Egypt’s Oil and Gas Sector is on The Right Track

Egypt’s Oil and Gas Sector is on The Right Track

The Ministry of Petroleum and Mineral Resources has always spared no effort to develop the Egyptian oil and gas sector. Accordingly, many breakthroughs were witnessed throughout 2019, under the umbrella of the Modernization Project. Accomplishing such a success encouraged major international oil companies (IOCs) to continue their business in Egypt and pump new investments.

Egypt Oil & Gas was honored to conduct an interview with H.E. the Minister of Petroleum and Mineral Resources, Eng. Tarek El Molla, sharing with us the sector’s major achievements in 2019 and giving us a glimpse of his vision for 2020.

Q: Your Excellency have always considered our foreign partners an integral part of the sector. Based on your vision, what was the ministry’s mechanism to attract more foreign investments in 2019?

We, in the Ministry of Petroleum and Mineral Resources, have always considered retaining and attracting foreign investments as a main cornerstone in our strategy. Thus, our first priority was reducing their arrears. Accordingly, we managed to drop these arrears to around $900 million by the end of June 2019. This is seen as an unprecedented level when we compare it to the $1.2 billion achieved by the end of June 2018 and the $6.3 billion in fiscal year (FY) 2011/12.

Hence, reaching such a significant level proves our commitment to our foreign partners, especially when we look at the lowest level previously reached in cutting down those arrears was around $1.35 billion in June 2010.

Q: To what extent is launching several bid rounds over 2019 helped the ministry attract more foreign investments to the oil and gas sector?

Throughout 2019, we paid a great deal of attention to intensify the role of foreign investments in our sector. This was accomplished through launching several
bid rounds which offered our foreign partners various investment opportunities.

February 2019 witnessed the results of the Egyptian General Petroleum Corporation (EGPC) and the Egyptian Natural Gas Holding Company (EGAS) bid rounds. These bid rounds covered 11 areas, with total signature bonuses of around $104.5 million and total investments of $744.5 million to drill 50 wells.

Also, Ganoub El Wadi Petroleum Company (Ganope) launched for the first time in March 2019 an international bid round for crude oil and natural gas exploration in the Red Sea, covering 10 blocks. Currently, this bid round is in the phase of reviewing submitted offers. We need to highlight that this bid round is one of the fruits of the demarcation agreement between Egypt and Saudi Arabia, as it enabled us to explore the area’s untapped potential.

Furthermore, we launched the Egyptian Online Gateway bid round in November 2018, and the participating companies submitted their offers on February 10, 2019. We assigned this project to Schlumberger, and its contract is currently under preparation.

In recognition of our initiatives over 2019, we succeeded in making 55 new petroleum discoveries; with 40 crude oil and 15 natural gas discoveries in the Mediterranean, the Eastern Desert, the Western Desert, the Gulf of Suez, the Nile Delta, and Sinai. Consequently, we managed to sign four new agreements with IOCs, with minimum investments of around $24 million to drill four wells.

In addition to that, we issued the laws pertaining eight petroleum agreements, with total signature bonuses of around $72.45 million and minimum investments of $246.5 million to drill 47 wells, yet their signature procedures are still underway.

Also, we implemented all the necessary procedures related to 18 petroleum commitment agreements, with total signature bonuses of roughly $209 million and minimum investments of $2.18 billion to drill 103 wells. Besides, we inked 20 development leases in the Western Desert, with development bonuses of around $10.3 million.

Q: Last year saw a noticeable change in Egypt’s production map. Can you give us more details about these changes? And how did this change help achieve consumption rationalization?

In 2019, the oil and gas sector achieved the highest production rate of crude oil, natural gas, and condensates by reaching around 1.9 million barrels per day (mmbbl/d).  Natural gas production in particular boomed, touching an unparalleled level of around 7.2 billion cubic feet per day (bcf/d).

Moreover, we have to mention that our total production in 2019 increased by 7% compared to 2018, recording around 84.2 million tons. Crude oil and condensates production alone reached around 31.3 million tons, whereas natural gas production was approximately 51.9 million tons and around 1.2 million tons of butane were produced, other than the butane produced from refineries and investment companies.

