Egypt is the largest oil producer in Africa outside of the Organization of the Petroleum Exporting Countries (OPEC) and the third-largest natural gas producer on the continent following Algeria and Nigeria. Egypt plays a vital role in international energy markets through its operation of the Suez Canal and the Suez-Mediterranean (SUMED) Pipeline.

The Suez Canal is an important transit route for oil and liquefied natural gas (LNG) shipments traveling northbound from the Persian Gulf to Europe and to North America and for shipments traveling southbound from North Africa and from countries along the Mediterranean Sea to Asia. Fees collected from these two transit points are significant sources of revenue for the Egyptian government.

The 2011 revolution led to an economic downturn, and the country experienced a sharp decline in tourism revenue and foreign direct investment, according to the International Monetary Fund (IMF). However, economic conditions have improved over the past few years, and financial support from the United Arab Emirates (UAE), Saudi Arabia, and Kuwait has helped Egypt address its increasing domestic demand for energy[1].

As part of the conditions outlined by the IMF’s economic reform package, the Egyptian government is implementing a reform program that will eliminate energy subsidies to reduce spending and strengthen its fiscal position. Energy subsidies are expected to decline to 2.4% of GDP in fiscal year (FY) 2017 – 18 (ending June 30, 2018), from a peak of 5.9% of GDP in FY 2013 – 14[2]. Energy subsidies have contributed to Egypt’s large budget deficit and to financial challenges for its national oil company, the Egyptian General Petroleum Corporation (EGPC). Subsidies have also deterred foreign operators from investing in the sector. However, quicker-than-expected progress on implementing reforms and recent natural gas discoveries have led to renewed interest among foreign investors in Egypt’s energy sector.