A Hopeful Outlook in Times of Uncertainty

German energy company RWE Dea has been operating in Egypt for 30 years, proving to be a successful partner in the development of the country’s hydrocarbon resources. Mr.Dirk Warzecha, General Manager of RWE Dea Egypt, speaks to Egypt Oil & Gas about the opportunities and challenges facing Egypt’s Petroleum sector as well as the company’s successes and plans for the future.

How long has RWE Dea been operating in Egypt? And what would you consider the company’s major achievements to be?
RWE Dea and its predecessor DEMINEX have been investing in Egypt for over 30 years. During this time we have conducted production activities in the Gulf of Suez with our Partner the EGPC and our joint venture SUCO.  We have contributed to Egypt’s energy supply during this period. In the past 10 years we have been very successful in exploration in Egypt and were able to discover significant volumes of gas in the offshore West Nile Delta area well as in our Disouq concession in the onshore part of the Nile Delta.  These newly-discovered volumes will deliver a very important contribution in order to satisfy growing energy demand in Egypt using national resources.

Geographically speaking, which area has been the focus of RWE Dea during the current fiscal year 2011/2012?
Our focus has been the Nile Delta area, following onshore and offshore discoveries in the area. We also invested significantly in GOS production in the 2011 calendar year, bringing production back up and stopping field decline.

Given Egypt’s political climate, what are the company’s priorities for the new fiscal year 2012/2013?
We will continue our developmental efforts in both parts of the Nile Delta, in our role both as operator and as partner. These efforts have continued and will continue during the ongoing transitional period in Egypt. We believe the development of national resources is of vital importance to Egypt. This fact is a fact, regardless of political or other interests of any parties. For these developmental efforts we were and will remain a strong and reliable partner for many years.

What effects (if any) did the political events of last year have on RWE Dea? Did the company draw contingency plans to deal with similar events in the future?
We didn´t see an immediate effect during last year’s revolution, which is due to the fact that production and implementation of projects commenced before such events broke out. During the transitional period we identified two developments: Firstly, we have experienced a slow-down in the process of the granting of necessary permits for some of our projects, for instance. Secondly, we are affected by the general state of the economy, which has led to a delay in payments due from our production sharing contracts.

In light of the current political instability, what are your expectations for the future of the sector in terms of growth and development?
Egypt is going through a transitional period. Even if we face a time of change and uncertainty we should see the opportunities and challenges and go ahead. Egypt has a lot of potential in terms of better usage of hydrocarbon resources and renewable energies, and there is also substantial potential for improving energy efficiency. These need to be and could be enhanced. 

In your opinion, what improvements could be made by the government to facilitate the dealings of foreign investors in Egypt?
We would appreciate seeing a quicker response from government entities in their dealings with investors in some cases. For instance, I see a delay in the approval processes for military permits, environmental impact studies, transfer of concession ownerships etc… Also, the government’s requirement of the formation of a joint venture operating company is not beneficial to smaller discoveries. If these could be enhanced, it will allow Egypt to bring more oil and gas on stream faster.

Do you think the current contractual regime of Production Sharing Contracts (PSCs) is the most suitable system for Egypt?
The PSC system is a well-established system that mostly works well in Egypt. It grants the foreign investor a percentage of production and secures stability and reliability. In certain cases, such as the West Nile Delta concession, it is not the most appropriate contractual system due to the sheer size and scale of investment, the technical complexities and consequential project management challenges of the development and production project, in addition to the urgent need to develop these deep water offshore discoveries in an ambitious timeframe at a relatively cheap price.

Petroleum Minister Abdallah Ghorab went on record declaring his vision to consolidate upstream dealings back under the EGPC. If such vision were to be implemented, what effect (if any) would it have on foreign investments and the Egyptian petroleum sector as a whole?
Both EGPC and EGAS have acted as reliable partners to us for many years. We only talk with one partner in one concession. We have a case where neighboring discoveries are treated by different entities and this makes the workflow more complicated than it needs to be. I guess the current system is more complicated especially for new investors in Egypt.

Some experts in the petroleum field have raised the issue of transparency and its absence from government entities when dealing with investors; do you think this represents a legitimate concern for foreign investors?
No, I do not think so. We are very transparent with our partners and our partners are very transparent with us.

In contrast to other countries, where do you rank Egypt in terms of attractiveness for foreign investors?
Although Egypt has a long upstream history, it has still a lot of potential for hydrocarbons and will be attractive to investors for this reason. Egypt has proven in the past to be a reliable partner, and is merely going through a transitional period. Therefore, I think that Egypt is ranks quite high in competition with other states and will continue to do so.

What effects do you think the new Islamist-dominated parliament will have on the petroleum sector?
The petroleum sector supplies Egypt with local resources for the growing energy demand but also offers a source of state revenue and exports. This is important to the country. In this regard, political parties have to offer an economic and social vision to Egypt. We are looking forward to further contribute to the development of the petroleum sector and to engage in projects for Egyptian society.

We understand that RWE Dea has been quite active in the field of Corporate Social Responsibility, what are the major projects RWE Dea has been working on during the past year? And what are some of the recognizable accomplishments of these projects?
RWE Dea sees it as part of its responsibility to assist in supporting and developing the communities of our concession areas. In the past we have had a number of remarkable CSR activities in renovation of school buildings and health units. We have also granted scholarships to two students from the Faculty of Engineering, Petroleum Section – Cairo University. The company is about to sign a Memorandum of Understanding with the Adult Education Agency (AEA) to sponsor books for 9000 students with health messages for the illiterate in the Kafr el Sheikh and Sohag governorates. In addition, RWE Dea has supported several cultural projects in the country like Beethoven on the Nile.

By Mohamed El-Bahrawi – Ahmed Matty


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