Why Egypt is attracting big gas investments, what Nigeria should be doing

After a visit last week by Miguel Arias Cañete, European Union Energy Commissioner, the European Union is promising to support Egypt transform into a regional energy hub. This is yet the strongest indicator that the North African country is turning the corner after the Arab Spring disrupted the economy.

In order to rejig the economy, the country endured some tough economic prescriptions which included removal of subsidies on food and energy. It also made a giant offshore natural gas discovery in Zohr, which has changed its story.

Last week Monday, Egypt and the EU signed a four-year Memorandum of Understanding for a Strategic Cooperation in Energy, which opens up a wide range of opportunities for investment between the two sides in the field of renewable energy. Another deal that will see Cairo become a major gas supplier to Europe is on the cards.

Sources say the MOU will cover critical areas including further assistance to the development of the oil and gas sector, continued support for electricity sector reforms, and the “development of the energy hub’’. Additional focus will be on renewable energy.

After years of difficult relations between the EU and Egypt, a thaw seems to have set in reports. Europe’s criticisms over the perceived military coup by general Sisi, Egypt’s human rights record and the power of the Muslim Brotherhood had been a major issue.

This now seems to have changed due to several major offshore gas finds in the Mediterranean and the growing cooperation between Cairo, Israel and Cyprus. The discovery and development of the offshore Zohr field, estimated to hold 30Tcf of gas, has been a major factor in the relationship. Not only is Zohr being developed by Italy’s oil and gas major ENI, but other European majors such as Shell and BP also have a stake in the megaproject according to oil price report.

These factors are helping cede the gas market on the continent to Egypt. In remarks made at the EU-Egypt Sustainable Energy Forum in Cairo, Canete said that Egypt has the potential to become an energy hub, adding that the EU “is keen to support Egypt with sharing of experience, financial and technical assistance, and with the mobilisation of international finance”

The discovery and development of the offshore Zohr field, estimated to hold 30Tcf of gas is oiling the relationship. Zohr is being developed by Italy’s oil and gas major ENI, Shell and BP also have a stakes in the project.

Through this deal, Egypt could get a long-term, viable gas customer benefit from technology transfer and financing by European partners of the upstream and downstream oil and gas sector. It will also accelerate its renewable energy ambitions.

For Europe, it will lead to increase of its security of energy supplies via diversification of sources, and shore up huge declines in European onshore gas production, as the Dutch Groningen gas field is facing a complete shutdown by 2030.

For Nigeria and other African countries, the lessons are strikingly obvious. There are no alternatives to deep economic reforms and good governance.

ISAAC ANYAOGU