STEPPING OUT FROM HISTORY’S SHADOW
▶ The year has started well for Egypt, but much needs to be done to end it on a high. Gavin du Venage reports
Record numbers of tourists strolling in the shadows of Luxor’s towering monuments, a possible resumption of flights between Cairo and Moscow, and the opening of the Mediterranean’s largest gasfield: for Egypt, 2018 begins on a high note.
The past seven years have been tumultuous for the North African country, with crowds standing their ground in Tahrir Square multiple times as regimes came and went. This year, Egyptians are going to the polls, opening up the possibility of yet another regime change in the Arab world’s most populous nation.
Meanwhile, as normality is returning to this country of 95 million people, visitors are also making a comeback. Tourism officials say hotel accommodation rates in Luxor and Aswan during Christmas and New Year holidays have returned to pre-2011 uprising levels, a sign that the turmoil following the ousting of former president Hosni Mubarak is no longer keeping visitors away.
Russia and Egypt have also begun talks to re-establish air links that were suspended after the mid-air bombing of a Moscow-bound Russian passenger aircraft in 2015 shortly after lift-off from Cairo.
“From a macroeconomic perspective, things are looking up for Egypt, and the reform programme it has embarked on seems to be paying off,” says Mohamed El Dahshan, an economist with the Tahrir Institute in Washington.
Foreign investment will boost growth to 4.8 per cent, given a leg up by the devaluation of the Egyptian currency. The government’s move in November 2016 to break the pound’s peg with the US dollar has resulted in the Egyptian currency losing about half of its value to the greenback, making the country more appealing to outside investors.
It was, however, a hard pill to swallow for the country’s poor. The currency is now showing some signs of recovery and inflation is around 26 per cent from more than 32 per cent last in July.
However, the headline act for 2018 will be the opening of the Zohr gasfield that will help to place Egypt in the league of world’s major energy producers.
The Zohr natural gasfield was discovered off the Egyptian coast in 2015 by Italian energy firm Eni, and with an estimated 850 billion cubic meters of reserves, is the largest in the Mediterranean. Zohr is already twice the size of the Leviathan field in the region and could grow even larger as exploration is still under way, Eni says.
Eni brought the field into production in record time – its fastest ever. The first gas began to flow last month and the nearest landfall is Port Said, about 190 kilometres away from the 100 square km drill zone. In total, Eni has had to spend about US$12 billion to get Zohr to this stage.
“Today is a historic day for us,” Eni chief executive Claudio Descalzi said in a December statement when gas production began. “It will completely
transform Egypt’s energy landscape, allowing it to become self-sufficient and to turn from an importer of natural gas into a future exporter.”
Eni now holds 60 per cent of the development and was joined in the Zohr development by UK oil major BP and Russian energy firm Rosneft. Egypt is planning to seek bids for more oil and gas exploration rounds in the region.
Initial production will be about 350 million cubic feet per day, rising to 1 billion cubic feet in June. It will reach 2.7 billion cubic feet at peak production by the end 2019, when at least 19 wells will be operating, according to Eni.
Energy security has been a driving concern for the government of Abdel El Sisi. Electricity shortages were among the factors that led to popular discontent with both the former regimes of Mubarak and Muslim Brotherhood president Mohamed Morsi, and contributed to ouster of both.
A former exporter of gas, Egypt had to abandon foreign sales in 2014 to focus on domestic demand. This has helped alleviate shortages but put pressure on foreign currency reserves.
Egypt will save at least $60 million a month initially – or the equivalent of three LNG cargo vessels in imports, the country’s oil ministry says. At peak production towards the end of next year, savings will more than double to $180m a month.
“This is potentially one of the most exciting developments over the past couple of years,” says Mr El Dahshan of the Tahrir Institute. Although the target of self-sufficiency this year may be somewhat optimistic, he notes.
Instability in neighbouring Libya could threaten Zohr’s production, but with so much of infrastructure in place already, the field will ultimately make Egypt a net exporter.
“It would free up an important item on the imports budget, and have the good repercussion of reducing imported inflation volatility,” Mr El Dahshan adds.