08.03.2017 Author: Dmitry Bokarev

Egypt and Interconnection of the European, Middle Eastern and North African Energy Systems

56444In the recent years, the Arab Republic of Egypt, one of the most developed Arab countries, has gone through difficult times. In addition to the political instability, Egypt has encountered an energy crisis that had grave consequences for all sectors of the country’s economy. Nevertheless, the country continues remedying the ramifications of the crisis. Supported by its long-standing partner, the Russian Federation, Egypt is striving to become a regional energy leader.

A lion’s share of the Egyptian energy is produced from natural gas and oil products. A shortage of these fossils causes a disrupted supply of energy. In 2014, Egypt sustained one of the most severe energy crisis in the past few decades, which affected both country’s residents and large enterprises, where the latter suffered massive losses. The crisis was so deep that in September 2014, after an accident that had plunged Cairo in complete darkness, Egyptian President Abdel Fattah el-Sisi issued a statement saying that the shortage of power was threatening the very existence of the state. He emphasized that the adverse circumstances had been triggered by a long-term underfinancing of the country’s power production industry. Abdel Fattah el-Sisi also noted that the Egyptian power sector was in need of $12 billion investment.

After the incident, the Egyptian government stepped up its efforts to improve energy security. A plan envisaging a reconstruction, modernization and development of the entire energy sector, as well as diversification of energy sources was enacted. Egypt chose to advance the production of both traditional (hydrocarbon-based) and alternative sources of energy (solar, wind, etc.).

The Egyptian nuclear program also received a new impetus. At that time, the country began looking for foreign and private investors. In 2014, Egyptian Minister of Electricity and Renewable Energy Mohamed Shaker announced that the Egyptian leadership had set the development of the country’s energy sector as its main priority. Today, the country is increasing the amount of investment in the development of its power sector. In November 2016, the Ministry of Electricity and Renewable Energy announced the allocation of $1.2 billion toward the overhaul of the country’s systems of energy transportation and marketing. Egypt has also committed to the increase of its annual investment in the development of the energy sector to $130 billion by 2030.

However, Egypt, like many other countries of the region, is cautious to rely solely on its own capacities in the matter of energy security. Therefore, it is looking to integrate its energy production network with the networks of neighboring countries to ensure that in case of emergency it would have access to backup power sources. This strategy has been adopted by many states across the globe. The creation of “energy pools” allows participating countries to help each other whenever their own electricity production fails. Pool participants can also sell electricity produced in excess, thus improving the quality of energy resource management and leveraging the power grid load. By today, Egypt has already formed energy coalitions with Jordan and Libya. In the near future other countries of the Arab Maghreb Union (which includes Libya, Algeria, Mauritania, Morocco and Tunisia), as well as Lebanon, Syria, Iraq and Saudi Arabia, might join in.

The most desirable project, however, will be the interconnection of Egyptian and Saudi Arabian energy complexes. Saudi Arabia, being one of the richest Arab countries, is also actively developing its energy sector, including the nuclear and solar power production. Another advantage—by integrating with the Saudi Arabian grid, Egypt would gain access to the power systems of other countries of the Persian Gulf. Since Egypt and Saudi Arabia are separated by an extension of the Red Sea, the Gulf of Aqaba, they have to run a seabed cable to connect their power grids. The project was launched in 2015. A test run is scheduled for the summer of 2017.

Early this February, Egypt, Greece and Cyprus signed a memorandum of understanding under which the three countries would map out a plan on the pooling of their energy systems. The memorandum was signed by the Egyptian Electricity Holding Company and the Cyprian Euro Africa. The participants are planning to connect the Egypt’s power system with the networks of Greece and Cyprus via the Greek island of Crete. To achieve this goal, a seabed cable would be laid across the Mediterranean Sea. According to the Ministry of Electricity and Renewable Energy of Egypt, this is only a part of a larger energy cooperation project engaging European and African countries. According to the Egyptian Minister of Energy Mohamed Shaker, in the next 1.5 years, the parties to the memorandum would produce a feasibility study, calculate the cost of the project and map out an environmental protection plan.

However, resolution of the energy crisis is just a part of the Egypt’s strategy. The country has long been cherishing the idea of becoming a major regional energy center. This is yet another reason why Egypt is seeking to interconnect its power grid with its North African, Mediterranean and Arabic neighbours. The Egyptian leadership expects that a successful implementation of this strategy would allow the country to assume the role of a key mediator of energy exchange between African, European and Middle Eastern countries, boosting the country’s energy security, its economic well-being and international prestige. And Egypt’s geographic location is conducive to the achievement of this goal.

However, it would take much more than mere integration of power grids for Egypt to transform into a major Middle Eastern and North African energy hub. Egypt must first scale up its production of electricity so that it can meet its own energy needs and share the surplus with the partners. And Russia might come in handy for Egypt to attain its goal. In November 2015, Russia and Egypt signed an agreement on the construction of the first nuclear power plant near the Egyptian town of El Dabaa. All the documents required to launch the project’s works should be executed within the first six months of 2017. It is clear that by becoming the first country-producer of nuclear power in North Africa, and one of the first in the Middle East, Egypt would increase its chances for becoming a regional energy leader. However, one NPP might not be sufficient. Prior to the political upheaval of 2011, which restrained the implementation of the Egyptian nuclear program, the country had been planning to build between 5 and 8 NPPs. It is quite possible, though, that the Egyptian leadership will reconsider its old plans.

After all, the creation of an energy pool interconnecting the entire Middle East and North Africa would undoubtedly contribute to the economic prosperity of this vulnerable region, thus contributing to the stabilization of the overall situation in the region.

Dmitry Bokarev, expert politologist, exclusively for the online magazine “New Eastern Outlook

 


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