Egypt's Non-Oil Private Sector Contracts Further in August: PMI Report

Egypt's non-oil private sector contracted further in August, according to the PMI. The decline in business activity was driven by weaker demand and production, with firms reducing their workforce. Suppliers' delivery times also lengthened, and inventories fell. The PMI noted that the overall decline in business activity was driven by the downturn in the manufacturing sector.

Egypt has taken a significant step towards stabilizing its energy security by signing $340 million in oil and gas exploration contracts with Shell, Eni, and BP. This move aligns with Egypt's 2025-2033 energy strategy, which aims to increase crude output by 9% and drill 75 new wells in underdeveloped offshore and onshore blocks [1].

The contracts, valued at $340 million, cover key areas such as the Mediterranean's Merneith block, the Nile Delta's North El-Khatatba block, and the East Port Said block. Shell's $120 million investment in the Merneith offshore area, Eni's $100 million in the East Port Said block, and Arcius Energy's $109 million in North Damietta signal a vote of confidence in Egypt's untapped reserves [2].

These contracts are part of a broader effort to revitalize Egypt's oil and gas industry, which has been facing declining domestic production and surging import costs. Egypt's natural gas output fell to 3.485 billion cubic feet per day (bcf/d) in April 2025, leading to a 1,650% surge in LNG imports to 1.75 billion cubic meters in Q2 2025 [1]. The government's response has been to accelerate exploration and settle long-standing arrears with international oil companies to restore investor confidence.

The Middle East and North Africa (MENA) region is projected to see renewable energy investments grow from $26.8 billion in 2025 to $59.9 billion by 2030, driven by solar capacity expansion and green hydrogen projects [4]. While renewables will play a critical role in Egypt's long-term energy mix—targeting 42% of electricity generation by 2030—the immediate need for gas and oil remains acute.

Egypt's strategic location and proven reserves position it to reduce import dependency and position itself as a gas export hub. The government's recent $1.2 billion payment to settle past incentives for oil companies further underscores its commitment to attracting foreign capital [5]. This financial discipline, combined with the 2025 EGPC Model Agreement's standardized terms for exploration, creates a predictable regulatory environment for investors [6].

Despite these positives, risks persist. Global oil prices remain volatile, and Egypt's aging fields continue to deplete. The country's reliance on LNG imports highlights the urgency of new discoveries. However, the contracts' focus on offshore drilling, where Egypt has seen recent successes like the Zohr field, mitigates some of these risks [3]. Offshore projects, though capital-intensive, offer higher long-term yields and align with Egypt's goal to export gas to Europe and regional markets.

The regional renewable energy boom also presents a complementary opportunity. While Egypt's 2025-2033 energy strategy prioritizes oil and gas, it also includes incentives for green hydrogen and ammonia production [4]. The $340 million contracts could serve as a bridge, funding the infrastructure needed to transition to a hybrid energy model. For instance, gas from new discoveries could power hydrogen production facilities, aligning with global decarbonization trends while maintaining Egypt’s role as an energy exporter.

Egypt's $340 million oil and gas exploration contracts represent a strategic recalibration of its energy sector. By targeting high-potential offshore and onshore blocks, settling arrears, and offering competitive incentives, the government is creating a compelling case for foreign investment. While challenges like production decline and regional renewable competition persist, the contracts' alignment with Egypt’s energy security goals and its strategic location make them a high-conviction opportunity. For investors, the key will be monitoring the success of these projects in boosting output and whether Egypt can sustain its momentum in a rapidly evolving energy landscape.

References:
[1] Fueling Egypt's Future: Gas, Diesel, Or Renewables? [https://egyptoil-gas.com/features/fueling-egypts-future-gas-diesel-or-renewables/](https://egyptoil-gas.com/features/fueling-egypts-future-gas-diesel-or-renewables/)
[2] Egypt Signs $340 Mln Oil, Gas Exploration Deals With Global Firms [https://gcaptain.com/egypt-signs-340-mln-oil-gas-exploration-deals-with-global-firms/](https://gcaptain.com/egypt-signs-340-mln-oil-gas-exploration-deals-with-global-firms/)
[3] Egypt Oil Output Drop: No End In Sight - MEES [https://www.mees.com/2025/8/15/oil-gas/egypt-oil-output-drop-no-end-in-sight/6a2a4100-79f4-11f0-b74d-ed0d94862ed3/](https://www.mees.com/2025/8/15/oil-gas/egypt-oil-output-drop-no-end-in-sight/6a2a4100-79f4-11f0-b74d-ed0d94862ed3/)
[4] MENA Renewable Energy Market to Reach $59.9 Billion [https://www.bccresearch.com/pressroom/egy/mena-renewable-energy-market-to-reach-$599-billion?srsltid=AfmBOoo6Dx_JCYb7ZUFvA6sKmCjirpziSUkKXDgJMtfM9avGRy2NgOPt](https://www.bccresearch.com/pressroom/egy/mena-renewable-energy-market-to-reach-$599-billion?srsltid=AfmBOoo6Dx_JCYb7ZUFvA6sKmCjirpziSUkKXDgJMtfM9avGRy2NgOPt)
[5] Egypt to drill 75 new oil wells to stabilise national output [https://energynews.pro/en/egypt-to-drill-75-new-oil-wells-to-stabilise-national-output/](https://energynews.pro/en/egypt-to-drill-75-new-oil-wells-to-stabilise-national-output/)
[6] 2025 EGPC Model Agreement (English) [https://www.scribd.com/document/895416006/2025-EGPC-Model-Agreement-English](https://www.scribd.com/document/895416006/2025-EGPC-Model-Agreement-English)