Could you briefly tell us about yourself and your journey in the oil and gas in- dustry before becoming General Manager of BG Egypt?
I have 32 years’ experience in the oil and gas industry. I have a doctorate in petroleum en- gineering from Stanford University in the US, and I started my career in the US as well. I’ve been all around the world, joining BG in 2000. While I’ve lived in a lot of different places, Egypt is like my second home – I have lived here over 12 years. In fact, I first joined BG in Egypt. At that stage we were doing a lot of major developments, and BG had not yet produced any gas. By 2005, we were by far the leading gas producer in the country. This is something BG prides itself on—very rapid development and implementation, which has been the hallmark of our stay in Egypt.
Considering your wide experience internationally, could you tell us about BG’s activities in Egypt, and how it compares to the rest of the world?
The production we have is through two con- cessions, the West Delta Deep Marine and Rosetta. While we are the operator for the Concessions, the actual implementation is done through our joint venture with EGPC, Rashpetco and Burullus . BG has three explo- ration concessions as well.
In BG’s portfolio, very soon after starting, Egypt became the largest producer for BG’s assets. Of course, our production is now a little lower than it was before, and at the same time there are other major assets we are developing in Brazil and Australia – so at some point, these countries will take over. But Egypt has been a very major component of BG’s portfolio.
What is BG’s share in oil and gas pro- duction in Egypt?
We have been as high as 40% of the gas pro- duction, and right now we are between 20 and 25%, but hoping to increase as we move forward. And we can talk a little bit about how we are working with the Egyptian government to try and counter some of the gas issues.
How would you characterize BG’s pro- duction in Egypt for 2014?
BG has opportunities to increase gas produc- tion and help stop the natural decline in pro- duction, which has been a feature of Egypt in recent years. We just invested $1.5 billion in our latest phase of development of the West Delta Deep Marine Concession, “9A”. The wells are actually coming on during this phase – this was a nine-well project, and we have seven of these wells on stream right now. This all helps compensate for the production de- cline.
What has been the biggest achievement in Egypt for BG?
Of course there’s been a lot of development, and being one of the biggest gas producers is important for Egypt. That is what has contrib- uted to keeping the lights on in Egypt through- out the past several years.
However, in my opinion, that hasn’t been our greatest achievement. Considering how technologically complex deepwater development is, when I first came here to discuss the initial investments, a lot of the work was being done by expats, because that was where the technological talent was at the time. However when I came back five years ago, I saw a lot of leading positions, commercial discussions, and developments being undertaken by very capable and senior Egyptians. That made me very proud and I consider helping develop local talent to be one of BG’s greatest achievements here.
Did you have any doubts about the oil and gas sector in Egypt following the January 25 revolution?
Simple answer: no. Since BG has been here, over the last 25 years, we’ve invested $14 billion along with our partners. Of that, $3.5 billion has been invested since the 2011 Rev- olution – we continued to invest, as we had every confidence in Egypt.
How are you positioning yourself in the coming years?
We are proud to say that we have been a long standing partner for the Government of Egypt, and we would like to continue to be a partner for Egypt.
Over 25 years of working in the country, we have invested in building one of the most comprehensive and largest networks of infra- structure in the Mediterranean, both onshore and offshore. Today, and as a reflection of our deep understanding of Egypt’s need for energy, we are making our infrastructure avail- able to other operators in the Mediterraneanneighboring IOCs with close discoveries in Egyptian waters – to bring their gas in through our infrastructure to ensure gas from these discoveries is developed sooner. We work with the Government to enhance gas energy supply into Egypt.
Have there been any developments for debt negotiation with the government?
There’s always been a clear message from the government of their intent to pay it back; in fact they paid $1.5 billion to IOCs last month. They recognize bringing down the receivables sends confidence to future investors, and to current operators. The new government is showing a clearer direction as well. Even when I came five years ago, we were aware of the huge subsidy environment that had de- veloped in Egypt, and there was a sense the government would take action. But the current government has come in with a very clear di- rection of reducing subsidies, which in effect reduces energy waste, and this also address- es concerns of payment balance.
What does the government need to do to attract more investment in the Mediterranean?
First of all, there is a lot of gas that has already been discovered, but not yet developed. For one reason or the other, the developments have been delayed. The government needs to focus on getting energy in the short term, but also on getting these developments started, which requires creating a confident investment environment – the receivables need to be reduced, and the right gas price needs to be set to attract investment into development. Also, you can combine activities of one partner with another to fast-track development. In our case, BG will allow other operators to utilize our infrastructure to develop their gas.
It is in the government’s interest to try to min- imize the cost of development. So we are working with them, considering that we have a lot of infrastructure, thinking about how we can bring in other people’s gas. For example, we expect to a sign an agreement to bring gas from a small field in the Mediterranean, from one of GDF Suez’ blocks to our infrastructure, which minimizes cost for the government. Working with the government to capitalize on our infrastructure will both reduce the cost of development and fast track gas production.
Some players see working with the Product Sharing Agreement (PSA) mod- el as a challenge, with increasing cost of development, particularly with more advanced technologies and deepwater exploration in the Mediterranean. Do you think the model needs to change?
I think the PSA generally works, as variables such as the cost recovery can always be mod- ified. I am generally not a believer in wholesale changes. Our counterparts have lived with a PSA environment for decades; if you start changing the model, this could create a gap in the process which in turn may result in delays, and Egypt cannot afford to have a big gap in its energy supply.
How far have discussions progressed concerning the ongoing negotiations to import gas from Israel?
We are looking at a lot of options to bring more gas into Egypt; these options include further exploration in our Concessions in Egypt, fur- ther development of our producing Conces- sions in Egypt, tie-in of local third-party gas, and finally looking at regional gas options. There have been a lot of gas discoveries in the Eastern Mediterranean. BG has signed a non-binding LOI with the partners of the Leviathan field to explore options of bringing some of that gas to Egypt. This is still at an
early stage. Cyprus is also very interested to bring in their gas to Egypt, and the president of Cyprus recently met with H.E. President Ab- del Fattah El-Sisi to discuss how Egypt and Cyprus can cooperate on this subject. There is clear recognition that any successful deal to bring in regional gas needs Government of Egypt approval.
What difficulties do you see the sector facing, concerning attracting new in- vestments in Egypt?
I believe the sector was facing an issue of credibility because of the way receivables have built up and other uncertainties. But the past few months have shown that the current government is taking solid steps, both on the general economic reform and regarding the energy sector. The repayment of a tranche of owed debts to IOCs in October was a very encouraging sign. In my view, direction now is set; there’s a focus on managing demand, subsidies, receivables, and gas pricing. So the government is taking the right steps to create confidence in the market. As this con- tinues, I think you will see the operators that are already here will start investing more, and also new players will begin to recognize op- portunities.
What are BG’s goals and future plans for 2015?
We’d like to continue working with the govern- ment to create the right investment environ- ment for us and for others to bring in more gas quickly through our infrastructure. I stress the issue of infrastructure because the value of that cannot be underestimated – it reduces the overall cost for various investments and reduces the time cycle, both critical to Egypt.
I’d also like to add that Egypt has been a fas- cinating place to work. When I came here in February 2010, there were some decline and other issues, so I anticipated it would be a challenge – but of course I couldn’t have predicted the political side of things. Being in Egypt during the past few years and today has been a fascinating experience that I’ve really enjoyed.Download