Our local market was stable throughout 2019. This level of stability enabled us to cover all domestic needs for petroleum products and natural gas. Building on that, the total consumption reached approximately 30.2 million tons of petroleum products and 45.7 million tons of natural gas. We have to look as well at our petroleum imports, which reached around 11.7 million tons, with a cost of approximately $6.8 billion.

Also, I would like to highlight that natural gas was used as a replacement for mazut in electricity stations. Thus, the country’s total consumption of natural gas and petroleum products decreased by 3.1% compared to 2018’s consumption level, which helped us achieve consumption rationalization.

Q: What was the ministry’s strategy to ensure that petroleum products and natural gas are easily accessed by all citizens?

Over the last year, the Ministry of Petroleum and Mineral Resources began implementing several projects to ensure that all citizens have access to natural gas and petroleum products. Therefore, the number of filling stations increased reaching 135, which raised the total number of stations over Egypt to 3,655. Moreover, the number of the newly-opened cylinders distribution centers reached 38, bringing the total number of centers to 3,060.

Regarding natural gas delivery, 2019 delivered it to over 1.2 million households, making the total number of natural gas-connected households across the country reach 10.7 million.

Additionally, around 2,013 commercial units and 56 factories were linked to the national grid. In this framework, we succeeded as well in converting around 42,813 cars to run on natural gas, boosting the total number of converted cars to 300,000.

Q: Last year saw many projects to increase natural gas production, especially after achieving self-sufficiency. Can you please share with us some of them?

We succeeded in making 10 projects for the development of crude oil and natural gas fields. These projects resulted in adding 1.8 bcf/d of natural gas and 15,400 barrels per day (bbl/d) of crude oil and condensates.

There are significant projects implemented that we have to mention. We completed developing Zohr field, raising natural gas production from 2 bcf/d to 2.7 bcf/d. This was achieved by drilling 20 offshore wells and establishing onshore and offshore production facilities, in addition to an offshore platform. The 700 million cubic feet per day (mmcf/d) increase in natural gas production resulted from establishing and operating three onshore production and processing facilities, and putting three offshore wells and a third offshore production line on stream, with a cost of $15.6 billion.

Moreover, we developed the second stage of the Giza-Fayoum fields in the North Alexandria and West Nile Delta fields to produce 700 mmcf/d of natural gas. To achieve this rate, eight new offshore wells were drilled, in addition to increasing the production capacity of Rashid plant to 500 mmcf/d instead of 440 mmcf/d with investments of about $2.7 billion. The production of this project began in February 2019.

Another project was Southwest Baltim field, which was developed through the establishment of all needed facilities for an estimated amount of production of around 500 mmcf/d of natural gas. This required drilling five wells at Southwest Baltim, with investments of around $363 million. The project commenced production in September 2019 by linking two wells to production, with initial natural gas rates of about 165 mmcf/d.

Adding to these projects, we completed the development of 9B Phase in the Western Delta fields to produce around 350 mmcf/d of natural gas and 3,000 bbl/d of condensates, with investments of $775 million. This was planned to be implemented through drilling eight wells and linking them to the Burullus Company’s offshore lines and processing facilities. In addition to that, the third and fourth wells were brought online in October and November, with a production of around 100 mmcf/d of natural gas, while the remaining wells are planned to be completed in March 2020.

Furthermore, we developed North Sinai field after completing its second phase, increasing natural gas production by 100 mmcf/d from four wells, with investments of around $100 million. Three wells were linked to production during July-October with an initial production rate of about 60 mmcf/d of natural gas. The fourth one was put onstream in December, with a production rate of 25 mmcf/d of natural gas.

Moreover, we completed the development of South Disouq’s Phase B, aiming at producing 100 mmcf/d of natural gas. This was planned to be achieved by completing 10 wells at Disouq and putting them on stream. In addition to that, six wells were linked to production, with initial rates of 50 mmcf/d of natural gas.

Moreover, we managed to develop South Disouq fields as well to produce 50 mmcf/d of natural gas by drilling and linking four wells to production at South Disouq and Ibn Younis fields. For that purpose, an early production unit with a capacity of 60 mmcf/d was established, with a cost of $49 million. We have to note that the field was put on stream on November 6, 2019, with initial production rates of around 45 mmcf/d of natural gas.

