BP’s CEO Bob Dudley spoke to Pipeline Magazine’s Julian Walker in an exclusive interview about helping build a brighter future for Egypt and growing its footprint across the industry
How important is Egypt to BP’s Group Portfolio?
BP is very proud of its relationship with Egypt, which goes back over half a century. In that time we’ve invested around $35 billion, and through the Gulf of Suez Petroleum Company (GUPCO), BP has produced around 40 per cent of the country’s oil. Our commitment to Egypt continues to be strong, reflected in the fact that BP invested more money in the country than anywhere else in the world in 2018.
Can you tell us, what is the significance of taking a stake in the Noor gas concession alongside the UAE’s Mubadala Investment Company?
At BP we see natural gas as an increasingly important fuel in the energy transition, and it’s also important to Egypt’s domestic market. Acquiring a 25 per cent participating interest in the Nour North Sinai concession area offshore Egypt from Eni provides BP with an opportunity to build on its track record of delivering energy to the country. Elsewhere, recent gas discoveries in Egypt are expected to play an important role in the medium and long term in reshaping Egypt’s energy sector on different levels.
In fact, investing in potential gas finds through partnering with other foreign investors is aimed at helping Egypt achieve self-sufficiency and positioning the East Mediterranean as one of the most commercially viable gas exporting options to Europe. Through such partnerships, we are extremely proud to be growing our portfolio and strengthening our presence in Egypt as it becomes a regional energy hub. Furthermore, these investments have had a positive impact on production, allowing Egypt to meet domestic energy demand and close supply gaps, reducing government expenditure on imports and potentially opening the door for gas exports.
Egypt’s gas sector has dramatically changed over the last few years – what role has BP played in this transformation?
‘Less red tape and more red carpet’ is one of my favourite quotes from a world leader when talking about energy, and this could easily apply to Egypt. Economic reform measures undertaken by the government over the past years will help to create the right momentum for energy rationalisation and efficiency.
BP recognises that our industry is changing. Our oil and gas trading teams have been looking at several inter-linked opportunities that could unlock great and sustainable value in several areas.
I also believe that the Ministry of Petroleum’s modernisation programme for the sector is a strategic initiative that will create a step change in the ongoing transformation of Egypt’s oil and gas sector. The program has the potential to increase attractiveness and competitiveness, while continuously unlocking the sector’s value chain potential as a growth engine for Egypt.
There’s a lot of alignment between BP and the Ministry’s modernisation programmes. Our team in Egypt has a lot of interest and enthusiasm for them and the impact they can have on performance.
How are your current operations in Egypt going? Are you looking to expand your presence in Egypt?
We have a long history of deep involvement here in Egypt, and a strong growth story. Let me first recap on our relationship.
Throughout our 55 years of partnership with the Egyptian government, we have been working together to build a brighter future for Egypt. To date, BP Egypt, in collaboration with the Gulf of Suez Petroleum Company (GUPCO), BP’s joint venture company with the Egyptian General Petroleum Company (EGPC), has produced almost 40 per cent of Egypt’s entire oil production.
BP currently produces, with its partners, close to 10 per cent of Egypt’s liquids production and close to 60 per cent of Egypt’s gas production through joint ventures (the Pharaonic Petroleum Company (PhPC) and Petrobel in the East Nile Delta) as well as through BP’s operated West Nile Delta fields.
We have a strong growth story here with special focus on our 2 major projects: West Nile Delta and Atoll. A significant milestone for the West Nile Delta project is beginning production from its Giza Fayoum fields, and we also aim to start production from Raven before the end of 2019. BP also acquired a 10 per cent stake in the giant Zohr field in 2017 and a 25 per cent stake in the Nour prospect in 2018, both from our partner ENI.
We are also growing our footprint across the industry. In May 2018, Castrol, part of the BP group, announced that it has formed a new joint venture company in Egypt with its existing distribution partner, TAQA Arabia. The new joint venture – Castrol Egypt Lubricants S.A.E. – will locally manufacture and market Castrol’s world class, high performance automotive and industrial lubricants, whilst TAQA for Marketing Oil Products will continue as the sole distributor for Castrol lubricants in Egypt.
In July of the same year, we were delighted to welcome Lightsource BP to Egypt and the opportunities it will bring through the new joint venture with Hassan Allam, a leading company in Egypt and the Middle East with a great history and capability in the construction industry. Lightsource BP hopes to take advantage of the increasingly important role that African economies will play in global energy markets. The joint venture will look to fund, develop and operate solar projects throughout Egypt, with the aim of offering residential and commercial customers competitively priced solar energy and energy storage.
Are you going to continue focusing on investing in Egypt’s gas industry?
Two of our six major Upstream project start-ups last year were in Egypt, a country which will grow in importance as the role of natural gas increases. BP’s Energy Outlook 2018 shows that on current trends natural gas is expected to grow strongly, supported by first, increasing demand, second strong increases in low-cost supplies, and third continuing expansion of supplies of liquefied natural gas (LNG) increasing the availability of gas globally. Global LNG supplies more than double by 2040, with around 40 per cent of that expansion occurring over the next five years.
BP continues to grow its gas production more than any other major. We safely brought 19 upstream major projects on to production over the last three years.
We continue working on meeting the needs of Egypt’s growing domestic gas market by actively exploring in the Nile Delta and investing to add production from existing discoveries. We will continue to high-grade our exploration hopper and participate in upcoming bid rounds leveraging our strong infrastructure position and strategic partnerships in the Nile Delta.
Do you see natural gas as a bridge to a lower carbon future?
Gas is a really important fuel, for today and long into the future. It has a big role to play in power generation in particular, where it burns with half the carbon emissions of coal.
That creates a real opportunity to bring down emissions fast and at scale by switching from coal to gas in power. It’s also abundant and affordable, and a perfect partner for renewables, which by their nature are intermittent. The sun doesn’t always shine and the wind doesn’t always blow.
Projects such as Atoll and West Nile Delta are important as Egypt plays its part in the energy transition. Through our longstanding relationship, BP is already helping to produce over half of the country’s annual gas production, and we are committed to Egypt for many years to come.
Did BP have a strong 2018? What is your outlook for this year?
2018 was a remarkable year for BP as we continued to deliver growth and real momentum in a tough and competitive environment.
Last year we completed our biggest deal in almost 20 years with the acquisition of world-class US onshore assets from BHP. We also started-up six major projects, two of which were in Egypt with Atoll and West Nile Delta, signalling our commitment to the country and our strategy to grow gas in our portfolio.
In retail we went from strength to strength as we expanded in Mexico and forged new markets in China and Indonesia. We also led the charge on mobility with the acquisition of the UK’s largest electric vehicle charging company.
The partnership to create Lightsource BP is already expanding its solar expertise to global markets. And BP’s Advancing the energy transition launch put in place actions including tough near-term targets to reduce emissions and mitigate the impact of methane.
This all took place in what was a volatile year globally and the outlook for 2019 looks much the same. We can expect another 12 months of fluctuating oil prices, geopolitical tensions, increased competition, and heightened awareness and scrutiny regarding climate change. It puts a premium on being able to deliver energy that is cleaner, better, efficient and at lower cost, and I believe Egypt to be well placed to support this effort.
The Egypt Petroleum Show (EGYPS) has grown year on year – what are you looking forward to at this year’s event?
I’ve really enjoyed being at EGYPS these last few years and it’s been great to see it get bigger and better. It’s a perfect opportunity to meet our friends and colleagues in the North African energy sector and wider energy community and see how we can make progress together.