In an unpredicted move, the Ministry of Petroleum decided to review the concluded deals signed for the exportation of the Egyptian gas worldwide, in an attempt to avoid the loss of an economic profit in the shadow of prices instability nowadays. As a matter of fact, oil and gas prices have been increasing, while the Egyptian prices remain unchanged.
“If we had the amount of oil and gas that we sold over the pervious years, we would have benefited from the big difference in prices. Therefore, my ministry and I have learned a lesson regarding the trade of petroleum and gas within the previous 40 years with prices not existing nowadays,” said Eng. Sameh Fahmy, Minister of Petroleum during a meeting with the Industrial Committee in Al Shura Council. He added that the Ministry of Petroleum (MoP) would rather not sign any agreements for gas export in the coming period unless there is a need for money.
Throughout the past few years, the MOP has succeeded to establish a big market for the Egyptian gas exportation. The debut was the inauguration of a large complex to export the liquefied gas in Edku city with a total investment of $4.6 million. The complex is composed of two factories, which produce approximately 7.2 million tons annually. The Edku complex produces 40% of the total natural gas production, which represents 60% of the country’s liquefied gas export. In addition to the factories, it also includes two stores with a capacity of 140,000 m2 and a specialized port to export the natural gas.
In 2005, Egypt has, for the first time in its history of gas exportation, started to distribute the liquefied gas to Europe and the United States of America (USA). The exportation procedure to reach these destinations goes through the natural gas liquefying complex located in Damietta. The capacity of this complex is 7.5 million m2 of natural gas, which produce 4.8 million tons of liquefying gas. This complex is supplied with natural gas from fields in the Mediterranean discovered three years ago, and classified as the largest unit of producing liquefied gas on the international level.
Noticeably, Egypt has strengthened its economic ties with several countries through the signing of cooperation agreements with some Arab & European countries for the processes of exploration, treatment and export of gas either liquefied or through pipes.
Fahmy clarified that negotiations had been conducted in order to expand gas exportations to Romania and Bulgaria through the European pipeline NAPACO. Moreover, the ministry is now executing a project to extend the gas pipeline to Turkey and studying the possibility of carrying out a similar project to Greece. This can be the middle ground to initiate a line between Greece and Italy, which is to play a vital role in shipping the Egyptian gas to all of Europe.
In a report conducted by British Gas (BG), the largest producer of the Egyptian natural gas, the British group tackled and analyzed a number of major problems that occurred within the Egyptian petroleum sector over the past few years and hindered the development of the sector. Moreover, the British group recommended the reviewing of the current pricing strategy and the necessity to release oil prices locally and internationally. BG sees that Egypt has fixed the petroleum prices locally, which is much lower than the international prices.
The operating companies bear all the cost of equipments needed in their exploration activities, while the Egyptian government follows the policy of fixed gas prices in the local market. This leads to the loss of more than two third of the revenue. Thus, these companies need a relative increase in the gas prices and in the revenue of fields’ development so they can invest in this industry. Due to this problem, some companies postponed their drilling plans until the prices of energy become more liberated.
BG asked – in many of its reports – to liberate the energy prices in order to encourage the exploration processes of natural gas and to reach a higher level of gas price in the local market as a way to ensure that Egypt competes with international market prices.
By Rasha Azab