Another project implemented in 2019 was the Nidoco / El Gamil Pipeline. The pipeline targeted transporting about 700 mmcf/d of natural gas from Nidoco field to El Gamil treatment plant to increase the extraction rates of butane and condensates, as well as increasing the ability to process larger quantities of gas. The project’s cost reached around $300 million.

Q: Last year was a noticeable year for crude oil production. What were the main projects behind that success?

In 2019, we managed to establish a shipping carrier and a subsea pipeline at El Hamra-El Alamein Port. The project aimed at boosting the production capacity of maritime shipping to around a million bbl/d, with investments of $90 million.

Additionally, we developed the Northwest October field in the Gulf of Suez. The project is supposed to absorb the anticipated increase in crude oil production, estimated at 3,200 bbl/d. This was planned to occur by establishing a marine platform, with investments reached about $37 million. The project was planned to be operated by the end of December.

Q: The Ministry of Petroleum and Mineral Resources pays great attention to petrochemical projects. Can you please elaborate on the reasons behind that?

The petrochemicals industry is an essential keystone for the success of our sector’s strategy. Thus, we have created a well-organized agenda, comprising the implementation of several projects to develop this industry. The year 2019 was the year when the petrochemicals industry saw the construction of four projects begin. This included a project for the production of polypropylene at Sidi Kerir Petrochemicals Company (Sidpec), with a capacity of 450,000 tons per year to cover the domestic demand and export the surplus. The investment cost of the project was $1.6 billion, and it is planned to be completed by the end of Q1 2022.

Another project is to produce 36,000 tons per year of rubber butadiene at the Egyptian Ethylene and Derivatives Company (Ethydco). This project depends on 20,000 tons per year of butadiene produced at Ethydco and Sidpec to maximize the value added, cover part of domestic demand, and export the surplus. The investment cost of the project was $165 million, and it is planned to be completed in Q4 2021.

Additionally, a project to produce 205,000 cubic meters (m3) annually of Medium-Density Fiberboard (MDF) using agricultural waste commenced with an investment cost of EUR 210 million. The project’s company was established in September 2019, under the name of “WOTECH Wood Technology Company” and it is planned to complete the project in Q2 2021.

Moreover, another project was included to produce 52,000 tons per year of urea formaldehyde and 26,000 tons per year of sulfonated naphthalene formaldehyde (SNF). The investment cost of the project was $50 million and the production is planned to commence in Q2 2021.

I would like to mention another ongoing petrochemical project which is the construction of a refining and petrochemicals complex in El-Alamein. The complex will use 2.5 million tons per year  of crude oil and condensates produced from the Western Desert. This complex’s production will help meet the local market’s needs and export the surplus. The estimated investment cost is about $8.5 billion and it is planned to be done by the end of 2024.

Q: Achieving a progress in refining was a priority for the ministry in 2019 as well. Can you please clarify the steps taken for such an advancement?

In 2019, we managed to establish a mazut hydrogen cracking complex at the Egyptian Refining Company (ERC). This complex aims to transform mazut into a high-quality middle distillate with a capacity of 4.3 million tons per year. The $4.3-billion-project has been completed, with the trials and production commencement in progress.

Furthermore, a group of refining projects are currently under-execution. This includes a high-octane benzene production unit at Assiut Refining Company to produce 800,000 million tons per year of high-octane benzene and fulfill the petroleum products’ needs in Upper Egypt. The project has costed around $450 million, and it is planned to be completed in April 2020.

Another project targeted increasing the Middle East Oil Refinery’s (Midor) production capacity by 60%. The project’s cost is estimated at $2.3 billion and its mechanical operations are planned to be finished in Q1 2022.

Moreover, a mazut hydrogen cracking complex is planned to be established at Assiut National Oil Processing Company (ANOPC) in September 2022. The complex will have a production capacity of around 2.5 million tons per year of mazut to be transformed into high-valued petroleum products. Another project that we began as well was establishing aromatics extraction units to update the oils complex at Alexandria Petroleum Company and increase its production to 10,000-16,000 tons per year, as well as increasing the wax production to 1,000-2,000 tons. The project’s necessary supplies are expected to be fulfilled in January 2020.

