In the shadow of the current global economic collapse, rumors and concerns spread in every corner stating that the E&P operations in Egypt are to decline and that recent demands for rigs have been cancelled. Eng. Mohamed El-Gohary, President of the Egyptian Petroleum HH for Rig Manufacturing Co (EPHH) replies to these rumors affirming that this strategic industry is in fact flourishing
How far would the economic crisis affect Egypt’s petroleum sector?
Generally speaking, Egypt, like any other country, would be definitely affected by this crisis, but we cannot assess its drawbacks for the time being. However, when we take a deeper look into the Egyptian Petroleum Sector, we would find out that it is secured to some extent and able to overcome the challenges of this collapse. As a matter of fact, over the past eight years, the Ministry of Petroleum has been engaged in diverse contracts and agreements, which guarantee the continuity of E&P operations in the country, as partners have to abide by the agreements’ deadlines and terms, regardless this current crisis.
Many rumors stated that various companies have cancelled and/or dismissed rigs. Comment
This is completely untrue, El-Gohary affirmatively replied. The companies currently operating in Egypt have not decreased or suspended their field operations. We did not receive any rig cancellation. On the contrary, companies are still operating at the same level and nothing has changed up till know in Egypt. For instance, BP has decreased its production level worldwide, except in Rashid. I believe that the exploration domain is the one to be distinctly affected; I believe that the new investments as well as the number of new comers into the Egyptian sector will decrease. It is still not clear if companies’ budgets can afford the initiation of a complete new exploration program with the current global deficit.
Rig manufacturing, being one of the newest industries in the country, what are the measures taken to save it?
EPHH for Rig Manufacturing, the first of its kind in Egypt and Africa, is still categorized as a new company. We are still studying the market, locally and internationally, and trying to set our reputation as world-class rig manufacturer. We are still in the early operation stages. The company was formally established on April 26, 2007. However, the negotiations with the Chinese HH Honghua Co., one of the largest rig manufacturing companies worldwide, were held for a long time, and this partnership issue toped the agenda of President Hosni Mubarak during his visit to China in October 2006.
The EPHH is the third branch for the Chinese company after Russia and the USA; the Chinese partner holds 50%, while the remaining 50% is held by Egyptian companies (Petrojet 25%, Tharwa 15% and Enppi 10%). The establishment and construction phases for this mega project witnessed the extraordinary contribution of the Egyptian shareholders, which intensified their efforts to get the factory ready to operate earlier than scheduled.
In less than six months, the factory team succeeded to assemble the first 2000-HP rig Mubarak-1in December 2007 and was publicly announced on January 19, 2008, during the visit of Eng. Sameh Fahmy, Minister of Petroleum, to the factory in the governorate of Suez. The production of this first rig was our landmark to set our base in the rig market and introduce our local rigs.
Currently, the company has expanded its marketing reach to satisfy the Middle Eastern and African demands in addition to the local one. According to our marketing strategies, our production should not be solely limited to the Egyptian market and have to be sold on local and international levels simultaneously.
Will EPHH decrease its rig production rate?
In my opinion, the Egyptian and African markets will not be severely affected; oil production will not decrease thanks to the agreements sealed and consequently I believe that the rig demand will remain the same, at least throughout 2009.
As a matter of fact, EPHH production stage has began ahead of the plan. The factory’s production phase and the continuation of construction phase have been concurrently executed and that is why the production of the first rig was ahead of the plan. According to the factory schedule, the year of 2007 was solely for the construction phase, yet we succeeded to produce the 1st rig in December of that year. We are even moving beyond; in 2008, two other rigs, Mubarak-2 and Mubarak-3 were already produced and presently finalizing two other ones which are expected to be introduced to the market in early 2009.
What are EPHH plans for 2009?
In addition to the objective of serving local demand, the company is presently marketing its rigs to neighboring countries, such as Libya and Sudan, as I mentioned earlier. There is a plan to sell five rigs over this year.
Until now, the board of directors has not made any changes for 2009 plan. The factory’s production rate will be maintained as planned throughout this year. However, we might postpone the execution of the 2nd phase of construction project, but still this is not determined yet.
Some researchers and analysts declare that the petroleum era is heading to its end. Comment
This is completely incorrect; the strategies implemented by the Ministry generate a significant profit to the country’s treasury and at the same time, secure the reserves. For instance, this factory symbolizes one of the ideologies of Eng. Fahmy to locally manufacture the components and tools needed to accelerate and intensify the E&P activities in Egypt instead of importing them.
The concept of local manufacturing has been expressed in a number of projects established by the Ministry; starting with the workshops of PetroJet which manufacture refining tools and pipelines, and there are also factories for the pipeline coating in Port Said and Ruruhupumpin factory for pumps manufacturing in Suez in addition to EPHH for rig manufacturing.
In this context, one of the newest mega projects to be announced this year is the establishment of a factory for the casing and tubing of drilling pipelines. I have been appointed by the Ministry to conduct the preparations phase. Further details will be announced within few months by the Minister of Petroleum.
By Yomna Bassiouni