The oil and gas industry had quite the year in 2020, facing tumultuous challenges beginning with a global pandemic; then hitting an oil price crash; and ultimately, adapting to a whole new work environment. Despite all these circumstances, the sector remained resilient. Egypt Oil and Gas (EOG) had the opportunity to get an inside scoop of how several international oil companies (IOCs) in Egypt managed to deal with the hurdles of 2020 while maintaining safety precautions and exploring what the future holds for the oil and gas industry in 2021.
The pandemic has altered various aspects of the oil and gas business on many levels, forcing oil companies, especially the ones focused on exploration and production (E&P), to alter their plans and adapt to the declining demand. Roberto McLeod, EnapSipetrol Egypt General Manager, told EOG that the global decline in production as well as lack of mobility “caused a drastic drop in global demand for oil which led to a significant drop in oil prices to unprecedented levels that were not expected at the beginning of 2020.” This has led the company to “review all our 2020 operations and production programs, where part of them had already progressed, then we had to decide what to do with the rest of our plan for the year.”
Looking into how the pandemic affected Kuwait Energy Egypt, Kamel El-Sawi, President of Kuwait Energy Egypt, addressed the topic noting that the company had to adapt its work program to react with the change. El-Sawi added that the budget has undergone a few changes “to balance between assets’ development plan and reduce the negative impact on financial key performance indicators like free cash flow and company net profit.” Lastly, Kuwait Energy Egypt’s projects were reprioritized so the focus was directed towards high-value projects and phasing out other projects to ease the impact on cash flow while maintaining the same production level, El-Sawi remarked.
Unexpected turmoil and changes are common in the oil and gas industry, but a pandemic was certainly not. Sameh Sabry, Senior Vice President of Wintershall Dea and Chairman of EOG Committee, explained that despite the volatile nature of the sector, nothing could have prepared the sector for the drastic changes the pandemic has caused. Seeing the glass half full, Sabry remarked a few takeaways from the unusual circumstances; “being adaptable to new challenges, digital excellence, and a positive team culture were three essential ingredients for our success in 2020.”
Schlumberger’s Managing Director in Egypt and East Mediterranean, Karim Badawi, noted that 2020 was a year of transformation, it “highlighted the resilience of our teams and the whole sector. We have all tag-teamed to ensure business continuity and deliver the energy needs for Egypt.” Remote working was utilized at Schlumberger to ensure smooth operations on all levels through a myriad of hybrid approaches of connectivity. Badawi also remarked that “the previous year has demonstrated the importance of the acceleration of the digital transformation that was already adopted by Egypt’s Ministry of Petroleum Modernization Program, and fully aligned with the Schlumberger corporate strategy.” To close the feedback loop, Schlumberger was able to deploy digitally-enabled and instrumented hardware, empowering customers with fit-for-purpose digital solutions and integrating decades of domain knowledge that optimizes performance.
The pandemic-induced prices did not have much impact on some companies, on the contrary, it has had a positive impact on their operations. DR. Mahmoud Dabbous, IPR Energy Group Chairman and CEO, stated that “the low-oil price environment of 2020 has not impacted IPR’s daily operations in Egypt, due to its prudent approach and operating practices.” It has even led to what Dabbous called “the biggest expansion and growth in IPR’s 27-year history in Egypt as an E&P company”. Thomas Maher, Apex’s CEO, illustrated that Apex was fortunate enough to complete the exploration drilling program in the West Badr El-Din concession just before the first COVID-19 cases were detected in the field.
Apache’s VP and General Manager, David Chi, indicated that throughout the pandemic, the company has been trying to integrate remote work with standard office hours to create a balance between human interaction and talent development. Minimizing costs became essential during such times as “it is critical to accelerate the creation of the digital oilfield, where we can improve cost efficiency and data quality while providing a safer work environment for our employees,” Chi noted. With such an uncertain environment that affects the whole world, Chi made it clear that “we need to do everything we can as a business to drive costs down so we can compete with other industries and other countries.”
Besides the trouble of molding life to the pandemic, the decline in demand has left its toll and led to one of the worst oil price crashes in a long time, which in turn “has negatively impacted activity levels, especially drilling, which has exacerbated the decline in Egypt’s oil production,” Maher indicated. However, the situation opened up new avenues to explore renewables and electricity. McLeod believes that “several industrial sectors and oil and gas companies now plan to increase their participation in the electricity value chain. These trends may foster collaboration that provides new business models and helps advancement in the energy transition.” On another note, Chi pointed out that the supply chain realignment will present an opportunity to Egypt; “as a nation with a large, cost-competitive population, abundant energy, easy access to large domestic and international markets, Egypt has a great chance to become the manufacturing powerhouse of the future.”
Throughout 2020, companies prioritized their employees’ safety and working from home became the new normal. In combating COVID-19, Apex moved to work from home at the beginning of the pandemic, now most of its employees are returning to office life with the flexibility of working from home if they chose to. Maher added that “operations in 2020 remained pretty much the same, but with situation-appropriate COVID-19 precautions and communication channels. Tele-conferencing, mask-wearing, and social distancing have become the new norm.”
In the same manner, Apache allowed its office employees to work from home early on and continues to do so. Chi stated that “we had the technical wherewithal and processes in place to adapt quickly, and our team has shown true resiliency and demonstrated their impressive talent and determination while adjusting to new ways of working.” For field workers, things were a bit more challenging, however. Apache took a series of strict measures which included regular health checkups, providing masks, and increasing cleaning and disinfection measures.