Furthermore, we began another project for the production of asphalt 60/70 at Suez Oil Processing Company (SOPC). Under this project, a vacuum distillation unit is established with a production capacity of 726,000 tons of mazut to produce about 396,000 ton of asphalt 70/60. The asphalt 60/70 will be directed to the local market. The project is expected to be finished in Q4 2021. Another project is aimed at establishing a Mazut Hydrogen Cracking and Benzene Production Complex at the Red Sea National Refinery and Petrochemicals Company. The project aims at exploiting the untapped capacities of the two refineries of Al Nasr Petroleum Company and SOPC, in addition to using the produced mazut to produce high-valued petroleum products. The project has a capacity of 2.5 million tons per year of mazut and 1 million tons per year of naphtha, and it is planned to be completed by the end of 2022

Q: Egypt has also seen an improvement in infrastructure. Can you please share with us the latest projects implemented for that purpose?

Last year saw the execution of three new pipelines transporting crude oil and petroleum products, in addition, we managed to replace and renew a number of pipelines. These advancements brought the total length of pipelines to about 313 kilometers (km), with a total cost of EGP 1.2 billion.

Among these operated pipelines in 2019 was Ain Sokhna-Al-Hafayer-Wadi Hagul crude oil pipeline. This pipeline aims at maximizing the benefit of the national network of pipelines, which will contribute to turning Egypt into a regional oil and gas hub. The project began operating in January with a cost of EGP 153 million. Another one is the new South Helwan-Bayad El Arab mazut pipeline, which ensures to continuously feed power stations with the necessary fuel. The first phase was completed in June with a cost of EGP 65 million.

Moreover, another network from the Suez-Mostorod production pipeline was replaced and renewed to preserve the operational capacity of the petroleum pipeline network and to continuously deliver petroleum products to governorates. The first stage was implemented in June with a cost of EGP 193 million. Additionally, a network from Tebbin-Assuit pipeline was replaced and renewed to secure and raise the transportation rates of petroleum products from Tebbin to Assiut and Upper Egypt. The cost of the first stage is EGP 100 million and was completed in June 2019.

Adding to that is the replacement and renewal of the Mahala-Shawa petroleum pipeline to deliver petroleum products to the Delta. The project was completed in August 2019 with a cost of EGP 107.4 million. Ras Bakr-Ras Gharib-Assiut pipeline was also duplicated to raise the efficiency of butane transportation rates in Upper Egypt to 200,500-300,500 tons per day. The pipeline was planned to be operational by the end of December with a cost of EGP 362 million.

Another crucial indicator to highlight is that we implemented many projects to maintain the storage capacity. This included establishing four diesel and gasoline tanks, with a total capacity of 45,000 m3 at SOPC. The project was completed in June, with a cost of about EGP 70 million. Moreover, we established numerous storage facilities at the Arab Petroleum Pipelines Company (SUMED) to store diesel with a capacity of 105,000 m3 in Ain Sokhna port. The mazut facilities were inaugurated by the President Abdel Fattah El Sisi in November, with a total cost of about $415 million. Furthermore, Sonker’s bulk-liquids terminal in Ain Sokhna was executed as well to increase the storage capacity of strategic products through the construction of six tankers (diesel/butane) with a capacity of 250,000 m3, in addition to the establishment of two lines to transport butane and a line to transport diesel. The first warehouses were operated in September and the rest will be operated successively until Q2 2020, with a total cost of $450 million.

Q: What improvements did Egypt witness in expanding the national gas grid?

Last year witnessed six natural gas transmission lines being operated with a total length of about 292 km and a total cost of around EGP 4.7 billion. This happened through the construction and installation of a 30-inch diameter line with a length of 3 km at the Egyptian Liquefied Natural Gas (ELNG) plant. It has been operating since February, with an investment cost of EGP 76 million.

Moreover, we rehabilitated the existing 29-km line in Rashid-Abu Homs in February 2019, with a cost of EGP 17.2 million. El-Tina-Abu-Sultan-the New Capital gas pipeline has a length of 165 km and a diameter of 42 inches. This project has supported the national gas grid by feeding the power stations in the New Capital and Beni Suef with natural gas. The project’s investment cost is about EGP 3,335 million and was operated in July.

Furthermore, the first and the second stages of the Sinai pipeline were rehabilitated as well through the establishment of a 36-inch pipeline, operated in November 2019, with a total investment cost of EGP 55 million. Moreover, Al-Wasiti-Beni Suef line, which started operating in December, feeds the Beni Suef power stations. The project’s investment cost reached EGP 511 million.

