BG investments counted for 12% of Egypt’s total 2009 FDI

“I am in the right place, at the right time,” described Dr. Arshad Sufi the timing of his appointment as the new President and General Manager of BG Egypt, earlier this year. He believes this is an “exciting time” for investment, future projects and education. Holding a Ph.D in petroleum engineering from Stanford University and distinguished by a splendid resume that includes diverse work experiences in the U.S.A, Canada, Trinidad, Egypt, Qatar, U.K, Nigeria and Oman, the new president bears the mission of maintaining and developing BG activities in the country. Dr. Sufi shares his views and discusses the current and future plans of BG Egypt

This is not your first time working and living in Egypt. How would working here compare to your extensive experience with the oil and gas industry abroad?
This is in fact my third time coming back here to Egypt; I have drunk water from the Nile River I suppose… Egypt is very dynamic, of course, it is a major economy that is growing very rapidly and to be an integral part of that is very exciting actually. It is not always easy to see how [Egypt’s market] feels compared to others, because it depends on the position that the company is in.

How would BG Egypt compare to other regions?
BG Egypt produces, or is associated with, 40% of the gas produced in Egypt. Given that it is such a large amount, you are, in all aspects, dealing a lot more with different entities as you go along. Compared to somewhere not producing that much gas, you are exposed to a more isolated piece of the business. BG Egypt is a production site. We supply to domestic, we export supplies and supply for the export market as well. This combination puts us in a very integral role, joined up with what the government is doing.

How would you characterize the investment climate; i.e. the level of investment, quality of opportunity, risk, etc, in Egypt?
Well, with our partners, we have invested $7 billion to date in Egypt. We are one of the largest British investors and have contributed extensively to the foreign direct investment in Egypt. Last year alone, our investments accounted for over 12% of Egypt’s total FDI in 2009. We are planning to spend another billion this year. We have been a major investor, and Egypt is very pleased to have us as an investor.

Would you place BG at the leading head of investors in your field?
Well, we are certainly one of the more important companies here, in the oil and gas sector, at this stage.

What are the future drilling plans for BG?
We can break it into two areas. One of them is the development of our current two concessions: West Delta Deep Marine (WDDM) and Rosetta. The phase I have mentioned earlier about the billion-dollar investment includes the installation of an onshore booster compressor and a pipeline. There are phases beyond that, which we will need to develop technically. These are deep-water wells. We will drill these wells to continue producing gas at a certain rate.
Also, there are exploration wells; we have three concessions that are termed exploration concessions right now; El Burg Offshore, El Manzala Offshore, and North Gamasa Offshore, the latter of which we won last year, and signed the concession agreement for this year.
We are currently looking at our exploration strategy for these; as to which and when we will be drilling the wells. The strategy is evolving, as we plan.

What is the time frame for these drilling projects?
Normally, it would take about 2-3 years. We look at some projects to be carried earlier, others carried later, but that is the current [time] period. For example, for the new concession that we have got, we need to acquire more detailed seismic work over that acreage, which then we need to interpret. Such study phase will take about a year, after which we can start planning the wells themselves.
These wells are quite challenging, especially if you are going for deeper horizons, so we must spend [a good deal of] time in the planning phase. So, it is a 2-3 year horizon we are looking at.
But of course the development wells are more ongoing, and underway.

Back to investment, do you feel the climate in Egypt is encouraging right now? Are the obstacles significant for most investors?
No, I would not say there are obstacles. This is a very focused business, where you drill, you find hydrocarbons, you produce them, and they are supplied into a very dynamic market. In this context, it is a good place to be investing in Egypt.

To what extent has the industry been affected by the financial crisis?
Well, the financial crisis happened…if you look at the business that we are in, we drill and produce gas predominantly over here. Part of that goes into the domestic market, and part into the export market. Those are basically assigned and fixed contracts where the product will be taken, even when the market prices might fluctuate a little bit. But, we are kind of buffered from the larger fluctuations that will happen here. So, in general, it was not really affecting [us] much.

