Egypt oil and gas sector grows by leaps and bounds

Feb 02, 2020
10 min read
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H.E. Eng. Tarek El Molla, Minister of Petroleum and Mineral Resources, discusses the latest developments in Egypt’s oil and gas sector and why 2019 was such a strong year for growth in the energy sector


What were the most important developments for Egypt’s oil and gas industry in the last 12 months?

In 2019, the oil and gas industry witnessed great leaps in its whole value chain from upstream to downstream, along with the services provided to citizens through availing the petroleum products and the national programme to convey natural gas to residential units.

The petroleum sector succeeded in achieving outstanding outcomes, on top of which are; realising unprecedented natural gas production reaching 7.2 BCFD (billion cubic feet per day), achieving gas production self-sufficiency and resuming exports. In addition, crude oil production reached 630,000 barrels per day, contributing to achieve the highest record of petroleum wealth in August 2019, e.g. about 1.9 million barrels of oil equivalent, condensates and natural gas per day.

The sector also succeeded in reducing the IOC’s accumulative arrears in the past years to reach $900 million by June 2019 that is considered the lowest rate since 2010, which confirms the present credibility and commitment of the Egyptian Government, particularly with the expansion in developing natural gas.  Last year, investments exceeded $10 billion, when Zohr gas field project reached its optimum production rate and the second phase of West Delta and North Alexandria projects started production.

We signed eight oil and gas exploration agreements, with total investments of $179 million, in addition to 17 new on-going agreements that were approved by the parliament with total investments exceeding $1 billion. The EGPC and EGAS bid rounds announced their results last February; offering 11 blocks with total signing bonuses of about $104.5 million, and total investments of $744.5 million, to drill 50 wells. In March 2019, Ganope also offered an international bid round for oil and gas exploration in 10 blocks at the Red sea area and the IOC’s offers are, currently, being evaluated.

The Egyptian Refining Company’s (ERC) project in Mostorod is considered the largest and most recent refining project that contributes to securing part of the petroleum products locally. Meanwhile, transporting natural gas to residential units, witnessed unprecedented boom represented in the continuous doubling of rates to reach one million and 250,000 residential units annually at a rate of 100,000 units per month, which led to an increase in the number of housing units that were connected with gas to exceed 10.6 million. The number of vehicles converted to being fuelled by natural gas increased in 2019, to exceed 43,000 vehicles bringing the total number of converted vehicles since the start-up of activity in 1996 to 300,000 vehicles.

What new partnerships are underway to develop resources and support the country’s growth aspirations?

It is well known that tangible success cannot be achieved apart from successful partnerships that benefit all parties.  Our IOC partners, operating in Egypt, play a significant role that cannot be denied in contributing to the success stories achieved during the past years. We have already held new partnerships recently, with major international companies working in Egypt for the first time, in the upstream domains such as American companies, Exxon Mobil and Chevron. Moreover, we’ve expanded our partnership with Shell International, as it was awarded five new blocks in 2019, to invest in the upstream field.

The East Mediterranean Gas Forum is also a distinguished partnership at the level of the countries in the region, bringing together Egypt and six Mediterranean countries with the goal of cooperation in monetising gas discoveries and distinctive infrastructure, for the benefit of the countries and their people. 

Egypt also launched strategic partnerships in the domain of energy, with both the United States and the European Union, contributing to Egypt’s benefit from the support, potentials and expertise of both parties to contribute to transforming Egypt into a regional energy hub.

How has Egypt’s energy sector become a more attractive destination for foreign investment?

With regard to foreign investments, we have to consider what our partners say about their investment success stories in the Egyptian oil and gas sector at conferences in Egypt and abroad.  They praise the Egyptian model in oil and gas industry development and how Egypt created an attractive climate for investment and success, which resulted in achieving distinctive business outcomes, so that everyone agrees that the current period is the most convenient, for directing their investment to Egypt, in the field of oil and gas industry. Moreover, the State has taken into account the reforms and incentives that were taken to achieve balance and benefit the State as well as the investor. In addition, it has provided a unique experience, concerning its obligations to pay the previous years’ arrears, along with fulfilling its new commitments, as the Egyptian oil and gas industry has witnessed positive changes recently that led the sector to become one of the most significant investment destinations for the major oil companies.

 Actually, the indicators are quite clear, as Egypt has awarded 28 new blocks for oil and gas exploration to international companies through six bid rounds over the past five years, and has signed 103 agreements with international companies for oil and gas exploration and development, since November 2013, with total minimum investments of about $17 billion and signing bonuses of $1.2 billion, for the drilling of 431 wells. In fact, these results are strong indications of the success of reform plans, particularly with the entry of new major companies in upstream domain in Egypt for the first time, which is an attracting factor for other companies to invest in Egypt. This contributes to increasing the flow of investments, in addition to the fact that the companies currently operating in Egypt are expanding their investments and activities in the upstream domain.