Finally, we doubled the Idku-Abu Homs pipeline, with a length of 30 km and a diameter of 42 inches, to transport the natural gas produced from Idku fields to support the national gas grid. The investment cost of the project amounted to EGP 716 million, and it was planned to start operating by the end of December.

Q: In addition to the ministry’s efforts to connect more households to the national gas grid, what about its electricity stations?

We are in the second phase of establishing an electricity station at Ethydco. The project aims to create a linkage to the national electricity grid. This is going to happen through a transformer station, either to export the surplus or to cover the deficit in the case of turbine failure. This station has costed around $25 million and started operating in March 2019.

Q: Egypt has a myriad of advantages that will allow it to turn into a regional energy hub. What were the ministry’s strides to achieve this target? 

Egypt has a clear roadmap to turn into a regional energy hub. This vision is pursued under the Modernization Project. Last year, we implemented several steps for that purpose. These steps included preparing a strategy by a specialized team, which was approved by the Steering Committee of the Modernization Project.

The East Mediterranean Gas Forum (EMGF) was also established, comprising the East Mediterranean countries with the most natural gas potential. The forum, headquartered in Cairo, aims at bolstering cooperation among the member countries, creating a systematic dialogue on natural gas and forming consistent policies within its framework. In addition to that, the forum will focus on creating a governmental cooperation to prepare a joint strategy based on a unified vision for the future of natural gas in the region.

Furthermore, in January 2019, a number of memoranda of understanding (MoUs) were signed between Egyptian and Jordanian natural gas companies, allowing the participation of the Egyptian petroleum companies in implementing projects for natural gas delivery in Jordan. We also completed a project in Ain Sokhna (SUMED Company) for trading and storing petroleum products, which includes the construction of a maritime platform for the regasification unit and petroleum products tankers. Last but not least, we completed El Hamra Port development project to receive ships with greater capacity than the current ones.

In fact, we believe in Egypt’s leading role as a regional energy hub to benefit all countries in the region. Egypt’s chief role will be an essential pillar for cooperation among countries and it will contribute to achieving economic benefits, in addition to being a means for prevailing peace in the region.

Q: Regarding the Modernization Project, 2019 marks a year with many milestones achieved. Could you please tell us more about these successes?

In 2016, the Egyptian oil and gas sector began the implementation of the Modernization Project to achieve a comprehensive change in the sector and increase its contributions to the development of Egypt. In the context of bolstering the Egyptian sector, many strategies were implemented under the umbrella of the Modernization Project.

These strategies included the implementation of Egypt’s Upstream Gateway project to market the Egyptian investment opportunities. This will happen through setting a new framework for the sector to cope with global changes, taking into consideration separating the sector’s policies, organizational, and executive roles. Moreover, we prepared a draft for the sector companies’ governance which is currently under review.

Additionally, we started the implementation of different programs, in coordination with IOCs, to prepare young leaders for the future of the sector. These programs are divided into three groups; two of them were completed, which are the administrative group with 140 trainees, and a practical group with 230 trainees. Currently, the training of the most distinguished group is underway; out of this group, the training of 100 trainees is done.

Moreover, we prepared a plan to develop the occupational health and safety departments in the sector’s companies, in addition to completing the first phase of a program developing the skills of 70 participants in the same field, and the second stage is under preparation.

When it comes to leadership positions, we have set a new plan containing the best practices of competency management and development; a mechanism that has been established to evaluate and select candidates according to this plan

On the other hand, we implemented many procedures to improve energy efficiency in refineries, production facilities and natural gas transmission networks.

Besides, we completed the first phase of the Enterprise Resources Planning (ERP) system in EGPC and began the implementation of the second phase to electronically exchange data and information. We are working on implementing the ERP system in all the sector’s holding companies. This system will help automate our daily production data and reports for a number of major crude oil and natural gas production companies at EGPC.

Q: Empowering the sector’s young professionals is not a one-time program, it is a long-term project. What is your opinion on that?

The ministry is continuing to implement its strategies, grooming up the sector’s middle management and youth through initiating several programs to prepare them, helping them develop their career path, as well as empowering them to takeover more responsibilities in the future. Therefore, it is very important to strengthen the sector’s capacity building; as we want to see more younger generation taking the lead and being empowered to become the next leaders of the sector.

