Iran War Doubles Egypt’s Gas Import Costs Amid Production Decline
Egypt is grappling with soaring liquefied natural gas (LNG) import expenses that have doubled due to the ongoing conflict in Iran while its domestic gas production continues to shrink. This surge in import prices has compelled Cairo to delay LNG shipments and rely more heavily on fuel oil to manage its energy expenditures.
Falling Domestic Gas Output and Its Impacts
As of August, Egypt’s natural gas output dropped to 3.63 billion cubic feet per day (bcf/d), reflecting a persistent decline driven by aging fields outpacing new well production. Production averaged 4.87 bcf/d in 2024 — a record low in eight years — and decreased further to around 4 bcf/d during the latter half of 2025. In July, imports overtook domestic production for the first time, indicating a significant shift in Egypt’s energy landscape.
The decline puts additional pressure on Cairo’s energy sector, forcing authorities to seek alternative sources and intensify exploration efforts. The Petroleum Ministry has extended the deadline for bidding on 14 upstream exploration blocks until mid-December to stimulate gas discovery and reverse the production downturn. Encouragingly, these initiatives have attracted over $19 billion in investments from international energy firms.
Rising LNG Costs Amid Regional Conflict
The turmoil in Iran has substantially affected global LNG prices, with Egypt’s costs for imported cargoes doubling since September. A government official reported that individual LNG shipments now exceed $100 million, up roughly 100% from earlier figures. Compounding the situation, the major supplier QatarEnergy has maintained a force majeure on LNG deliveries since April and extended it through December, disrupting supply agreements.
To alleviate financial strain, Egypt has requested postponement on several November LNG deliveries, deferring nearly five of the 15 scheduled cargoes to 2027. This comes in addition to approximately 15 deferred cargoes dating back to July, illustrating the extent of logistical and financial challenges the country is confronting.
Energy Strategy: Diversifying and Reducing Imports
In response to rising LNG bills, Egypt has increased fuel oil imports, surpassing 640,000 tons in October alone, and purchased high-sulfur fuel oil cargoes to supplement power generation. Meanwhile, the country is actively pushing to broaden its renewable energy sector, targeting 45% renewable electricity by 2028. This dual approach aims to curb dependence on costly gas imports and enhance energy security.
The strategic partnership with Israel’s Leviathan gas consortium remains critical, supplying 1.20 bcf/d by pipeline under a $35 billion agreement extending to 2040. However, with existing fields losing about 120 million cubic feet daily and new fields only temporarily stabilizing output, Egypt faces ongoing challenges in achieving energy self-sufficiency.
Energy analysts stress that continuing tensions in the Middle East are likely to sustain pressure on LNG prices and supplies, underscoring the importance of Egypt’s accelerated exploration and renewable energy expansion for long-term economic and energy stability.
Petroleum Minister Karim Badawi emphasized the government’s commitment stating, “We intend to add about 330 million cubic feet of domestic gas to our output soon” as part of these efforts.
Why This Matters for Pakistan
Egypt’s experience highlights the vulnerabilities countries face amid regional conflicts affecting energy supplies. Pakistan, similarly reliant on imported LNG and domestic gas production under pressure, can draw lessons in diversification and infrastructure investment. Rising energy import costs impact economic stability and consumer prices, making renewable energy development and local production expansion critical strategies for energy security in the region.
