Egyptian control over trade routes
Egypt holds a pivotal role in global trade due to its control over key trade routes, particularly the Suez Canal, which facilitates essential maritime transport between Europe and Asia. This strategically located waterway significantly reduces travel time for ships, saving between eight to fifteen days compared to alternative routes around Africa. Additionally, Egypt manages the Sumed Pipeline, a vital conduit for transporting Persian Gulf oil, further enhancing its influence in international energy markets.
Geographically, Egypt's landscape is predominantly desert, with fertile arable land found mainly in the Nile Valley and Delta. This unique positioning not only affects its agricultural capacity but also underpins its energy production and trade. While Egypt is not a leading oil exporter, it has a substantial refining sector, making it a significant player in the petroleum market. The country produces oil primarily from the Gulf of Suez and has been investing in enhanced recovery methods amidst declining production levels.
Moreover, Egypt's burgeoning natural gas sector is supported by discoveries made since the 1990s, with a notable portion of its energy generation powered by natural gas. The country also exports gas through pipelines, connecting to various regional partners. These dynamics illustrate Egypt's critical position in the trade and energy landscape, influencing both regional and global economic conditions.
Egyptian control over trade routes
Official Name: Arab Republic of Egypt.
Summary: The Republic of Egypt is a significant actor in the economics of energy. As the nation that oversees the Suez Canal, Egypt controls one of the most important trade routes between Asia and Europe.
Egypt is a transcontinental country with its landmass located on the African continent and the land bridge formed by the Sinai Peninsula to Southwest Asia. Much of Egypt’s physical geography can be classified as desert with arable land (only 2.9 percent of Egypt’s total land use) located in the Nile Valley and Nile Delta regions along the Nile River. Bordered by the Mediterranean Sea in the north and the Gulf of Aqaba and the Red Sea to the east, Egypt shares political boundaries with Sudan to the south, Libya to the west, and Israel and the Gaza Strip to the east. Egypt’s strategic geography has figured prominently in the country’s relationship to both the trade and production of energy resources.
Although Egypt is not a major exporter of petroleum, crude oil has been produced in commercial quantities in Egypt since 1908. Oil was discovered in the Gulf of Suez in the 1930s and later in the Western Desert, the Eastern Desert, and the Sinai Peninsula. Much of Egypt’s oil yield comes from the Gulf of Suez basin. In the twenty-first century, the wells in the Gulf of Suez began entering a period of natural production decline. To mitigate the losses brought about by this decline, major companies in the Egyptian oil industry have invested in enhanced oil recovery and exploration in the Suez fields. In 2023, their investment paid off with the discovery of a new well capable of producing 2,500 barrels per day.
Total Egyptian oil production has declined since its 1996 peak of an estimated 935,000 barrels per day. Egypt’s proven oil reserves in 2023 amounted to 3.1 billion barrels, while oil production averaged 548,000 barrels per day and domestic oil consumption averaged 741,902 barrels per day. The Egyptian government imported approximately 6.8 percent of its oil. While the country may soon need oil imports to accommodate domestic energy use, Egypt imports oil in order to refine it and export the petroleum product. According to the US Energy Information Administration, Egypt had the largest refining sector in Africa, with a crude oil processing capacity of 762,000 barrels per day in 2022.
Petroleum trade has broader implications for Egypt’s economy, given the location of the Sumed Pipeline, as well as Egypt’s control of the Suez Canal. The Suez Canal and the Sumed Pipeline are the main routes of Persian Gulf oil exports, allowing oil to be transported between Europe and Asia without needing to travel around Africa. The Egyptian government collects operation fees from those who use the Sumed Pipeline and the Suez Canal, generating significant revenue. Going through the Suez Canal saves between eight to fifteen days of travel time. The Sumed Pipeline is 200 miles long and extends from Ain Sukhna on the Gulf of Suez to Sidi Kerir on the Mediterranean Sea. The pipeline is owned by the Arab Petroleum Pipeline Company and had a capacity of 2.5 million barrels per day in 2023.
Egypt’s natural gas sector shows promising indications of continued growth. In the early 1990s, oil companies discovered sizable natural gas deposits in the Western Desert, the Nile Delta, and offshore in the Mediterranean. In August 2001, management of the natural gas sector was allocated to the new, nationalized Egyptian Natural Gas Holding Company, separating natural gas assets from those of the Egyptian General Petroleum Corporation. Egypt had 2,209 billion cubic meters of natural gas reserves and produced 59.29 billion cubic meters in 2023. Demand for natural gas in Egypt has risen with the greater prevalence of thermal power plants. Natural gas powered about 81 percent of Egypt’s electricity generation capacity, with the balance powered by hydroelectricity that is provided mainly by the Aswan High Dam.
Egypt exports natural gas via pipeline as part of the Arab Gas Pipeline project, as well as liquid natural gas shipments to other Middle Eastern countries. The first section of the pipeline is divided into three segments. The first segment consists of an overland pipeline and compression station and connects Al Arish, Egypt, with Taba, Egypt, on the Red Sea coast. The second segment runs undersea from Taba, Egypt, to Aqaba, Jordan. The third segment links the pipeline to a metering station and the Aqaba Thermal Power Station. A second section of the Arab Gas Pipeline runs from Aqaba, Jordan, to El Rehab, near the Jordanian-Syrian border. A third section was completed in 2008 and connects El Rehab to Homs, Syria. In 2006, Jordan, Egypt, Syria, Lebanon, Turkey, and Romania agreed to extend the pipeline to the Turkish border, cultivating the possibility of European gas delivery.
Egypt has pursued civilian nuclear technology for several decades. The country has two small research reactors, but the government’s efforts to obtain permission for power reactors were frustrated until recently by the United Nations’ International Atomic Energy Agency (IAEA). The nuclear program had maintained momentum until 1986, when projects were put on hold following the disaster at the Chernobyl Nuclear Power Plant in Ukraine. Except for the continued maintenance of research reactors, the nuclear program was suspended until 2006, when the Egyptian government unveiled plans for building civilian nuclear power facilities. After the results of a 2005 IAEA investigation demonstrated that Egypt’s research and future plans did not include uranium enrichment or weapons development, the IAEA voiced its support in 2010 for Egypt’s plan to build four nuclear reactors by 2025.
However, in late 2011 and early 2012, Egypt, like many nations in the Middle East, were caught up in a series of popular uprisings known as the Arab Spring. Plans for any nuclear facilities were put on hold until the country’s political situation stabilized. In 2013, Egypt teamed up with Russia to finance a nuclear plant at El Dabaa, a site on the Mediterranean coast. Construction on the first four reactors at El Dabaa began in 2016 and continued into the 2020s.
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