One of the most remarkable programs in the sector is the middle-management program. The selection of this program’s participants was mainly based on transparency and providing equal opportunities. Out of 711 applicants, around 462 were selected after passing oral and written tests. Those 462 participants were divided into three groups, and a group of 117 participants was selected to be prepared, in accordance with IOCs including Total, Shell, ExxonMobil, BP, Schlumberger. We need to highlight that the second batch of the program will be announced soon.

Based on your plan, how will this program help brighten the future of young professionals?

Executing such beneficial training programs for our young professionals, in collaboration with IOCs, will provide them with an opportunity to acquire required soft skills, hard skills, business skills, leadership skills, and expertise. This will play a major role in generating more conscious leaders. Accordingly, this will be reflected positively on the future of our sector, enabling us to achieve all our targets and visions.

Moreover, I want to mention that these programs are considered to be ongoing, as they come in line with the ministry’s goal of achieving sustainability. And when it comes to sustainability, we have to pay a great deal of attention to the organizations’ restructure. For that purpose, the ministry has prepared a memorandum and plans to announce it during Q1 2020.

Q: Mineral Resources is an integral segment in the ministry’s strategy. What were the main achievements witnessed in 2019?

Last year, we succeeded in executing several reforms in the mining sector. In May 2019, an agreement licensing the exploitation of phosphate ore in Abu Tartur in the Western Desert was signed between the Egyptian Mineral Resources Authority (EMRA) and Egypt Phosphate Company. This agreement covers an area of 220 square kilometers (km2), and it is considered the culmination of the ministry’s plans to develop mineral wealth, optimize the use of phosphate ore, maximize the value added of natural resources, and achieve an effective contribution to the development of societies through establishing new industrial zones and increasing investment opportunities.

Moreover, we evaluated the offers submitted for the general contractor auction to implement a project for phosphoric acid with a production capacity of a million tons per year by the Valley Company for Phosphate Industries and Fertilizers, with investments of approximately $1 billion by a turnkey system in addition to funding. After evaluating offers, the results came in favor of the Egypt-China alliance and a letter of intent was signed, in which the Bank of Alexandria has been authorized to lead the banking alliance funding the project.

Finally, law number 145 of the year 2019 was issued on August 7, 2019 to amend some of the provisions of the mineral resources law number 298 of the year 2014. The law amendments aimed at setting clear constraints and rules for the exploitation of mineral resources in Egypt; including quarries, mines, and navigators to achieve ideal exploitation rate. Additionally, these amendments target unifying the governing rules of this vital field. Moreover, they granted the EMRA and the competent authorities the right to negotiate with licensees on the application of rental values, royalties for licensing exploration and exploitation, as well as the right of issuing licenses for mining ores, navigators, exploration and exploitations.

Could you please provide us with a glimpse of the ministry’s vision in 2020?

In 2020, our strategy is to focus on finalizing the implementation of all plans that we could not complete in 2019. With an eye on IOCs’ vital role in our sector, we succeeded in the inclusion of major companies in the Red Sea and Mediterranean areas. Moreover, this year will witness a noticeable presence for major IOCs such as ExxonMobil and Chevron, which will make a great difference in the market’s dynamics.

In 2020, major IOCs will focus on offshore regions which needs more investments, advanced technologies, and with high-risks. Meanwhile, mid-size companies will concentrate on onshore activities that do not require large investments, advanced technologies, and is considered less-risky areas.

We have reached self-sufficiency in natural gas production, which enabled us to export it, but with the decrease in the international prices of liquefied natural gas (LNG); exporting has become challenging. Thus, in 2020, we are going to concentrate on managing this issue.

Furthermore, we plan to develop the production of crude oil in 2020 as it is our number one challenge. Yet, the decrease in oil consumption in Egypt has helped easing the challenge’s intensity. This decline has resulted from implementing the pricing indexation mechanism and lifting the subsidies off of the petroleum products. Hence, in 2020, we will work on reaching targeted production rates to narrow the gap between production and consumption.

Finally, I need to stress that we are working hard on turning Egypt into a regional energy hub. We target to announce the EMGF as an organization and we are really looking forward to seeing it up and running during Q1 2020.



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