Are BG’s investments mostly concentrated in the Mediterranean region?
Yes. It is predominantly offshore in the Mediterranean area.

Are there any plans or opportunities to expand elsewhere?
Not at the moment! I think there is enough there, we do not have reason to look elsewhere. At this stage, the focus remains in this area. Because a lot of these do require a lot of focus to sort of bring in the right technology to maximize hydrocarbon recovery from those areas. So our focus remains fixed.

Moving on to policy, what do you think about the recent debate concerning the EGPC’s contract policy regarding foreign partners?
These are very standard contracts. You take concessions, you bid them out, it is a very transparent process. Companies bid a certain amount of signature bonus and work commitments. And then you negotiate; and the party that is bringing the largest benefit to Egypt is awarded the contract.
The risk of all of that is taken by the party that is actually investing. So, it is a standard model used around the world, which has been very successful worldwide, and very successful in Egypt. So policy-wise, it is a model that has worked.

Does BG apply this model in its international partnership contracts?
Well, it is pretty standard as far as going into acreage around the world. The terms are different, depending on where exactly you are. Of course, the terms have to reflect the prospectively of the area you are looking at and then, the closeness that you have. If it is oil, you can sell it in the world market. If it is gas, it is more focused, and depends on availability, and how close the market is.

What else would you add regarding investment in Egypt? i.e. what can we expect in the near future, and what is unique to the market here?
For one, the market growth; it is a very dynamic county and the growth rate is high. The population is relatively young, which means great potential. The rate of growth will continue, and to help propel that, you need energy. So, a growing market is always a good place to be.
Given the fact that we have worked so well with the ministry, with our partners, and with the government, to reach the point that we are at now, we hope to be part of the solution for Egypt’s ongoing energy needs. 

Egypt’s workforce brings a lot of discussions to the table on many levels, and is well known for its large young unemployed workforce. Is BG capitalizing on this resource at all?
Yes. Right now in BG Egypt, we have around 400 employees; and more than 90% are Egyptians. Of course, we have got a very capable staff, coming into the system and gaining more experience. In the past, there was the perception that a lot of people would go to the Gulf for jobs. But at this point, we think the resources are here, as we need them– so the first place we look, we try to maximize on our Egyptian workforce.

What are the future plans of BG?
We are always looking at opportunities. Obviously, as new blocks come up for bidding we will evaluate those, as well as the exploration that we talked about.
We celebrated 20 year of our presence in Egypt last year. We hope for a continued, long-term presence here.
We have got the exploration projects that we are focusing on, exploration blocks. The other step is to see what comes, then focus on that and see how we can compete.
In terms of localization, BG has some important projects underway. We are doing an interesting social investment project that we launched in October, last year, to mark our 20th anniversary. It is kicking off very soon, a project for building skills of geosciences students. This is focused on the University of Cairo, geo-science, geology and geo-physics majors, to improve language skills and general marketability skills.

His Excellency the Minister of Petroleum had identified a skills gap in the graduates of Egyptian universities, particularly [those studying] petroleum engineering and geology. They are very strong when it comes to the core skills, but when it comes to soft skills and language, which are very important when it comes to international oil companies. What we are trying to do along with the British Council is to address this gap and give these students the English skills and the soft skills they need to be more employable.
Another program we have involved a chair at the American University in Cairo (AUC) for a government school student in the field of petroleum engineering every five years, which gives this student the chance to study at AUC.

We have been supporting education efforts. Since 2007, we have had a number of students who went on the BG Chevening Scholarship (a British Council Higher Education Scholarship, which BG Egypt has supported since 2007). We have sent three Egyptians on Chevening scholarships, and two other on BG Group scholarships, to study at higher education institutes in the UK.

The student currently on BG Chevening scholarship is an engineer from ENPPI, an EGPC affiliate company, and is studying sustainable development at Cambridge.


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