The year of 1886 was the landmark in the Egyptian petroleum history, when oil was found for the first time ever. Since then, a long journey of attainments and failures shaped today’s history of the Egyptian petroleum sector.
The beginning of the Oil industry in Egypt goes back to 1883. M. de Bay, a belgium specialist along with the Egyptian Government were exploring Ras Gemsah in the Eastern Deseret for the search of oil, but operations did not take place until 1885. Based on a publication by Schlumberger discussing the history and role of oil and gas in Egypt and its evolution, M. de Bay was working on the drilling of five wells along with his team. The results of their drilling operations led to a production of 1.3 tons of oil and gas per day from the first well. Unfortunately, the drilling operations of the second and third well were not fruitful and as a result, the government decided to find a replacement and assigned an American, H.T. along with a new team of drillers to follow M. de Bay’s search.
In 1886, the Egyptian Government was able to dig oil from Ras Gemsah, which marked the beginning of the country’s oil industry. During this same year, an American team was appointed to develop a survey on the area, based on which, the team recommended resuming the drilling operations, not only in the Ras Gemsah but also at the Ras Dhib to the north and Abu Durba on the east side of the Gulf. However, the government stopped supporting the drilling in these areas by the year of 1888.
At the beginning of the 20th century, and specifically in 1904, the Egyptian government had authorized Cairo Syndicate to explore oil in Sinai and Quena, this is when foreign companies began their activities.
In 1907, the Egyptian Oil Trust Ltd was registered, with the objective of receiving concessions, developing, drilling, purifying, supplying, reserving, distributing and handling petroleum products. A year later, the Egyptian Oil Trust Ltd started the drilling process. And, in 1909, the Egyptian company was able to produce a large amount of oil from Ras Gemsah at depth of 1287 ft. The well was producing two barrels of oil per minute. Hence, Ras Gemsah became a very important source of oil, and in 1911, the first oil refinery was established. The refinery’s first operations commenced in 1912; the first tank steamer carrying 3000 tons of oil moved from Ras Gemsah headed to the Far East, which was considered the only origin for oil production for quite some time.
During this year, the total number of drilled wells was 23 wells. By time, the oil production began to decrease until operations were stopped in 1927.
Before that, there was another important exploration made in the Hurghada field in 1911, approximately 380 km south of Suez. Oil was discovered by the Anglo Egyptian Oilfields Ltd (50% Shell and 50% BP) in 1913. It is worth mentioning that Shell was the largest marketing and distribution oil company in Egypt. The Anglo Egyptian Oilfields Ltd had moved to the Hurghada field in 1915. Unfortunately, exploration activities stopped due to World War 1 for some time. Hurghada field was a turning point in Egypt, being a very productive field. In 1931, the field’s production rate reached 1.8 million barrels per year.
The growing petroleum sector then required an equal expansion on the production facilities. A second refinery was established in 1922, called “The Royal Governmental Oil Refinery”, situated in Suez, but operations did not start until 1923.
During the 1920s, operations were very slow, several attempts of drilling took place on the coast, Sinai and several Egyptian islands, but eventually companies stopped their operations and began to work on developing new technologies that can be of benefit during these unfruitful times.
The Anglo Egyptian Ltd Company was a pioneer and introduced a new technology called Eötvös torsion balance, which was never used outside Europe. This new technology was used to gather statistics, especially from Ras Gemsah and Hurghada fields.
In 1934, the Cooperative Petroleum Association Co. was established in Egypt in order to link cooperatives for the exchange of goods and services and support cooperation in Egypt. In 1937, the Egyptian Government began establishing new regulations and rules regarding the mining regulations. It began providing licenses over areas not less than foursquare kilometers for the duration of one year; these licenses were subjected to renewal. This decision made by the government encouraged companies in the U.K as well as the U.S.A to bid for these licenses. There were five major international companies that were authorized; the Anglo Iranian Oil, Royal Dutch /Shell including Anglo Egyptian, Socony-Vacuum Oil Co. Inc., Standard Oil Co. of California and Standard Oil Co. of New Jersey. The government could only authorize 40 licenses, so these five companies through their subsidiaries bid for the available blocks, which resulted in the presence of around 23 companies exploring in the search of oil.
The year of 1938 symbolized a new era for oil production in Egypt, as the first commercial oilfield was discovered. The Anglo Egyptian Oilfields was able to discover an oil field in Ras Gharib, located between Hurghada and Suez. The well was producing 150 tons of oil per day, which was a boost in the oil production. Containers were built in order to ship oil from Ras Gharib. The production rate was increasing and reached its peak of 5.1 million barrels in 1939.
After this discovery in Ras Gharib, new breakthroughs were being discovered. In 1946, the Anglo Egyptian Oilfields along with Socony-Vacuum Oil Co. were able to find oil at Sudr, located on the east coast of Sinai. The well was producing around 3.5 million barrels, which increased the total oil output of the country. Sinai had become during this year a significant geographic exploration location for the companies. Two years later, the Egyptian Government passed a law that forbid the exporting of crude oil. This decision affected the foreign companies that were operating in Egypt and there was a downslope in the oil production until 1953. The government allowed that only refined products in Egypt could be sold.
In 1956, the Government established The General Petroleum Authority (GPA), which was responsible for handling governmental refineries as well as important institutions dealing with petroleum matters. The following year, the GPA established the General Petroleum Company, which was the first national company operating with 63 licenses in the Gulf of Suez and the Eastern Desert. Oil was discovered in Ras Bakr, Khreim and Ras Gharib by the 1960s, during which there was a total of 90 wells in the new fields. In 1961, the first offshore oifield was discovered in North Balayim. In 1962, The Egyptian General Petroleum Corporation was formed, handling and operating in the form of joint ventures with foreign companies.
In 1964, two partnership, American Co.(Recently Amoco ) and Philips Petroleum Co, were founded to work on expanding and discovering new areas. In 1965, the Gulf of Suez Petroleum Company (GUPCO) was established as the Egyptian American Corporation. It discovered the oldest and biggest oilfield in the Egyptian petroleum history. GUPCO operated and drilled around 12 oil wells and one dry well, but the company’s production started in 1967.
The 1967 war affected the oil industry and operations were slow. In 1972, Egypt has joined the Arab Petroleum Exporting Countries and in 1973, the first Ministry of Petroleum was formed in order to carry out all the responsibilities related to the oil industry.
In 1977, October field was discovered, which was the third largest oilfield in Egypt. Since its discovery and until 1991, it produced more than 420 million barrels of oil. Egypt has become an important strategic oil producer from four areas, Gulf of Suez, Western Desert, Eastern Desert and Sinai. In 1997, Another discovery was made by Apache and Seagull in the Western Desert that contained around 100 barrels of crude oil. By 1998, Egypt was producing an average of 866,000 B/D of crude oil.
From 1999 until 2010, the petroleum industry has been revolutionized. More than 176 petroleum agreements and laws were established to develop and increase the country’s production rate. The total number of discoveries had reached 489 in the Mediterranean, Gulf of Suez, the Eastern and Western Deserts, Sinai, Delta and Upper Egypt, 311 discoveries of which were crude Oil.
One cannot ignore the success and achievements of the Petroleum Sector in Egypt and that it all began more than 100 years ago in Ras Gemasah.
By Nourallah Khaled