How did the structural reforms adapted by the ministry during the past few years help the petroleum sector navigate the pandemic?
No doubt that COVID-19 pandemic represented a tangible test for the success and effectiveness of the country’s economic reforms, as well as the measures that have been taken in the oil and gas sector at the same time. It strongly showed the impact of these reforms in reinforcing investment opportunities in this sector, strengthening the financial and investment position, and achieving sustainability. Our continuous efforts during the recent years paid off with the signing of 14 upstream agreements, in the midst of the pandemic’s peak months from March till now, with major international oil companies (IOCs) that work in the Egyptian upstream domain for the first time, such as ExxonMobil and Chevron, with investments of about $1.5 billion. We also inaugurated the new Egyptian Refining Company (ERC) refinery in Mostorod, along with the major expansions in one of Alexandria’s refineries, with total investments of about $4.5 billion. Both were inaugurated by H.E. President Abdel Fatah Al-Sisi. We continued upgrading Egypt’s infrastructure that supports the efforts of transforming into a regional energy hub, after the inauguration of H.E. Prime Minister Mostafa Madbouly of the El Hamra Petroleum Port expansions and new shipping line on the Mediterranean coast. Furthermore, Egypt’s efforts for utilizing the East Mediterranean natural gas resources paid off with the signing of the East Mediterranean Gas Forum (EMGF) Statute to become a regional intergovernmental organization.
Despite the unusual circumstances, Egypt managed to make several discoveries. Could you share with us some of the highlights of 2020?
The most prominent and important achievement in 2020, as an exceptional year for the upstream activity, was definitely adding the Red Sea and the West Mediterranean to the world investment map for the first time, representing promising untapped areas, full of opportunities and potentials. In fact, those areas attracted investors and mega players to invest in the Egyptian oil and gas industry, which would be of great returns and positive outcomes over the next few years. However, in 2020, and despite the COVID-19 pandemic and its effect on the world oil prices decline, 62 new oil and gas discoveries were made in the Mediterranean Sea, Western and Eastern Deserts, Nile Delta and the Gulf of Suez; 15 of which were natural gas and 47 were crude oil discoveries.
How did the ministry manage to maintain production plans amid last year’s exceptional conditions? What were the breakthroughs in crude oil and natural gas production this past year?
Dealing with these exceptional circumstances, the ministry has adopted the balance principle in applying its work strategy, achieving work plans, and preserving the lives and safety of workers at the same time. Operations and activities in production fields continued, in parallel with our full commitment to the precautionary measures. In 2020, we have completed major gas production projects, such as North Alexandria fields and Phase 9B at the deep waters of the West Delta, Baltim gas field, Katameya gas field, and others. This comes within the framework of putting five major projects of gas and crude production along with more than 200 new wells on the production map successfully over the whole year, with total natural gas production of about 1.5 billion cubic feet (bcf) and more than 190,000 barrels of crude oil and condensates. Egypt’s current average production of crude oil, condensates and liquefied petroleum gas (LPG) is 638,000 barrels per day (bbl/d), whereas production of natural gas is about 6.6 bcf/d, knowing that our production capacity allows us to produce about 7.2 bcf/d.
Despite everything, the petroleum sector had a productive year signing over 22 agreements in 2020. How will these agreements impact the exploration and production arena in Egypt?
We signed 22 upstream agreements with IOCs in 2020, with minimum investments of about $1.6 billion and a signature bonus of about $139 million, for drilling 74 wells. These agreements give hope in the near future, representing a key pillar for achieving more discoveries, as well as maximizing Egypt’s production and reserves from new areas within its exclusive economic waters in the Red Sea and the Mediterranean Sea. Moreover, the focus on Egypt is obvious, particularly after the decision of Chevron and ExxonMobil companies to invest in nine blocks together. This provides the petroleum industry with the advanced technologies these companies possess for upstream operations in the new areas, in the West Mediterranean Sea and the Red Sea, in particular.
In light of such indicators and the growing interest of major IOCs, I think the upstream domain in Egypt is very promising, and there will be opportunities for discovering new oil and gas resources, and adding them to Egypt’s production.
What was the ministry’s mechanism to help its foreign partners especially the IOCs operating in Egypt during the challenges that were faced in 2020?
Despite the challenges imposed internationally on the petroleum industry, the attractive investment climate of the oil and gas industry in Egypt encouraged foreign companies to enhance their partnership with the petroleum sector, exerting efforts together to confront the international challenges. Of course, many factors supported this, and contributed to providing a positive, as well as resilient climate, on top of which came the successful economic reforms, as well as the political stability. This was reflected in signing 22 oil and gas upstream agreements in 2020, with minimum investments of $1.6 billion, which confirms the role of economic reforms in consolidating the petroleum sector to face the worldwide challenges in such period, through amending terms and models of agreements to attract foreign investments.
