Representing one of the few Arab companies that have distinguished E&P operations in the Egyptian petroleum industry, Mohammed Al-Howqal, Chief Operation Officer of Kuwait Energy Company (KEC) believes that Egypt is still has unexplored opportunities and the best is yet to come
Quoting “Kuwait Energy seizes the opportunity of purchasing someone’s stake to enter new markets”, don’t you think such move is risky?
It is risky and challenging, but Kuwait Energy follows a mid to long-term strategy as opposed to a short term one, to strengthen its position in the future. In fact, once the instability of a market or a country eases, a company can often be given priority and even appreciated as the company was there during difficult times. Moreover, our activities are not limited to exploration and production activities only, but also include social support and community activities. For instance, the Yemeni market is considered one of the most unstable and risky markets, yet we believe in Kuwait Energy that now is the right time to invest in this area. We share the same culture as the Yemenis and we also have experience in working with the Yemeni society, giving us access to work and grow in the country.
Talking about market unrest, how do you see the current instabilities of the Egyptian petroleum sector?
Personally, I believe a new dawn has begun in Egypt and I am very optimistic about the future here. From now on, Egypt will be focusing more on the welfare of the country, satisfying citizens’ needs, attracting more investment and strengthening the Arabs cooperation. I am expecting more positive adjustments and incentives to be granted to speed up the wheel of development in all sectors. The market in Egypt is very big, holds lots of resources and is not fully explored. I am sure there will be more Arab and Gulf countries activities in the country in the near future.
It is important to focus on the role played by the private sector in the development process, as well as motivate the Egyptian youth so the country can benefit from their talents and capabilities along with helping them initiate their own small projects.
Has Kuwait Energy altered/postponed any operations amid the current political unrest in Egypt?
We have maintained our production output throughout the uprising; however we made a brief, precautionary 10-day pause at the peak of demonstrations in our exploration activities in Abu Sennan, in order to allow our employees to return home safely to their families. Since the end of the unrest, we have returned back to our regular exploration activities in Abu Sennan and at the same time, we have emphasized heightened awareness of safety and security among our staff through training.
Operating in Egypt, what kind of problems/barriers would you recommend to solve for a more effective working environment?
As a matter of fact, the workflow is relatively smooth; however it could be improved by shortening the approval processes. As you know, time is money and any delay could affect a company financially, which can add up on a long-term. I would recommend applying and receiving such approvals through online means, i.e. internet, which would definitely save time and money for all parties.
What are Kuwait Energy’s latest operational updates in the Abu Sennan and Burg El Arab concessions?
In the Abu Sennan, we are drilling the ZZ-4 well, which reached 3,945 meter of its target depth of 4,434m on April 23. Preparation continues for a second exploration well and drilling is due to start during June 2011. Moreover, four exploration wells are planned in 2011.
In the Burg El Arab, we have completed a new surface unit installation on the BEA-7 well, which gave us a slight boost in production earlier this month. Three development wells are planned for the remainder of 2011.
What is the current daily production of Kuwait Energy?
For the first quarter of 2011, Kuwait Energy produced approximately 13,000 boepd.
How much is the Egyptian share of Kuwait Energy total production?
For the first quarter of 2011, Kuwait Energy’s Egyptian operations contributed 60% of the company’s total production.
In your opinion, where do you see Egypt’s high-potential areas in terms of oil and gas production?
The Nile basin has high potential for gas while the Gulf of Suez continues to have potential for oil production. Kuwait Energy continues to focus on opportunities in undeveloped reserves of natural gas and oil and we have intensified exploration efforts to compensate for natural depletion in older fields. To date, we have been successful in blocks in the Western Desert and we believe this area will continue to be fruitful in both oil and gas finds.
How do you evaluate the effects of the current unrest in the Middle East and Africa on the petroleum industry?
It’s not possible to make blanket statements about the region regarding the unrest. Each country is a unique situation. The impact of the unrest on Libya’s petroleum industry has been much more challenging than the impact on that of Egypt, Tunisia and others. However in all cases, the faster conflicts can be resolved, the better it is for the local populations. Stability is also best for the petroleum industry but this is the case for all aspects of the countries’ local economies. The resource potential of the region doesn’t change because of unrest and investors know this. We acknowledge that there are challenges ahead for Egypt; however, our long-term commitment to the country means we maintain an extremely positive outlook on its operations and growth opportunities.
Has Kuwait Energy finalized its plan of a pre-IPO Rights Issue to raise USD100 million, and to target an IPO on the London and/or Kuwait stock exchanges mid 2011?
Kuwait Energy retains its aspiration to obtain a Stock Exchange listing, however as we’ve always said, timing will be dependent on market conditions.
What is the significance of such plan?
We are one of the fastest growing, MENA-based, indigenous exploration and production companies and it’s inevitable that we should be looking for the appropriate listing to help finance new and potential acquisitions to fulfil our 2015 target of 75,000 boepd production and 400mmboe of reserves.
Established in 2005, what were the major achievements of Kuwait Energy over the past six years?
We’re very proud of our consistent growth record since the beginning and being profitable since inception. Discoveries in Egypt and the wider MENA region, have enabled us to book robust growth in reserves and production since 2005. Eurasia has been a significant contributor to Kuwait Energy’s growth between 2005 and 2010 and Eurasia has enabled Kuwait Energy to establish a track record of growing its 2P reserves.
Looking ahead, Kuwait Energy is now aiming to focus more on the MENA region in alignment with its strategy. One of our most significant achievements in this direction occurred last October when we were awarded the development contracts of two gas fields located the Diyala and Basra provinces of Iraq.
Does Kuwait Energy consider any future expansion in Egypt specifically and worldwide generally?
Our focus will remain on the MENA region. We have built strong relationships and a solid reputation in the region and there are abundant opportunities to explore and develop assets in the region. We are open to further expansion in Egypt and in the wider MENA region should the right opportunity present itself.
In your opinion, should the newly appointed Egyptian Minister of Petroleum honor or change the already signed agreements? Why?
Though the Minister is new to his position, he is not new to the agreements themselves. He served as CEO of EGPC for the two years running up to these political changes and knows these agreements very well. We expect that the Minister will follow the required channels for approval of agreements by the parliament and don’t expect any major changes in this regard.
Having over 30 years of experience in the oil and gas industry, in your opinion, what are the factors needed to improve/develop the petroleum sector in Egypt? (As an investor, what are the elements you are seeking to strengthen your investments in the country?)
As an investor, I see the transfer of power to a stable government that meets the needs of the people as the most important factor in Egypt’s future. It is up to the Egyptians themselves to determine how this will occur. Kuwait Energy has always prioritized the needs of local people where we operate because we recognize that they are the backbone of our operations and if they are healthy and thriving then so will our business.
By: Yomna Bassiouni