Lacking the production vision

“A decrease in the production of oil in Egypt,” as the United States Department of Energy predicted in last February, it came in a report titled “The Forecasts of Energy in the Short Term”. The report, which is focused on non-OPEC supply of oil in 2010 and 2011, said that it expects a decrease in the country’s oil production during the monitoring period that runs from 2009 through 2011

The report came as a shocking slap to the petroleum community in Egypt that lately had lots of statements and declarations of a new era for the oil and gas industry in Egypt. If we looked at the figures of Egypt’s production from July 1st, 2009 till March 31, 2010 we will find it nearly 1489,5078 million barrels of oil and 3444,88673 million cubic feet of gas, which shows different indications to those made by the United States Department of Energy. Those declines made by the department are to be questioned if we looked at some of the companies’ production rate from January to June 2010, for instance Apache Corporation announcements that new production from its Faghur Basin fields has boosted its Egyptian gross-operated oil and gas production above 330,000 barrels of oil equivalent (boe) per day, which exceeded the company’s 2005 goal of doubling output from Egypt’s Western Desert within five years. “The emergence of the Faghur Basin as a key component for Apache’s continued growth in Egypt permitted us to fast-track production through the Kalabsha Facilities Project and enabled Apache to reach the 2X goal with seven months to spare,” said G. Steven Farris, Apache’s Chairman and Chief Executive Officer. Apache also finalized the work in the Phiops 9 well, which tested at rates of 4,632 barrels of oil per day from the Alam El Bueib-3E (AEB-3E) formation, which Farris described as “During the first quarter of 2010, Apache’s oil and gas production generated $10.6 million per day of revenue to the Egyptian government, and our joint ventures with the Egyptian General Petroleum Corporation directly employ nearly 4,500 Egyptians. Our partnership with EGPC is a win-win for both Apache and Egypt.”

Moreover, Circle Oil Plc, the international oil and gas exploration, development and production company, said that both the Geyad-2X ST1started producing at a rate of approx. 2100 bopd, and Al-Amir SE-5 appraisal well has been successfully commenced production at a rate of approximately 1500 Bopd in the onshore North West Gemsa Concession, which David Hough, CEO of Circle, expressed it as “We are delighted with the successful hook up of the Al-Amir SE-5 well. The partners are now agreed on the 2010 budget and the way forward for the future which will see both a stable and increasing revenue stream for all partners.”
Sea Dragon Energy, Circle Oil’s partner in the N.W. Gemsa block, also stated a significant increase in its oil production. “We are very pleased to have achieved new record production levels in the NW Gemsa block. It is indeed a testimony to the high prospectivity of this concession and we feel fortunate to be a participant in its development,” said Mr. Said Arrata, Chairman and CEO of Sea Dragon.

Furthermore, the news of more upcoming discoveries and new wells to be drilled are augmenting from day to day, from companies like Qarun, Gebel El Zeit Petroleum Company (Petrozeit), Esh El Mallaha Petroleum Company (Eshpetco), Zafrana Oil Co., and AGIBA Petroleum Company.

In order to shed light on the truthfulness of such report whether it is based on doubtless assurance of Egypt production is poised to fall, we needed to ask credible sources. Most of the judgments were against the report, with confirmations that Egypt production is rising and describing Egypt’s production as fine, maintaining the rate of production needs around the clock work, but we can do it if we have the needed productive mentality.

“The companies need to conduct a production policy that will not harm the well or the reserve, scientific approach is needed to keep our reserves at an excellent rate,” said Eng. Abdul Moniem Gabr, petroleum expert. “But to have such mind-set you need to be supported by a government that rules in favor of this. The Ministry conducts a meeting with all the companies’ chairmen to agree on a certain production plan, where the Ministry ask for a specific production number and decide which company should raise its output and which should decrease it. It all stands on wellbeing of the reserve and the ongoing maintenance to the well,” added Eng. Gabr.

It is noted that any well’s production starts weak then reaches the peak point then goes down again, and the companies should make the most of that peak period, “Once the production at the well reaches the peak point that’s when the real hard work starts,” according to a member at the Energy Committee in the People’s Assembly. He also agrees with Eng. Gabr that keeping the pipelines, marine platforms, and all the production facilities in constant maintenance and safeguarding.

“What we really need is to drill development wells continuously. It is our way to raise the production rate,” said an official from that Egyptian General Petroleum Corporation (EGPC).

He highlighted that taking care of the pipelines and the pumps to enhance its lifespan, especially the wells that stops producing, “Early analyzing and taking fast procedures to solve the problem would help placing the well on the production line again. We need a certain way of thinking for this to happen.”

Additionally, he talked about boosting the exploration activities, which led to reaching high reserves and maximum production rates. “This will only come through EGPC helping the companies overcoming all the obstacles they face, mostly speeding placing the newly explored wells on the production line as soon as they give proven results.”
“The Ministry already helped in this by setting the rule of one company can use the nearest company’s facilities,” added the EGPC official.

“To help raising the production we need clear policy and straight gas pricing, effective management that encourage production at the freshly acquisition areas,” said one governmental official that refused to mention his name.
“We all share the same interest, which is to meet our domestic need and to improve Egypt’s rank in the countries exporting oil and gas,” he said.
North Sinai Co. For Petroleum (Nospco), to look at it as an Egyptian model, we will find that its oil production since May 2009 reached 6283 thousand barrels, and 180 million cubic feet of gas, and planning to keep its output steady and even raise it. It shows that companies in Egypt are willing to give more, but it stands on the effective leadership with right decision.

“Egypt is a significant oil producer and a rapidly growing natural gas producer. The Suez Canal and Sumed Pipeline are strategic routes for Persian Gulf oil shipments, making Egypt an important transit corridor for world oil markets,” according to the United States Department of Energy page on Egypt. They blame the oil decrease more on the growing need of gas for the domestic supply, “Egypt could soon require oil imports to meet domestic energy demand.”

The Sumed pipeline (also known as Suez-Mediterranean pipeline) is an oil pipeline in Egypt, which runs from Ain Sukhna terminal on the Gulf of Suez to Sidi Kerir on the Mediterranean. It provides an alternative to the Suez Canal for transporting oil from the Persian Gulf region to the Mediterranean.

“Due to major recent discoveries, natural gas is likely to be the primary growth engine of Egypt’s energy sector for the foreseeable future,” they added.
Furthermore, Eng. Gabr said that companies should put into consideration the operating capacity of the refineries, “It is an industry that all connected, so companies should always supply the refinery with needed oil to keep working, and never to reach a rate less than 75% supply or else the refinery will shutdown.
On the other hand, the Ministry should always put in mind that clear and flexible agreements with the foreign partners is a major stimulation to bring more investments into the country which will lead to higher production.

“Production Share is the best system to deal with the foreign partner. Bendable negotiations with placing the interest of Egypt as a priority,” said the EGPC official.
He also talked about the terms that concentrate on production in the agreements between EGPC and the companies, as it include certain figures that the companies should meet, and there are specific penalties if the company was late in delivering or less than the agreed number of barrels.

“Sometimes the reason behind fallen delivery is that the foreign partner would not spend the needed finance for the project,” he added.
Eng. Gabr also said, “EGPC should have the flexibility to make adjustments to the agreements, and to deduct the cost recovery and the development and exploration financing, then look for its best interest in the output.”

Egypt is packed with enough oil and gas reserves that only need a clear vision and efficient managing that deal with our belated start and growing domestic need. We might be late, but we are getting there, he added.

By Sama Ezz Eldin


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