As Egypt paid more than 80% of arrears to IOCs, how can this contribute to the increasing of investments in the coming period?
We succeeded in reducing the arrears gradually by 86%, from about $6.3 billion in 2013 to $850 million at the end of the last fiscal year despite COVID-19 pandemic. This led to increasing our partners’ confidence and stimulating their investments in oil and gas upstream operations. It is worth mentioning that, during the past four years, oil and gas investments exceeded $30 billion. Moreover, Egypt has received new investments from major IOCs, such as Chevron and ExxonMobil in several areas within the Egyptian exclusive economic waters at the Red Sea and Mediterranean Sea.
What Are Egypt’s plans to attract new investments in light of the state of contraction in the world economy?
As I previously explained, Egypt is one of the few countries that managed to achieve growth during 2020, and that its economic reforms have proven their robustness and strength against the pandemic’s impacts. Egypt is committed to its obligations and the rights of investors, including the foreign partners’ arrears reduction to less than a quarter and the signing of 14 new petroleum agreements during the period of the COVID-19 pandemic since last March until October; these are important indicators that the investors take in mind. We are working within this framework with an integrated strategy that achieves our main goals in securing fuel supplies and implementing Egypt’s national project of transforming into a regional oil and gas hub. This shall be accomplished by continuing to offer petroleum and mining investment opportunities at all aspects in the whole chain of the oil and gas industry. We have an international bid round for the exploration and exploitation of gold and other minerals, investment opportunities in refining activities, oil and gas fields’ development, and production agreements. We will continue to offer international bid rounds and ink petroleum agreements as they are key pillars of upstream activities. Our oil and gas activities to achieve optimal economic exploitation are continuous efforts, whether in projects implementation, offering bid rounds, or promoting investment opportunities.
In light of the ministry’s digital transformation track, what are the latest updates on Egypt Upstream Gateway (EUG)? How does it contribute to Egypt’s economy in terms of investments and exploration opportunities?
Currently, we are working on launching Egypt Upstream Gateway (EUG) to promote Egypt’s promising oil and gas blocks internationally through availing the geological and technical data for the interested IOCs. This project is one of its kind in the Egyptian petroleum industry, and was implemented under the first program of the sector’s modernization project (Upstream). This gateway is a modern quantum leap in promoting the oil and gas potentials via an integrated digital portal for the activity of exploration and production of oil and gas resources. It was implemented with the assistance of Schlumberger, a major IOC with expertise and advanced technological solutions. The gateway comprises the technical data of such activity and works to maximize its value, development and marketing worldwide. It displays opportunities, indicators, and potentials together and promote them via the new portal of the international bid rounds, offered by the petroleum sector over the coming period, with the aim to explore for new promising areas. This advanced mechanism will assist in taking investment decisions rapidly in Egypt through a clear perception based on information and data.
What is the ministry’s strategy to support the leadership vision to maximize the usage of natural gas?
The rapid expansion in natural gas utilization and its various services nationwide is on the top priorities of President Al-Sisi, due to its high economic, environmental and cultural returns to the citizen’s daily life. Therefore, the ministry has adopted this presidential guidance and doubled the rates of natural gas connections to residential units annually to be 1.2 million new residential units per year, compared to only 600,000 units per year, previously.
Furthermore, we have launched an initiative, which is adopted consecutively for the third year now, within the context of the president’s direction, for natural gas connection to be paid in installments, not exceeding EGP 30 per month for the regions that the natural gas is connected for the first time, without any down payment or interest.
In 2020, natural gas reached more than one million residential units, despite COVID-19 pandemic. In addition, we are collaborating with the state’s ministries, to implement the president’s initiative, launched last July, for expanding the replacement and converting vehicles to use natural gas as a fuel. It is an integrated and excellent initiative, in which citizens will feel the difference, as the natural gas cost stands for 50% of the gasoline cost per liter. Moreover, in order to increase the expansion of gas fueling stations, we are currently constructing 325 new stations until next December, which is an unprecedented number, along with the replacement and conversion of 400,000 vehicles to use natural gas within three years, in addition to providing stimulating programs, facilities and soft loans for the initiative beneficiaries.
How will the changes in the LNG scene this year contribute to Egypt’s goal to become a regional energy hub?
