Egypt’s investments on track

In any industry, the volume of investments represents the backbone of the industry’s richness, development and effectiveness. The petroleum sector, being one of the leading industries in Egypt, aims at creating this favor environment to lure more investments to the country

During the first half of this year, the petroleum industry succeeded to maintain the rate of luring foreign investments into the country, in the different sectors of the oil and gas sector. The Egyptian Minister of Petroleum Eng. Sameh Fahmy affirmed that his sector has been able to face challenges and has achieved its strategic targets through the developed methodologies and the appropriate economic planning. “This is what helped us to diminish the negative effects of the current global economic crisis,” he added.
As a matter of fact, the petroleum sector lured more than $9 million foreign investment, out of which $7 million were allocated for the exploration and development operations led by foreign companies jointly with other public companies. In addition, the total investments in the petrochemical sector totaled up to $520 million.
Focusing on Egypt’s gas reserves, they count for approximately 77.2 trillion cubic feet, while the crude oil reserves count for 4.4 billion barrels. It is worth mentioning that the total production of oil and gas counts for 81 million tons equivalent, this figure reflects a 65 percent increase.

The Minister has been eyeing the development of the Egyptian companies in terms of production, operations and achievements. For instance, in the gas industry, the Egyptian Natural Gas Holding Company (Egas) signed 23 agreements, worth $1.8 billion since its establishment, while in the oil industry, Ganoub El Wadi Petroleum Company (GANOPE) signed 15 petroleum agreements, worth $500 million in promising areas compared to the Gulf of Suez and the Mediterranean Sea. The Ministry is continuously opting at attracting more and more foreign investments to develop different petroleum sectors, at the top lies the refineries that are characterized by their high investments, followed by the exploration and production operations, which are no less important than refineries and always remain a focal magnetic point for foreign organizations seeking to expand their operations in the country. Egypt has been considered as one of the main countries that enjoys several promising areas need to be exploited. For example, Egypt’s Western Desert has lately witnessed a booming activity as various companies succeeded to hold interests to operate in this area, such as the Greek Vegas Oil & Gas, the Ukrainian Naftogaz in addition to Shell, which has been operating in Egypt for a long time and considered as one of the leading companies in the country.

Sharing the same objective, the necessity to lure foreign investment, the Energy Committee of the National Democratic Party (NDP) presented a working paper highlighting the party’s vision to create a better investment environment in the country and means to respond, cope and adapt the continuous changes occurring in the petroleum industry, locally and internationally. The party’s paper recommended the government to continue pumping the necessary investments highly needed to finance projects, which have a strategic impact on the country, while encouraging the private sector to manage, develop and renovate these projects, within a clear framework of regulations and rules set by the Ministry to control and evaluate the activities of the private sector and at the same time, this framework would help create a spirit of healthy competition in the industry.

In fact, the private sector can have an indispensable role in various petroleum divisions. It can execute projects like the construction of pipelines for the shipment of natural gas and petroleum products, carry out the maintenance procedures and become responsible for operating these pipelines. This kind of projects leads to high revenues, which cover the amount of investments paid at the beginning by the private sector. And, in order to encourage more private companies to participate in such projects, the NDP working paper highlighted that the agreements signed between the Ministry of Petroleum and the private entities should include incentives to attract more investments.

Moreover, the Party’s paper suggested offering the private sector the opportunities to take part in the storage, marketing and commercial deals of the petroleum products as well as in the refining and petrochemical sectors. The necessity of offering these opportunities serves the Ministry’s goal to ameliorate the rank of the Egyptian petroleum industry worldwide and make it an international hub of petroleum.

On the other hand, the Egyptian government is developing and ameliorating techniques that would create an attractive environment for investments targeting the exploration and production of oil and natural gas. The governmental strategies should grant more flexibility to the private sector in order to guarantee a higher rate of operations’ efficiency, through the following factors:

  • Some amendments should be made in the signed contracts clarifying the exact commitments of both sides, while keeping the system of production share that is mandatory to develop and maintain the country’s oil and gas reserves
  • Timings of bid rounds for the exploration areas should be definite to give space for companies to be aware of the coming rounds and be ready to allocate part of its investments to the new areas
  • Searching for new areas should be put into consideration to expand the exploration activities in the country. For instance, E&P operations should expand in touristic areas, if oil and gas findings are proved, though these areas were solely limited to touristic activities
  • The financial grant system should be amended as well to increase the Egyptian share of oil and gas in case if the partner disclaims parts of his share to a third party. This amendment will avoid the loss of the country’s oil and gas resources as the partner will be granted the permission to sell directly part of his share to the domestic sector for local consumption

According to an official at the Egyptian General Petroleum Corporation (EGPC), asked to be anonymous, said that the volume of crude oil and condensate production counted for 690 thousand barrels per day during the first half of this year, while the natural gas production averaged six billion cubic feet daily during the same period of time.
These production figures answer the ongoing question of how far would Egypt be able to fulfill its commitments at the projects of Nubacco and the Arab Gas Pipeline. “The rates of oil and gas production are distinguishably increasing and will definitely cover the country’s commitments in both projects,” the official replied.

He further added that this year’s production plan is based on two main angles; achieve an oil and gas production increase by setting a quick timeframe to put the new discoveries on operation lines, connect the new findings to the production facilities that are currently existing in the fields.
Asked about the most promising areas for oil production, the official highlighted that the Western Desert tops the list of the most oil producing areas, followed by the Gulf of Suez, Delta and Sinai. As for the gas production, the Mediterranean Sea comes in the lead and is considered the future of natural gas in Egypt.
One of the problems threatening the stability of the petroleum industry worldwide is the swinging oil prices. The official expects prices to regain its prosperous time to some extent as they are estimated to increase by the end of this year due to the increasing demand with the beginning of the winter season. Also, the latest statistics indicating a decrease in the U.S. stockpiles of oil would be another factor behind a possible increase of oil prices.

By Tamer Abdel Aziz


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