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Egypt’s growing oil and gas sector

Feb 11, 2019
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Tarek El Molla, Egypt’s Minister of Petroleum and Mineral Resources talked to Pipeline Magazine ahead of the third Egypt Petroleum Show in February about the successes the country achieved in 2018 and what is planned to keep the momentum going in 2019  

How has the oil and gas sector moved forward and showed more developments during 2018?

2017 was a truly remarkable year for Egypt’s oil and gas sector and this was clear at last year’s EGYPS where we showcased all these achievements. The challenge in 2018 was to build on all these successes and ensure a sustainable growing sector which I believe we were able to do.

Looking back at 2018, we were able to sign 12 new oil and gas exploration agreements with total investments of US$275 million. We reduced our partner arrears to only $1.2 billion. We were able to gain trust of all our international partners and invite even more investments in the sector. We created Egypt’s first digital data bank and we are currently finalising the launch of the Egypt Upstream Gateway, which will make all data available online making it easier for investors.

We worked on the upgrade of refineries where studies were developed for the new hydrocracker and gasoline complex at Suez governorate for high quality refined products with total investments of $2.35 billion. Also we worked on the expansion of terminals, transmission and gas pipelines and oil and gas infrastructure. We implemented energy efficiency measures in our highest consumption refineries yielding annual savings of EGP 348 million.

Our four main gas development projects; West Nile Delta, Noros, Atoll and Zohr were able to transform Egypt from a country with major energy shortage to one of the largest gas producers in the region. Zohr field surpassed our expectations as the production level reached 2 bcf last September. The gas sector in 2019 witnessed a 50 per cent increase in natural gas production as compared to previous years which allowed it to be self-sufficient. All these achievements in the gas sector brings Egypt a step closer to becoming a regional oil and gas hub.

To ensure a sustainable growing sector, it was crucial to enhance the sector from an organisational point of view. We have already completed legal, administrative and the first phase of financial due diligence for the new structure to create an agile sector able to compete in the current environment. We have created sector governance. In order to improve decision making, we implemented ERP in SOEs and a rollout for affiliates to integrate information.

We believe that our people are the foundation of this sector and we need to focus on them more. We created human capital database to understand the available talents and development programs to enhance them. We recently launched the first phase of the middle management development programme according to a systematic and scientific approach to empower youth to become the future leaders of the sector. We are changing the culture of the whole sector to be performance based.

I am very optimistic for our sector’s future and excited to see the fruits of all these reforms and further achievements in the coming years. I am sure that we are on the right path and looking forward to celebrate all our sectors’ accomplishments during the exhibition.

Can you provide us with any new information related to the coming bid rounds, especially the coming Red Sea bid round? How do you expect these bid rounds to benefit the sector in the years ahead?

In our efforts to improve the investment environment in Egypt’s oil and gas sector and gain our partners’ trust, we worked on creating a new fiscal regime for the bid rounds. Concerning the upcoming Red Sea bid round, the new fiscal regime is gross split to eliminate cost recovery mechanism to achieve fast track project.

The main completion elements for evaluating the winners are governmental entitlement, technical programme and signature bonus. All this will add more flexibilities and benefits to improve the performance and encourage the IOCs to invest more. The bid round will unlock the Red Sea potentialities and attract new investment to escalate the development phase and achieve targeted production of oil and gas.

In its third year, what are your aspirations for the EGYPS 2019 conference and exhibition and how is it supporting your ambition for the Egyptian oil and gas sector?

EGYPS is quickly becoming one of the most important oil and gas exhibition and conference internationally, where oil and gas professionals and leaders convene to engage in dialogue, create partnerships, do business and identify strategies that help in shaping the future of our industry. This year we will continue to highlight our sector’s success stories and increase prospects for further developments and progressive investments in the sector. 

After only three years, EGYPS is now considered a key platform in the North African energy calendar bringing together government representatives, key project owners, NOCs, IOCs, EPC contractors, consultants and financiers to address the evolving opportunities in the North African and Mediterranean energy region.

All this gives a vibrant signal to international investors and the whole world that the oil and gas sector in Egypt is of considerable importance both locally and global. Such distinguished gathering of experts engaging in further discussion around the Egyptian sector is a strong sign of our commitment towards our foreign partners and encouragement of further investments. We are now ready as always to support and are committed to further collaboration for the benefit of our sector and the whole region.

EGYPS 2018 witnessed the start of the JV modernisation project at Bapetco. What are the ministry’s recommendations for JVs to make this modernisation happen?

Let me start by explaining the reason behind the initiative of modernising the JVs. We embarked on a huge transformation project to enhance the whole value chain of our sector through the modernisation project. In order to continue with the project’s many achievements, it was crucial to seize that momentum and enhance the overall work environment throughout our sector companies.

We started by creating a specialised programme to modernise JV companies making use of the support of our IOCs. The main objective is to create an effective business environment there and transform the JVs into world class organisations. 

In order to ensure the success of such a transformation, we had to make sure that clear action plans were in place where adequate resources and early engagement with all shareholders were included. This process includes several phases and we started with the major JV companies in the sector. The Badr Petroleum Company (Bapetco) was considered the pilot project for such a transformation with the support of our partner Shell. It focuses on three main areas, which are improving operational aspects, governance and developing people and talent. It was important to have the buy in of all stakeholders.

A specific steering committee headed by the CEO of the Egyptian General Petroleum Corportion (EGPC) and including representatives from all stakeholders involved like Shell, Bapetco and the modernisation project was formed. Its main role is to support the process and overcome any challenges to ensure a smooth transformation project. This steering committee had a huge role in approving and getting the required investments as well as ensuring the availability of the experienced international consultant and I am quite optimistic with the results of Bapetco’s modernisation. The main success of such a transformation process will happen through dedication and effectiveness of people involved.

We are currently in the phase of finalising the required agreements to start another modernisation programme in Petrobel with Eni’s support followed by other similar programmes at Qarun and PHPC.

EGYPS 2019 includes a Youth Forum which highlights importance of development of youth, what does this mean to you?

One of the most important pillars within our modernisation project is dedicated mainly for human capital; we even named it “People Programme”, as it is our most important asset. The performance of the sector in terms of governance and identifying talent management is a key aspect of success.

This programme mainly focuses on “Best utilisation of our human capital”. The first step was to identify the available talent pool where the team worked on establishing a unified integrated database that includes all sector employees followed by analysing the data of all companies across the sector through creating SWOT analysis. This allowed us to have a better view about the employees’ competencies and skills, the strength and weaknesses of capabilities in each company and opportunities available in others, which enabled us to assign the right person in the right place.

I personally always say that the future of any industry depends mainly on its youth, so we needed to concentrate more on building our youth talents in sector. It is crucial to understand how to identify, develop and retain such talented people, to generate a dynamic pool of qualified calibers prepared and equipped to take high-level responsibilities in the future. I focus on empowering youth to move forward and lead the sector for a better future.

In order to identify these talented youth within the sector, we launched “The Middle Management Programme.” We mainly focused on how to select the young talents with equal opportunity.  The whole process was based on transparency. The programme offered a competitive chance for young professionals who have the passion, commitment and capability to lead our future growth.

The programme was an extraordinary experience to all participants and the team involved in the implementation. It introduced a new culture where assessment and evaluation were the criteria for selection.

We are also working on empowering the youth and engaging them with the top level, and I started this myself by appointing two Ministers’ assistances in their 30s to make use of the youth power and energy and also to get the experience needed to become successful future leaders.

 

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