Egypt’s Oil & Gas Sector: A Year of Progress

Egypt’s Oil & Gas Sector: A Year of Progress

The Egyptian oil and gas sector witnessed significant developments in 2024, marked by a renewed focus on exploration and production (E&P) activities, strategic bid rounds to attract foreign investment, and the implementation of new investment incentives to bolster industry growth. Addressing the critical issue of arrears payments to partners was also a key focus, aiming to foster a more stable and attractive investment climate.

E&P Empowered by Bid rounds

In 2024, Egypt has made significant strides in oil and gas exploration and production. In October 2024, Minister of Petroleum and Mineral Resources Karim Badawi announced that the oil and gas sector’s production stood at 1.4 million barrels of oil equivalent per day (mmboe/d). He emphasized that new production was achieved during the first quarter of the 2024/25 fiscal year, including an increase of 30,000 barrels of oil per day (bbl/d) and 133 million cubic feet per day (mmcf/d) of natural gas.

On the other hand, Badawi stated in December that the sector’s 2025 plan encompasses several key initiatives, including: intensifying research and exploration efforts, accelerating oil and gas production, expanding the utilization of natural gas, and maximizing refining and petrochemical capacities.

Accordingly, the year 2024 witnessed the Egyptian Natural Gas Holding Company (EGAS) launching a new international bid round for the exploration and exploitation of natural gas and crude oil across 12 blocks in the Mediterranean and Nile Delta, comprising 10 offshore and 2 onshore blocks. This initiative is part of Egypt’s broader strategy to enhance exploration activities in the Mediterranean, which is recognized for its substantial natural gas potential.

The 2024 bid round marks the eighth such initiative launched by the Ministry of Petroleum and Mineral Resources, utilizing the Egypt Upstream Gateway (EUG) platform. This digital tool facilitates access to updated technical data and streamlines the bidding process, thereby attracting new investments in the sector. The focus on the Mediterranean region aligns with the increasing global interest in natural gas, positioning Egypt as a key player in the energy market. This comes as the EUG provides a timely platform to attract investments as the portal is capable of enabling investors to access comprehensive data and take advantage of the opportunities it presents.

2024 New Investment Incentives

In August 2024, Badawi unveiled a new incentive package designed to stimulate oil and gas production. This aligns with the overarching goal of maximizing output in collaboration with our exploration and production partners. The Minister underscored that this move signifies the petroleum sector’s dedication to enhancing the investment climate, encouraging partners to invest more heavily, and ultimately boosting gas and crude oil production. Recognizing investments as the bedrock of production growth, these incentives encompass new mechanisms tied to exceeding current production levels.

Furthermore, they incentivize increased exploratory and developmental drilling activities. The revenue generated from this augmented production will be utilized to settle a portion of our partners’ dues and to augment gas and oil supply, thereby mitigating the gap between production and domestic consumption.

Resolving Outstanding Debts

The Egyptian General Petroleum Company (EGPC) has accrued arrears to international oil companies (IOCs), estimated between $4 billion and $5 billion. These arrears have arisen due to a combination of foreign exchange shortages and various structural issues, including declining domestic gas production, rising domestic consumption that limits gas export opportunities, and increased subsidies provided by EGPC to the electricity sector, as revealed in April 2024 in the International Monetary Fund (IMF)’s First and Second Review.

In the past few months, the Ministry has been successfully implementing new mechanisms for paying partner arrears, including ensuring regular fixed payments to maintain payment continuity and sustainability.

In July 2024, Prime Minister Mostafa Madbouly stated in a press conference that between 20% to 25% of the value of arrears due to foreign companies have already been paid, depending on each company’s arrears. Meanwhile, Dana Gas announced in December 2024 that it received around $20 million payment from the Egyptian Government. This amount takes the funds received in Egypt in Q4 2024 to $24.5 million.

The year 2024 has been a pivotal year for Egypt’s oil and gas sector, characterized by significant advancements in exploration and production activities, strategic initiatives to attract foreign investment, and a proactive approach to addressing outstanding arrears. The government’s commitment to enhancing the investment climate is evident in the successful launch of new bid rounds and the introduction of incentive packages aimed at boosting production levels.

 

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Sarah Samir 3804 Posts

Sarah has been writing in the oil and gas field for 8 years. She has a Bachelor Degree in English Literature. She has three years of experience in the banking sector.

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