Recently, the global oil and gas industry witnessed unprecedented challenges, and we are talking about a pandemic that lasted nearly for a year and its impacts are still there. In fact, many countries are still trying to mitigate its effects on their economies, but in Egypt, due to our success in implementing economic reforms for years, we were able to face the effects of the pandemic on our economy and the industry, in particular. On the other hand, Egypt has a strong strategic system in the field of natural gas, as it owns two plants for liquefying natural gas in Idku and Damietta, privileged by their location on the coasts of the Mediterranean, in addition to the presence of a Floating Storage Regasification Unit (FSRU) in Ain Sokhna and an extended and flexible pipeline network. All this enables Egypt, in spite of the challenges of the COVID-19 pandemic, to continue LNG exporting activities and to become a starting point for the Eastern Mediterranean gas to Europe and the world. In light of the growing expectations of a recovery of the pandemic in late 2021, with repeated news of vaccines, it is expected that Egypt will expand the activity of LNG in the coming years, as natural gas will remain, for many years to come, the most important fossil fuel, adopted by all countries in their transition to expand the use of renewable resources. Natural gas is considered the cleanest fossil fuel and one of the green energies that have low emissions, and Egypt, as part of its commitment to international agreements regarding reducing emissions and preserving the environment, adopts a strategy to expand the uses of natural gas at all life requirements in houses, factories, cars fueling, and power plants.
As the EMGF turns into a regional organization, do you expect change in the dynamics of the world natural gas market? What are the prospects of cooperation under the umbrella of the new organization and its effects on Egypt?
The member countries of the EMGF share one joint interest, which is achieving the maximum economic benefit from their natural gas resources of the East Mediterranean region, through forming an integrated regional, cooperative system that utilizes the potentials and infrastructure of each country to benefit all producers, consumers and transit countries. In fact, signing the forum’s statute is a significant step towards achieving this goal and will definitely contribute to the East Mediterranean region as an additional and reliable source of natural gas for Europe and worldwide with competitive prices. This will certainly change the dynamics of the international gas market. Moreover, other countries increasing willingness to join and participate in the activities of the forum is evidence that the forum has succeeded in setting a distinct model for international regional energy cooperation, which attracted the world’s attention, as France has formally applied to join the forum as a member, in addition to the requests of the US and the United Arab Emirates (UAE) to join as observers. Therefore, I would like to assert that the Egyptian initiative for establishing the forum has already started to bear its fruits, in light of increasing activities of the forum, despite the current challenges of COVID-19. The high-level working group of the Forum has held its 8th meeting to review the forum’s roadmap during the year 2021 and approved the requests for joining two additional members to the Gas Industry Advisory Committee (GIAC) to be 29 members from the most significant companies and institutions concerned with gas industry in the region, compared to 16 members since its establishment in November 2019.
New international oil companies have joined the petroleum scene recently in Egypt. How does their involvement play a role in turning Egypt into a regional energy hub?
How can recent infrastructure and ports projects help Egypt turning into an energy trade hub?
As I mentioned before, the entry of new major IOCs in Egypt’s upstream activities, in addition to expanding the activities of the currently existing ones, was due to their confidence in the improved investment climate in Egypt recently. These companies aspire to benefit from the integrated system of cooperation, which the EMGF countries are working on, in intensifying their activities, not only in Egypt, but in the entire region as well. This shall take effect by utilizing the existing infrastructure in the region and maximizing the economic results from the discovered gas or in the future. These companies’ increasing interest to invest in the region, came in parallel with EMGF Statute signing, through participating in the activities of the forum’s GIAC, which enables fruitful cooperation among the countries as well as investors in regional gas projects.
As for the infrastructure and its role, the Ministry of Petroleum and Mineral Resources’ strategy is based on modernizing the infrastructure and upgrading the refineries and pipelines that support Egypt’s potentials, such as the unique geographical location, the strong flexible infrastructure and the expanded pipeline grid. In addition, Egypt is working towards upgrading its petroleum terminals such as El Hamra Port, which recently witnessed the inauguration of the Maritime Shipment Facilities Development Project. We also have two liquefaction plants in Idku and Damietta, an FSRU unit in Ain Sokhna, SUMED pipeline, and the Suez Canal, which is one of the most important maritime navigational canals in the world, in addition to the distinguished and qualified human cadres. All these factors enable Egypt to become a regional energy hub.
Throughout the year, the success of Egypt’s petroleum sector has attracted the attention of several neighboring countries who sought Egypt’s expertise and cooperation. Could you please highlight some of the important agreements in this regard?
