Egypt Oil & Gas (EOG) held its first online webinar on July 1 to discuss the impact of the novel coronavirus on Egypt’s oil and gas sector. The webinar, titled “Egypt’s Oil and Gas Sector Pandemic and Commodity Price Crash”, hosted industry experts to share their insight on these prevalent issues and also give insight as to how their companies were dealing with the ensuing pandemic.
The webinar was moderated by the President and CEO of Apex International Energy Thomas Maher. Speakers at the webinar included Abed Ezz El Regal, CEO of the Egyptian General Petroleum Company (EGPC); Sameh Sabry, VP and Managing Director of Wintershall Dea – Egypt; Colby Fuser VP of Halliburton – Egypt and Libya; and Nicolas Katcharov, VP Operations MENA Edison SpA. Wintershall Dea was the lead sponsor of the webinar.
Production, HSE are Two Sides of the Same Coin
The recurrent theme throughout the webinar was that of employee safety. The main challenge has been to maintain production levels whilst simultaneously safeguarding employees’ health and safety. Speaking on the role of the Egyptian government in supporting the sector during COVID-19, Ezz El Regal said: “We have clear policies and by rotating the workforce we have managed to keep production at the same level.” He also added that this was a joint effort between Egypt’s Petroleum Minister, Tarek El Molla, and other sector entities.
From a company standpoint, Sabry announced that Wintershall Dea is taking all the precautionary health and safety measures to reduce its employees’ exposure to the pandemic. Speaking on the company’s policies he said: “We have encouraged people as much as possible to work from home, we have reduced staff in the operational field as well as other measures such as social distancing and banning business travels.”
However, the general sentiment running throughout the webinar was that the Egyptian government had supported the companies’ health, safety, and environment (HSE) efforts throughout, with Fuser pointing to the success of Egypt’s Ramadan campaign which was aided by the Ministry of Petroleum and Mineral Resources.
Managing E&P Activities with Production Cuts
With regard to exploration and production (E&P), there was a focus on how to maintain E&P activities amidst production and budget cuts. Abed assured that “until now there have been no severe effects on E&P in Egypt.” This can be showcased by Wintershall Dea’s E&P activities that have maintained production stability in the Western Delta as well as the company’s project in Disouq onshore the Nile Delta. Regarding exploration, Sabry exclusively revealed that Wintershall Dea is actively restarting work on exploration in Egypt again, stating that the company is preparing five to seven well drilling campaigns in the East Damanhour block, which the company obtained drilling rights for last February.
Katcharov revealed that Edison SpA’s production has dropped by 10%, however, it is actively continuing to develop the company’s gas production capacity, particularly in Egypt which it views as a top priority country. Talking about future exploration investments he said: “We will be very carefully screening to catch the strategic exploration opportunities in the gas potential for preparing for our growth in the future.”
Achieving Operational Excellence, Cost-Efficiency
After the pandemic has passed, Ezz El Regal believes that EGPC can achieve a more efficient economic process for development and exploration so as to maintain pre-pandemic levels of E&P.
Edison SpA has placed more of an emphasis on optimizing operations, with Katcherov announcing that the company’s long-term focus will be more on synergies and connecting existing infrastructures to decrease costs. In the short-term, the company has altered the shift timetable so as to minimize downtime. Furthermore, the current active workforce has been reduced to 35% and will be further reduced to 15%. Due to careful reduction in non-essential practices Edison has managed to reduce operational costs by 20%.
Handling the Ups and Downs of Oil Prices
Due to the oil price crash and the subsequent reduction in profit margins, a large emphasis has been placed on operational efficiency and creating a leaner business model; as Sabry says, “In this perfect storm, only the fittest will survive.” In order for the government to help companies handle the market’s volatile nature, it has further aided the sector by reducing the fuel price for industries to help the value chain, according to Ezz El Regal.
Haliburton has reduced its operational activity and has placed more emphasis on value proposition. Fuser announced that Haliburton has further refined costs since the 2014 oil crash. On further reducing Haliburton’s cost base, Fuser said, “We have worked on efficiencies which has been achieved by collaboration with the ministry and our customers.”
Wintershall Dea has taken budgetary cuts in capital expenditure (Capex) 30%, operational expenditure (Opex) 10%, and the exploration budget 20%. Despite these cuts, Sabry insists that Wintershall Dea is “trying to maintain the company’s readiness to capture operational value once the market returns back to normal and not to cripple ourselves with short-term measures.” With this said, the company has managed to maintain asset integrity portions, with the example of the current investment in waste water treatment at Disouq.
The New Normal for the Oil Industry After COVID-19
Another key area of discussion was the role that technology has played in alleviating the impact of the pandemic.
As Katcharov says, “The world has already moved towards structural change,” adding that “there has been a structural progress from the Egyptian government.” According to Ezz El Regal, this structural change comes in the form of utilizing new modern technologies to increase efficiency when dealing with international oil companies (IOCs).
As a service-based provider, Halliburton has placed increased importance on technology to optimize profits during the pandemic. Colby Fuser announced that “We [Haliburton] have managed to bring new technologies that have helped to lower overall customer costs and complete wells in a manner that optimizes that asset value.”