No more production exploitation to please authorities

Following our aim to be part of the positive change and draw a future scheme for the petroleum sector, Egypt Oil & Gas host a panel discussion about the challenges facing the oil and gas production in the Egyptian petroleum arena.

Asked about the system of production sharing agreement applied by the Egyptian Ministry of Petroleum, Eng. Ahmed El-Geddawy, Assistant General Director for Crude Oil Production at the General Petroleum Company (GPC) reflected his opposition to this system by stating, “as an Egyptian loyal citizen, I am totally against the idea of prioritizing the foreign investments over the local ones. In other words, why do I give the privilege to foreign companies to explore and produce oil and gas, while we do have the Egyptian investments and expertise to do such operations.”

“I know that some people are for this system believing that it is more feasible and easier to get foreigner do the whole job and bear the risks and at the end share the production with the EGPC, but personally I believe it is an inefficient method!” added El-Geddawy. “The Egyptian petroleum industry does have the experienced personnel, but they just need the opportunity to take part of the industry, instead of the brain drainage we have been suffering from as experienced employees migrate for better job packages.”

Commenting on El-Geddawy’s perception, Eng. Lotfy Ramadan, General Manager for Oil Production at the Egyptian General Petroleum Corporation (EGPC) clarified that this applied system reduce the risk level and secure a certain amount of production for the local market. “Whether I am for or against it, there are positive values behind this production sharing system,” he highlighted.

Tackling the factors that lead to the increase or decrease of production levels in the country, El-Geddawy shed light on the lack of future vision and fixed plans as an important factor, which is not related to any technicalities. “Unfortunately, over the past years, there was a common trend followed by the top management of petroleum companies, which was, if not still, maximizing the production rate of the companies’ fields to show off in front of the top officials at the Ministry of Petroleum.” He added, “There is no plan for the future, most of chairmen thinks under their feet and cares more of their reputation by generating unprecedented production rates, while they should have been implementing reasonable production plans in order prolong the age of producing wells for the future generations.”

From a technical perception, Ramadan highlighted that the most commonly used technique to extend the productivity and age of the reservoir is the water injection technique. “We should take into consideration the fact that the production plan is set in accordance to the national budget and what is required from the Ministry of Petroleum. For instance, the petroleum sector is asked to secure $60 million, then we work to fulfill this target,” added Ramadan. “When we convert this request to production figures, the EGPC contacts all operators to present their annual production plan to draw the general sector plan. However, most of the companies provide lower production rates, for example a company declare that its expecting annual production averages 80 million barrels, while its actual production is 105 million barrels! This is a mean to avoid any liability in case the production rates are not achieved,” explained Ramadan.

Recently, there are attempts to increase the production rates over the coming period of time. “Some discoveries will be put on production line soon, which will serve the Ministry target for production increase. Two of the recent discoveries include the oil discovery made by Khalda Petroleum Company and Petro Sennan Petroleum Company,” highlighted Ramadan. “The oil discovery of Khalda was achieved in its Western Kalabsha Concession in the Eastern Desert and hit two wells, one oil producing and another gas producing. The first well showed an oil production rate of 3700 barrel per day, while the second showed 500 thousand cubic feet of gas, at a total depth of 14500 feet. The other discovery of Petro Sennan was hit in the Western Desert and showed oil production of 1200 barrels per day from the HG34/3 and HG34/4 wells,” clarified Ramadan. “The total investments of Khalda’s discovery counts for $3.5 million, while the Petro Sennan’s averages $9 million for both wells.”

Ramadan revealed that the EGPC is in the preparation phase for a new bid round that will include 18 new areas for exploration and production activities.
Seizing the opportunity, El-Geddawy urged the EGPC to change the selection criteria of the bid rounds. “I do not deny that the price factor is crucial in any bid round, however, it should not be the base for selection. Quality is much more significant to be considered in any bid round and it is the mean by which we can ensure the effectiveness of any E&P operation,” he stressed.

Asked about their opinions concerning the current controversial gas exporting deal to Israel, both officials warned of stopping the gas supply to Israel and asked to amend the gas prices only. “This is not the right time nor the right political circumstances to abolish this deal. We should review all gas contracts in accordance to the international prices,” said El-Geddawy.

Ramadan finalized the discussion by stressing that the Egyptian petroleum sector is a very rich one. “There are high potentials in terms of E&P activities and this is the right time to make the positive change.”

By Yomna Bassiouni


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