Furthermore, it is planned to continue signing the 17 new upstream agreements, approved by the Parliament last year.

Additionally, we shall offer new international bid rounds in 2020 to explore for oil and gas in the Western Desert, Gulf of Suez and East Mediterranean and the frontier areas in particular, within the forthcoming period.

Undoubtedly, the demarcation of the maritime borders with the Kingdom of Saudi Arabia, has allowed Egypt to launch its first International bid for oil and gas exploration in the untapped area of Red Sea, which represents promising opportunities for IOCs to pump new investments in that region.

As one of the main axes in our plans, we will work on intensifying our activities in the existing crude oil production areas to offset the natural decrease in production and achieve new discoveries to put them on production as soon as possible.

How are the plans for establishing Egypt as a regional energy hub going?

The Egyptian State has a specific vision and goal represented in the project of transforming Egypt into a regional hub for oil and gas trade, which will have a very significant return on Egypt and its national economy. The project will help Egypt restore its pioneering role in the region and monetise the natural gas infrastructure, attract more investments and secure energy resources to meet the country’s requirements, provide job opportunities, as well as foreign currency.

 For its part, the Ministry of Petroleum embarked on a work program within the Modernisation Project to develop the sector to work according to specific strategies. The programme includes 3 major axes, in which the Ministry moving forward; whether at the internal, the political, or at the technical and commercial levels. These axes include the implementation of new infrastructure projects and achieving the optimal exploitation of the existing infrastructure together with the issuance of legislations that support investment in oil and gas domain, where a law was issued to regulate gas market activities and the establishment of an independent gas regulatory which gives an opportunity for the private sector to enter and compete in the whole chain of gas industry. Furthermore, Egypt has all the qualifications to play this role, in light of its excellent strategic location, having the necessary infrastructure and facilities, e.g. power generating stations, gas liquefaction plants, re-gasification unit, refineries, storage tanks & warehouses, port docks along with oil and gas pipelines networks.

In fact, Egypt has been keen to take active steps to establish a wide board regional cooperation with gas producing countries in the Eastern Mediterranean region and establish a partnership with the European Union in the field of energy to serve the Egyptian perspective to transform into a regional energy Hub.  Egypt has the keys to the future of gas in the Eastern Mediterranean and seeks to monetise all the current potentials in that region. In addition, we take into consideration the ambitions of the countries of the Eastern Mediterranean region to achieve the maximum benefit of the discovered natural gas resources and the future ones. Therefore, we worked on establishing the first forum that gathered gas producing countries in this region, under a joint Egyptian initiative within the framework of a cooperation mechanism with both Cyprus and Greece during the Crete Summit that took place last October. President Sisi agreed with the leaders of Cyprus and Greece on the idea of establishing the forum.  To realise this agreement on the ground, Egypt initiated an invitation to the energy ministers of the Eastern Mediterranean countries and representatives of the European Union and the U.S. Energy Minister for two meetings to activate the initiative to establish the forum along with the coordination to invest in gas discoveries and infrastructure in the eastern Mediterranean for the benefit of countries and their peoples.

How important is Egypt’s burgeoning downstream sector?

The current expansion in refining and petrochemicals domain represent a new added value to Egypt from its petroleum resources and assets. We have a work programme, currently being implemented in the refining industry to achieve self-sufficiency of fuel by the fiscal year 2022/2023, through the Egyptian refineries’ throughput. The programme includes six new projects, currently being implemented in Alexandria, Suez and Assiut, with investments of about $7.1 billion, aimed at increasing domestic production of petroleum products with high economic value, such as gasoline, gas oil, and LPG, as well as providing petroleum products with the highest quality standards, in accordance with the international standards. It is planned to implement these projects successively; including producing high-octane gasoline project in Assiut, Midor refinery expansions project in Alexandria, ANOPC complex project for gasoline, gas oil and LPG production in Assiut, which is considered the largest refining project in Upper Egypt. These are in addition to the Red Sea Refining and Petrochemicals Complex in Suez, as well as the LPG and asphalt production units in Suez. Besides these projects, we have completed this year the largest project in the refining domain, which is the Egyptian refining project in Mostorod, with investments of about $4.3 billion, applying the latest advanced technologies. It is considered a successful partnership between the government and the private sector. This project is currently operating experimentally, paving the way for regular operation. Moreover, we are planning to establish a huge complex for refining and petrochemicals in the new El Alamein region, with investments of about $8.5 billion.

In the petrochemicals domain, we are implementing four new projects, with investments of about $2 billion to add new production capacities to this industry, as well as increasing and diversifying the products provided. We have the project of Formaldehyde Production of Suez Company for Methanol Derivatives, in Damietta Port, poly butadiene production project in Ethydco Complex in Alexandria and Sidpec Expansions Project in Alexandria for Propylene and Polypropylene Production, as well as Medium-Density Fiberboard (MDF) Production Project.


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