https://oilprice.com-By Cyril Widdershoven
- The geography of Egypt already makes it one of the most important trade hubs in the world, and now it has the potential to become a major energy hub.
- As Europe attempts to wean itself off Russian gas, Egyptian LNG is already receiving attention from European companies and will become increasingly popular.
- Meanwhile, Egypt is focused on building out its hydrogen capacity and it looks to leverage its position as a trade hub to influence shipping fuels.
North African energy producer Egypt has an opportunity to become one of the most important energy hubs on earth.
To begin with, it has become a focal point of European gas companies as the continent attempts to wean itself off Russian gas. At the same time, Cairo is attempting to take advantage of the global call for more clean energy. The Egyptian government is currently assessing its options to put in place a $40bn hydrogen strategy in 2022. The first steps towards this aggressive strategy are already receiving support from the European Bank for Reconstruction and Development (EBRD). The EBRD has signed an MOU with Egypt’s Ministry of Electricity and Renewable Energy and Ministry of Petroleum and Mineral Resources to set up a framework to assess the potential of low-carbon hydrogen supply chains. Based on the EBRD info, which has been confirmed by Egyptian counterparts, the MOU covers mapping the current and future expected international supply and demand of the hydrogen market. It will include analyzing existing and potential hydrogen production in Egypt, while at the same time a valuation assessment of storage, conversion, and transport of hydrogen will be carried out. Egypt’s Minister of International Cooperation Rania Al Mashat stated that the hydrogen strategy will fall within the government’s broader plan to use clean and renewable energy. The new $40 billion hydrogen strategy will entail a production capacity of 1,400MW by 2030.
Alongside this $40bn strategy, Egypt has allocated several new areas around the Suez Canal Economic Zone for green hydrogen production. Egypt’s Prime Minister Moustafa Madbouly announced this allocation during a meeting with the EU Commission’s VP Frans Timmermans in Cairo. Both parties have been discussing increased cooperation in the energy sector, all with the support of Egyptian president El Sisi. The EU Commissioner is in Cairo in preparation for COP27, which is going to be held in Sharm El Sheikh in November 2022. Both parties have also reiterated the importance of cooperation when it comes to ensuring LNG and green hydrogen supplies for Europe. Egypt would play a central role in ensuring those supplies, acting as an energy hub. Egypt and the EU have also proposed the setup of a Mediterranean Green Hydrogen Partnership, focusing on hydrogen trade. In recent weeks, several new project proposals have been published, including a 1GW liquid organic hydrogen carrier (LOHC) hub at Egypt’s East Port Said by US-based H2 Industries. At the same time, German engineering giant Siemens Energy plans a green hydrogen pilot project, while Belgium’s Dredging, Environmental & Marine Engineering Group is vying for another one. In 2021, the Sovereign Fund of Egypt (SFE) agreed to set up a 50MW-100MW electrolyzer facility to produce green hydrogen for green ammonia with Norway’s Scatec and UAE-based Fertiglobe. Italian oil and gas major ENI signed an agreement in 2021 with Egyptian Electricity Holding Company and Egyptian Natural Gas Holding Company to assess blue and green hydrogen projects. Egypt’s TAQA also signed an agreement to set up a pilot project for green hydrogen as a fuel for tourist buses with Germany’s MAN Energy Solutions.
In March 2022, Norwegian company Scatec announced that it would build a 1 million tons per year green ammonia facility, with an option to reach 3 million tons per year, in Ain Sukhna, a Red Sea port within the Suez Canal Economic Zone. Last month, Yehia Zaki, chairman of the Suez Canal Commercial Zone, stated that there are plans to construct a further 220,000 tons per year green ammonia plant, with an estimated cost of $1bn. The green hydrogen would target maritime transportation companies as clients. The project plans emerged following discussions that Danish shipping giant Maersk held to set up “green marine fuels” production in Egypt. Maersk signed an MOU on March 28 with Egypt for a feasibility study, transforming hydrogen into green methanol.
Last week, Abu Dhabi company Al Nowais Group reported that it has submitted a proposal to the Egyptian Ministry of Electricity for a merger of its 500MW solar power projects with ADIA, the Abu Dhabi Investment Authority (SWF), hydrogen projects in Egypt. ADIA would become a partner in the ammonia production project.
The above moves are substantial, especially when looking at the growing role of Egypt’s offshore natural gas production, and the upcoming major Israeli natural gas exports to LNG regasification plants in the Nile Delta. Egypt could soon become a major energy hub by combining natural gas (LNG) in the East Med and its clearly commercially attractive position as a hydrogen producer and exporter. Egypt’s geographical importance as a trade route connecting Europe with Asia means it is uniquely positioned to impact the makeup of shipping fuels. If Cairo pushes for a major maritime bunkering position, combining Alexandria and Suez to use LNG and Hydrogen for shipping, new strategic options are going to be available. Making the Suez Canal area a low-carbon arena would be a win-win situation for all.
By Cyril Widdershoven for Oilprice.com