Germany wants to buy more liquefied gas in Egypt and work with the North African country to set up hydrogen production. The project, which was discussed during President Abdel Fattah al-Sisi’s visit to Berlin, goes well with the “very long industrial relations that the two countries have with each other,” said the Chancellor Olaf Scholz on Monday in Berlin. The energy partnership with Egypt is necessary because “you can’t rely on a single partner, you have to have many good partners,” Scholz continued.
President Al-Sisi is delighted that another German-Egyptian high-technology agreement will be implemented almost immediately, following the recently concluded contract with Siemens for the construction of a high-speed network. Autumn will not only be difficult for Germany. The sharp rise in food and energy prices is increasing fears of social unrest in the country of 100 million people Egypt.
Should the Russian gas deliveries through the Nord Stream 1 pipeline fail to materialize, Germany will need far more than the amount now agreed LPG from the eastern Mediterranean. Every possible cubic meter will be delivered, said Al-Sisi. After years of criticism, the human rights situation in Egypt was only briefly addressed this time in Berlin.
Compared to other gas producers, Egypt is a godsend for Europeans hungry for a substitute for Russian supplies. The LNG (Liquefied Natural Gas), cooled to minus 161 degrees for transport in tankers, is immediately available thanks to the huge Leviathan gas field off the Israeli coast and existing liquefaction plants on the Egyptian coast.
Unlike Qatar, Cairo also sells most of its LNG production on the spot markets and avoids long-term contracts. The world’s largest LNG producer is bound to Asian customers by long-term contracts. Italy is currently trying to increase gas supplies from Algeria, but the pipelines only allow a 10 percent increase in supplies. The dispute between Morocco and Algeria over the territory of Western Sahara claimed by Rabat makes Algerian supplies a risk. Spain cannot count on more gas from the largest country in Africa because it is allied with Morocco because of the refugee crisis and its North African enclaves.
The supply problems and price increases of LNG after a fire at a Texas LNG liquefaction plant in June show how sensitive the market is to disruptions. The German-Egyptian gas and hydrogen project is also taking place in a politically sensitive environment. The two Egyptian liquefaction plants at Damietta and Idku were originally built to liquefy Israeli pipeline gas. Since 2020, Israel, which does not have its own LNG infrastructure, has been exporting its gas reserves intended for the world market to Egypt, which collects a commission from its former archenemy. Undersea reserves discovered off their coasts also want to be transported by pipeline to Greece and Cyprus in the future and liquefied.
The 6.6 million tons of gas exported in 2021 could be doubled this year if pipelines and liquefaction plants are fully utilized. This means that the only North African country with LNG technology could replace ten percent of Russian gas supplies to Europe.
“The LNG project comes at a good time for Egypt,” says Sherif Rohayem of the Society for Foreign Trade in Cairo. “And President Sisi’s visit to Berlin will help with the ongoing negotiations with the International Monetary Fund.”
New pragmatism in the Middle East
Before the Ukraine war, Egypt was considered a candidate for national bankruptcy because of low oil and gas prices and mismanagement. “The European energy partnership and the confidence of Germany will attract investors again,” believes the analyst Rohayem.
How pragmatic the political situation is in the region, which has been hit by a severe economic crisis, will soon become apparent during the celebrations on October 6th. Then a parade by the Egyptian army commemorates the start of the Yom Kippur War against Israel, and aid packages are sent to Palestinian refugees. Reconciliation with neighbors is still a sensitive issue in Egypt. But criticism of the Egyptian-Israeli energy cooperation is taboo.
This also applies to the fate of thousands of political prisoners in Egyptian prisons. Few journalists dare to speak openly about the ongoing wave of arrests. On the occasion of the Petersberg climate dialogue, 21 Egyptian and international human rights organizations drew attention to the many activists who have been in custody for years. But the current political pragmatism of the Middle East has now also reached Berlin.