Xiaoyi: Welcome to a new episode of "Argus Podcast." I'm Xiaoyi, deputy editor of Argus LNG Publication, "LNG Daily." And with me here today is Bob Wigin, senior reporter for Argus European Products.
Bob: Hi, Xiaoyi. A pleasure to be here.
Xiaoyi: Thank you. So today we want to talk about Egypt's gas and fuel oil supply, both its impact from the Israel-Iran conflict and its overall outlook over this summer. We are recording on the morning of 25th June, 2025. So basically, Israel's energy ministry has just approved oil and gas operators to restart production this morning. The country has halted its gas production as a precautionary measure on 13th June, when the conflict just started. And because Israel exports gas to Egypt, the whole production also impacted Egypt's gas supply in the past two weeks.
Bob: Okay, Xiaoyi. So, does this mean that Egypt is now in the market to buy more LNG after losing so much supply from Israel?
Xiaoyi: Very good question, Bob. The country, unfortunately, is constrained by its LNG importing capacity at the moment. It only has one floating storage and regassification unit, FSRU, whole gallon at the moment. So, what we have observed in the second half of May and earlier in June was there were a couple of loaded cargoes waiting offshore Egypt to be unloaded, meaning that the vessel at the moment is working to its maximum capacity. Even though Egypt has lost all these supplies from Israel because it has maxed out its own FSRU, it's only one FSRU, it's not really able to buy any additional LNG in a very prompt basis to make up for the loss. But the country is scheduled to receive two more FSRU by the end of this month, according to the energy ministry. So, by then, we would hope that maybe the country would be able to import LNG faster to deal with any loss of supply. But on top of all the very quick LNG supply, we also hear from the market that Egypt is buying a lot more fuel oil this year to avoid the summer blackout. Bob, could you tell me more about what's going on in Egypt this week?
Bob: So, with pleasure, Xiaoyi. On Monday, EGPC, the National Egyptian Oil Company, issued a tender to import between 630,000 tonnes and a million tonnes of fuel oil for roughly delivery time in August. Now, this is the second tender that we know of this year that the company has put out to buy these large volumes of fuel oil. The first one we reported on was in April, and that was to buy between 970,000 tonnes a month, or roughly 1.95 million tonnes, for delivery in around May and June. And then between that period and now, we think that the company may have sourced around 1 million tonnes for use in July. So, what does this mean for the fuel market in general? Well, these are very large volumes to be imported. And as you say, Egypt has cited its commitment to avoid power cuts this year because they were facing them last year.
Xiaoyi: But if we want to track how much fuel oil Egypt has received in May and June under the first tender, it seems like the country has only ramped up receipt in May. Its receipt in June is still on track with past record in June 2024. So, what really is different this time?
Bob: So yeah, good question. This year, if what we believe is true, Saudi Arabia will be supplying most of the volumes to EGPC. This will be a definite swing away from the previous summer supply to Egypt, which was Russia, who supplied quite a lot of volumes to the country. It's worth noting that volumes that arrived in Egypt last year might also not have necessarily been used for electricity power generation, but partly some of them could have been used for marine fuel bunker supply as well as refining feedstock.
Xiaoyi: Does it have a wider impact for the Mediterranean market?
Bob: Yeah. If the supply does come from Saudi Arabia, this will reduce a lot of available supply that could have gone to Europe. Last year, Russian supply that went to Egypt was not available to be bought by Europe because of the flat-out ban on importing products from the country. With flows from Saudi Arabia going to Europe potentially, this would further reduce the available supply of fuel oil to the continent at a time when demand for particularly higher sulphur fuel oil in Europe starts to grow. Data from the Port of Rotterdam shows that the first quarter of the year in terms of marine fuel sales since 2021 are always lower than either Q2, Q3, or Q4. And we've already had a very high volume of sales in the first quarter this year, which means that we should expect higher demand in terms of marine fuel sales throughout the rest of this year already.
Xiaoyi: I see. What a fascinating market. We started just from Egypt, but actually it also has a knock-on effect on the European markets. I think that's everything we want to cover today. Thank you very much for listening. If you want to track our work, please subscribe to Argus "LNG Daily" and Bob's work from Argus European Products. Thank you very much. If you are interested in another service, please go to Argus website for more information. Thank you very much.
