2012 Triggers Mixed Expectations

Experts’ predictions and opinions regarding the state of the Egyptian petroleum sector in 2012 have varied, particularly in light of the shift in policy witnessed under the Petroleum Minister Eng. Abdullah Ghorab in comparison to his predecessors. These opinions can be broadly categorized into two main outlooks: one which retains much optimism for the new year, expecting an increase in investments despite ongoing political turbulence, the other sees drilling and exploration operations in Egyptian concessions taking a turn for the worse.

Experts believe that sealing new agreements should be at the top of the Ministry of Petroleum’s priority list during the coming period. The Ministry aims at signing a number of agreements in the near future, a step that will give a boost to local companies working in drilling and exploration.

An official at the Ministry of Petroleum expressed optimism regarding the current year of 2012, expecting an increase in production rates of both crude oil and natural gas, in accordance with companies’ outlined plans. In fact, the petroleum companies managed remarkable success in implementing their drilling plans across the Egyptian concessions in the Mediterranean Sea, Eastern Desert, Western Desert, Gulf of Suez, Delta, and Sinai, despite the political and social unrests that took place at the beginning of 2011.

In exclusive statements to Egypt Oil & Gas, the Ministry source added that the petroleum sector has not been affected by the events in Egypt, as evidenced by the levels of success achieved in concessions in Egypt. He referred to the production success achieved in the Mediterranean Sea area, where production rate counted for 1541429 million cubic feet of natural gas in the previous fiscal year 2010-2011, which reflected 85.71% of the area’s production plan.

The official claimed that the Delta area achieved an unprecedented success rate of 105.85%, as production of natural gas reached 164354 million cubic feet, while crude oil production reached 1283818 barrels. Drilling operations in the Sinai area thrived as well, achieving a success rate of 83.69%, with production hitting 2139 million cubic feet of natural gas and 24775629 barrels of crude oil.

Eng. Lotfi Ramadan, General Manager of Crude Oil Production Plans at the Egyptian General Petroleum Corporation (EGPC), is similarly optimistic, stating that the petroleum sector was not affected by the ongoing events in Egypt. Ramadan pointed out that companies outlined several plans, and a substantial number of those plans were implemented to a large degree, adding that production levels were not affected by the events that followed the January 25th revolution.

Ramadan said that there was no security problem and that the exploration and production activities in concessions were safe, as evidenced by the complete lack of complaints directed towards the Ministry of Petroleum or the EGPC regarding the matter.

According to a source working at one of the major petroleum companies, the petroleum sector is achieving consistent growth, and a number of foreign newcomers is expected to invest in the sector this year. The Ministry of Petroleum eyes the release of a number of bid rounds for concessions in the coming period in cooperation with the EGPC, the source said, in order to pump new investments into the sector in the current year 2012.

The source added that all the Egyptian petroleum companies are working to boost investment, whether on a local or international level, seizing the fact that the global demand for petroleum services is increasing. In his view, the petroleum sector will benefit greatly from the agreements the Ministry plans on finalizing over the coming period, as the agreements signed last year with Yemen and Malaysia. This latter is expected to assist in the gas liquefaction process, as it possesses ample experience in that field.

The agreements will push Egypt forwards in the plan to increase the country’s petroleum resources and greater employment rates for skilled professionals, by increasing tenders in order to guarantee investments, the source added. Petroleum services contractors will play a major role in the success of these agreements by offering their services to global companies.

The source said that the Egyptian petroleum sector is stable due to the availability of drilling equipment operating in the activities of exploration and drilling of wells. The EGPC is currently seeking drilling equipment to commence the drilling of two exploratory wells in 2012.

Eng. Ahmed Al-Gedawi, General Manager of Crude Oil Production at the General Petroleum Company (GPC), is less positive. He believes that the sector has been affected by the recent political happenings in Egypt, including the General Petroleum Company (GPC), demanding that the state should pay more attention to the GPC, after 10 years of disregard.
Al-Gedawi added that oil and gas are among Egypt’s strategic sources of income along with the Suez Canal and the tourism industry. The costs of extracting these resources are high, but they are justified by the returns. The petroleum industry’s revenues are added to Egypt’s GDP, which are a primary source of national income. Additionally, Egyptian skill and experience in this field must be protected and exploited, rather than allowing foreign investment to cripple Egyptian innovation in the name of funding primary production operations (exploration and drilling).

Al-Gedawi stressed the importance of foreign investment in the petroleum sector nonetheless, in order to find new reserves and boost national income. He advocated the cultivation of technical skill and talent in the future, in addition to keeping spending under control to be able to produce every barrel of oil and every cubic feet of gas at the lowest possible cost. This, according to Al-Gedawi, is how the GPC operates. Al-Gedawi said the Company has become an institution built on technical and applied sciences, providing expertise to the entire Arab world and attracting those studying and working in the field to come and train in its fields and laboratories.

By Shady Ahmed – Wael Serag


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