.
To deal with that, the government imposes scheduled power outages for certain neighborhoods across Egypt staggered throughout the day, since they can’t all have power at once. It used to be one-hour daily outage periods, then it crept up to two hours per day, and now it’s often three hours per day. Many of the upper class areas and coastal resorts are excluded from these outages, whereas many of the poorer rural areas have even more than three hours of daily outages.
A few years ago, Egypt partnered with Russia to build a nuclear power facility on Egypt’s north coast to generate more electricity for the country, but that won’t be operational until 2026 or later. Ideally, they should have started that power plant earlier and phased out the construction of their new cities more slowly, but top-down central planning often results in significant inefficiencies and suboptimal ordering of events like that. They were early to finance and direct the construction of entire new cities which are still mostly vacant, but were late to do the same for their power generation capabilities which are gravely needed. And after the power shortages of 2023, they should have prepared temporary responses for more issues in 2024 ahead of time, but didn’t do so.
As a result, there are people without power, while new buildings sit vacant in the desert, all financed with the accumulation of external debt and repeated currency debasement for the people that are currently without power.
Egypt’s government is playing catch-up and trying to temporarily resolve the issue by importing LNG now, but that’s expensive and comes with key limitations. For one issue, Egypt doesn’t have re-gasification infrastructure. If you import LNG, you need to be able to convert that imported LNG back into usable gas, which requires complex and expensive facilities to do. Egypt, being prepared mainly for exporting LNG rather than importing LNG, has liquification capability but doesn’t have re-gasification capability.
But there’s a fix for that. Egypt contracted with Hoegh Galleon, a massive Norwegian vessel that serves as a floating storage regasification unit (“FSRU”). Renting these types of ships allows a country to import LNG if they don’t have the regasification infrastructure in place, although naturally it’s expensive and these types of ships are limited. So Egypt will be importing LNG, and is renting the FSRU for at least the next year to be able to convert that imported LNG to the natural gas they need for their power grid.
That’s good, but the problem is that it’s expensive and requires the expenditure of globally-acceptable external currencies like dollars. Egypt has a structural trade deficit, meaning they import more things overall than they export, so dollars are not so easy to come by at scale. As a result, they need to get dollars mainly from external investment and loans. Thanks to the IMF and UAE injections of dollars earlier this year, Egypt now can afford this LNG and FSRU temporarily, but within a couple of years they are likely to run into more dollar shortages, which ultimately puts their energy security at risk.
For the next year and beyond, Egypt plans to increase production from their gas fields, but it remains to be seen if they’ll be successful at that or not. By 2026 or later, their nuclear facility will come online and could boost their nationwide total electricity generation by up to 15% or more. And in theory, Egypt should be a decent place for large-scale solar installations, since they have long hours of desert sun and their biggest electricity shortages occur on hot and sunny summer days. However, solar panels are energy-intensive to produce, and so China produces the vast majority of them, and thus importing solar panels could further hurt Egypt’s structural trade deficit unless they can find more ways to reliably get their exports up (including tourism revenues).
This example of a natural gas shortage and overall energy shortage represents a challenge that a lot of developing countries face. It shows the importance of establishing a balance of trade and acquiring globally acceptable money. If Egypt is going to be a net energy importer, it needs to export more things, which in Egypt’s case can include better manufacturing numbers or can include better tourism numbers.
It also shows how interconnected energy systems are for both developed and developing countries. Most types of energy are not very fungible; they need to be converted, refined, compressed, transported, and so forth. Countries often need to work together to either monetize a surplus for one of them, or fill a deficit for another one of them, both in terms of the type of energy itself and the infrastructure to make use of it. And as previously described, some countries import raw forms of energy (natural gas via pipeline, or barrels of oil via pipeline or via ship, or uranium via ship), and then refine it, compress it, or do whatever value-add process that the particular type of energy requires, so that they can export it as a more readily transportable or usable form.