Egypt’s international relations are witnessing an unprecedented boost, particularly with neighboring countries, in light of the political leadership conscious perception of the international cooperation significance in dealing with challenges and achieving development plans. These continuous efforts exerted by the government improve the image of the Egyptian economy before the world with regard to the investment opportunities it provides. As a result, the countries and economic organizations’ growing confidence in the business climate of Egypt has contributed to opening new horizons for cooperation and partnership with Arab countries. Thus, we have adopted a mechanism for cooperation and triple integration between Egypt, Jordan and Iraq in the field of oil and gas, as the Iraqi side seeks to expand cooperation with Egypt and Jordan in implementing natural gas projects for the benefit of all parties. Furthermore, Egypt and Jordan are working together to enhance joint cooperation and Egyptian expertise, in the field of household natural gas activities, in particular. Moreover, in the coming period, other mechanisms will be studied to support joint bilateral cooperation between Egypt and Iraq, after the successful visit of the Iraqi delegation, by taking advantage of the diversified Egyptian expertise and the appealing opportunities in the Iraqi market within the framework of the “Reconstruction in Exchange for Oil” mechanism. On the regional level, there are several other projects for regional cooperation which are being studied among the activities of the EMGF which targets achieving maximum utilization of the East Mediterranean gas and providing an additional reliable source of natural gas for Europe.
Last year witnessed the inauguration of petrochemical mega projects. Can you please cast light on the ministry’s plan to maximize the potentials of this promising sector?
Recently, the petrochemicals industry has witnessed unprecedented attention due to its importance as one of the national economy main pillars that achieves high added-value from natural gas. Actually, a number of petrochemical projects were inaugurated and operated during the last period as well as modernizing the petrochemical strategy to embrace the country’s needs until 2040. A number of petrochemical projects started implementation in 2020, with total investments of $8 billion, including; Medium-Density Fiberboard (MDF) Production Project that depends on rice straw as raw material instead of burning it, in order to protect the environment. The Refining and Petrochemical complex in the Suez Canal Economic Zone (SCZone) of the Red Sea National Company for Refining and Petrochemicals will also contribute in meeting the local market needs of petroleum and petrochemical products and export the surplus. There are also other projects under study, to be implemented in the coming period.
Mineral resources is an integral segment in the ministry’s strategy. What were the main achievements witnessed in 2020? Did Egypt begin to reap the fruits of the new mineral resources law?
Of course, issuing the new law and its executive regulations gave momentum to the mining activity and we started to reap its fruits. Last November, we announced the results of the international bid round for gold and associated minerals exploration, where 23 interested companies bought the data packages, despite the repercussions of the COVID-19 pandemic, which is an unprecedented investment of high demand. Seventeen companies submitted their offers, 11 of them were awarded 82 blocks in the Eastern Desert, standing for 28% of the total blocks offered with a total minimum investment commitment of $60 million in the early stages. Seven international companies won this bid round, one of which is Barrick, the largest company worldwide in gold mining along with four national companies.
Moreover, 2020 has witnessed new commercial discovery, in the Eastern Desert at IQAT area, and it was achieved by the Egyptian Shalateen Mineral Resources Company. The discovery holds reserves exceeding 1 million gold ounces with an extraction percentage of about 95%, which is considered one of the highest percentages ever.
Are there any plans for other bid rounds for other minerals in near future?
Currently, the mining sector’s contribution to the state’s gross domestic product (GDP) is 0.5% and we seek to raise it to reach 5% by 2030. Therefore, separate and independent strategies for each mineral will be implemented during the next phase for achieving the added value of the produced ore and benefiting from it, and instead of exporting the ore in its raw state, it is provided to a local factory or company to be used in the industry. Hence, we have set a road map aiming at annual investments results of $750 million for the year 2030 by continuing to offer bid rounds, not only for gold, but for other minerals as well, throughout the year. Actually, we have launched a second round for the remaining areas of the first bid round including 208 blocks, on an area of 38,000 square kilometers (km2) in the Eastern Desert for the exploration of mining ores in a new tradition, which is the continuous bidding throughout the year and the quarterly announcement of the results achieved and the blocks that have been awarded. Other areas are offered once again for bidding, which provides continuous opportunities of gold mining investments. Furthermore, a new international bid round has been announced for the exploration of ores and associated minerals, starting November 19 until mid-March 2021, including iron, phosphates, copper, white sand, feldspar, potassium salts, lead, zinc, kaolin and Lake Nasser deposits in several blocks. We have added new evaluation criteria to be applied, including the added value achieved by the investor, throughout the processing and transformation operations of the extracted minerals.
Could you please provide us with a glimpse of the ministry’s vision in 2021?
In 2021, we plan to complete a number of new projects in the field of developing and increasing the production of crude oil and natural gas, refining, and infrastructure. Furthermore, we plan to accelerate the implementation of existing and extended projects in the upstream domain, as well as maximizing production capacities in refining and petrochemicals. The added value of infrastructure will transform Egypt into a regional hub for oil and gas trade.