BG’s 20-year journey in Egypt

Seizing the occasion of celebrating 20-year partnership in Egypt, BG Egypt President Tim Blackford takes us to the company’s long and outstanding journey, throughout which this leading British-based company has been crowned as one of the biggest investors in the country and an indispensable partner of success

Operating in the Egyptian market for 20 years, how do you evaluate the development of the natural gas sector in the country?
Egypt has moved rapidly and skilfully over that period from a domestically focused producer to an increasingly important player in the international market for liquefied natural gas. The Minister of Petroleum has been working hard to develop the domestic market and expand the gas network, which has reached Upper Egypt this year. Also, the Ministry makes the best use of its energy resources. Moreover, there is a structural reform, taking place in Egypt’s petroleum sector.
A further key development is deregulation. We support the government’s moves to encourage direct sales of gas to industrial users. Opening up the market in this way will help to strengthen the market and the Egyptian economy.
Egypt is key to our business. It is one of our prime locations for sustained investment and long-term economic, environmental and social development. Over the last 20 years, together with our partners, we have invested more than $6 billion in upstream and downstream operations in Egypt.
BG has a long journey in Egypt that has been so successful, especially with the high cooperation we have with the Egyptian government. Our journey in Egypt has been exciting and rewarding. We have been fortunate, indeed, to find in the government a wise and patient partner, able to appreciate the long-term perspective, which our industry requires.
We established ourselves as one of the biggest investors in Egypt’s growing natural gas industry – certainly the largest British-based company – and one of the largest foreign direct investors in the country currently accounting for some 15 percent of FDI.
At BG Group, we are proud of the role we have been able to play in helping the government develop and deliver its coherent, strategic vision for the Egyptian energy industry.

Over this long journey, what were the major achievements of this partnership?
The results of our joint efforts speak for themselves: gas production has tripled since the 1990s, enabling Egypt to build a global leadership role in LNG while continuing to grow its domestic gas market. Our sustained exploration and production success and our access to export markets for LNG have made BG Group a key partner in both the national and international strands of Egypt’s natural gas industry.
Today our operations account for more than 40 percent of the country’s total gas production, and the LNG business, we have helped to build, generates more than one billion dollars a year for the national economy.

In your opinion, what is the future of gas industry in Egypt?
I am expecting more expansion for the gas industry. Egypt is becoming a reliable domestic market and a more sophisticated one, for instance the EGPC and EGAS have now specific roles that serve the Ministry strategy to develop the gas industry.
Moreover, with global demand for LNG projected to double by 2020, Egypt is well–placed to continue to make substantial gains by exploiting its strategic geographical position close to high value markets in Europe, Asia and the United States.
As we look to the future, we look forward to playing our part in shaping the new blueprint for Egypt’s sustainable energy future. Together, we want to realize the full potential of Egypt’s energy resources, playing our part not just in the upstream and midstream, but also contributing our knowledge and expertise to Egypt’s supply-side energy strategy.  We are committed to being part of Egypt’s energy future for the long haul, but to do so we really do need fiscal stability, security around receivables and strengthened and streamlined governmental processes, to ensure that new opportunities are progressed as efficiently as possible.

What do you think of exporting the Egyptian gas to Europe via Turkey?
Currently, Europe is seeking the diversification of its gas supplies in order to maintain its energy security. And, as I said, Egypt is making the best use of its energy resources, whether on the domestic level or the export one as well. So, this is a good opportunity for Egypt, especially that Europe is seeking the countries enjoying the highest value of gas. I think this is a positive step for Egypt.
Egypt has the reserves base to continue to answer growing domestic demand and to provide vital export revenues.  But targeting value in a cost-conscious international market requires careful management, and the Egyptian government has done an outstanding job of striking this balance. Last year’s changes to gas pricing are an important step in the right direction and will be key to the sustainable future of the industry.

Have you postponed or cancelled any project due to the current economic crisis?
No, BG Egypt has not changed, altered or cancelled any plan. It is important to remember that the global financial crisis has put pressure on all the players in the gas chain. Companies are seeking to target efficient exploration and production; governments need to maximize their share of international risk capital in an increasingly competitive marketplace. In this context, issues such as pricing, exports, subsidies, and streamlining of procedures are of critical importance to us all.

Is there any new project/investment to be announced soon?
With our partners, we decided to sanction a further $1 billion investment this year and potentially a $2.5 billion project commencing next year. Both will extend our gas supplies to the domestic market and existing export contracts.
We were also delighted to be awarded a further new exploration block, Block-1 in the North Gamsa offshore, in the latest EGAS international bid round 2008, announced last month, which hopefully in the fullness of time will enable further investments and developments.
And, with our production volumes continuing to grow, we are continuing to invest in our businesses here and remain alive to new opportunities in both the upstream and downstream sectors.

By Yomna Bassiouni


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