IPR had a similar approach to managing the pandemic to ensure safety while also maintaining the same productivity levels in the office. Extending their approach to the field, IPR implemented safety protocols “to ensure field personnel were safe and managing operations prudently.” Likewise, Apex, established an Emergency Response Plan (ERP) to apply when needed, especially since the company began its exploration drilling in December, Maher remarked. As for Kuwait Energy Egypt, the company has made it a priority “to keep our workforce healthy and all precautionary measures to safeguard the employees and ensure the business continuity were taken while maintaining all operations running with 100% efficiency,” El-Sawi added.
Relying on technology to ensure safety became the mainstream attitude for most companies in 2020, but for Wintershall Dea, technology has always been a core part of its operations. Sabry elaborated that “the extent of digitalization is shown by the fact that in some of our business units in the Netherlands and Norway, our production platforms are operated unmanned, controlled by [a] mouse click from a control center. By enabling home working and remote operations, digitalization makes us more resilient.” Pinpointing on Egypt, Sabry asserted that “we [Wintershall Dea] have fully utilized the available tools and pushed ourselves to be more digital to cope with the current situation.”
Prioritizing HSE was at the top Schlumberger’s agenda as the company aimed to maintain its relentless efforts to foster a safe working environment for everyone. The company extended its approach beyond COVID-19 to maintain the industry and ensure a high state of awareness and adoptions of mitigation measures, Badawi remarked.Schlumberger put its technological capabilities to work by adopting Greenroad applications to digitally monitor the company’s fleets and improve drivers’ abilities. One of the most notable efforts was the development of Onesite Pass application during the pandemic, as it “let people check-in whether working remotely or in our facility and to confirm their good health status,” Badawi explained.When it comes to the digitalization of domestic logistics, Schlumberger rolled out BlueHaul which “provides accurate and live tracking of all our trucks and materials shipping within different locations in order to enhance the safety of our drivers, while also providing real-time visibility on our assets with estimated delivery to our warehouses or well sites,” Badawi stated.
In addition to the pandemic’s impact on the global industry, it has also left a tangible effect on the local market. Many small and medium-sized companies had to shut down as they could not stand a chance against the tumbling global economy. McLeod demonstrated that “the change seen in the energy industry forced authorities to take precautionary measures that affected all industries all over the country such as tourism, airlines, investment in the oil sector.”
Market disruptions have certainly made an impact on all industries that new, creative solutions should be targeted. On mitigating the crisis, El-Sawi conveyed that “companies shall be innovative and think out of the box to optimize the cost. Ensure that they are having a well-established automation and digitalization system to gain a good connection with all employees.” Acknowledging the state of the market, Sabry believes that after the crisis, Egypt could have the upper hand when it comes to the energy transition. “A growing recognition of the importance of gas in the energy transition can be positive for Egypt and the whole Eastern Mediterranean, which is so promising for new gas developments,” Sabry stated.
Taking an in-depth look into Egypt’s energy industry in 2020, Badawi noted that the ministry remained on track to achieve self-sufficiency of oil and gas to meet the local market needs. For Schlumberger, Egypt became its center which allowed it to “support operations in other countries, such as Jordan and Lebanon, where we have leveraged the regional talent pool, infrastructure, and our technology leadership to achieve many successes throughout the year,” Badawi stated.Badawi proclaimed that focusing on brownfields to gain oil sufficiency should be replicated in the gas industry. Badawi made it clear that “brownfield development will be at the forefront of Egypt’s goal of achieving oil supply self-sufficient. However, to fully exploit these fields, innovative fit-for-basin solutions will be needed as opposed to prescribed technologies.”
Perhaps one of the most affected areas that COVID-19 hit was the investment aspect in oil and gas. With the imbalanced state of supply and demand, a reduction in costs and activity level came along. Apache’s Chi noted that oil and gas companies faced another type of pressure in addition to COVID-19, which is shareholders’ focus on investment returns rather than production growth. However, “in the long-term, one of the top priorities for oil and gas producing nations will continue to be competing for foreign investments,” Chi remarked, adding that “in a resource-centric industry like oil and gas exploration and production, a key to long-term success is the continuous replenishment of opportunity inventory, and this has been a focus for Apache in Egypt.”
For Egypt in particular, several IOCs have expressed their intentions to expand their business in the country. Enap’s CEO explained that after the organizational restructure of the company in Egypt, “the new Board and administration showed determination to grow its operations and investment in Egypt besides our operations in the Western Desert in East Ras Qattara Concession which is operated by our joint venture (JV) with the Egyptian General Petroleum Corporation (EGPC).”
Similarly, Dabbous remarked that “Dana Gas’s onshore Nile Delta assets instantly boosted IPR’s production profile by 300%, as well as increasing its proved and probable reserves base by 400%.” He continued that the acquisition of Sojitz’s share in Alamein concession “increased production and reserves while allowing IPR to accelerate its exploration efforts in 2021.” Maher also made it clear that “Apex will continue to identify and evaluate mergers and acquisitions (M&A) opportunities in Egypt, with the hope of making a significant investment as early in the year as possible.”
When it comes to competitiveness, Chi pointed out that “Egypt is sitting in a very advantageous position given its abundant hydrocarbon resources.” What’s more is that through modernizing the government’s fiscal regimes and operating model, Egypt’s edge is never lost. As the pandemic pushed the oil and gas industry to a new normal, it also pushed forward its digital transformation especially when it comes to working locations. Chi explained that creating jobs is a major challenge for Egypt and its fast-growing population, however “with proper training and an abundance of talent at a competitive cost, I think Egypt should investigate opportunities to create jobs in this new world norm.”
One of the most impactful investments, in the long run, is investing in developing cadres. Schlumberger has always been a pioneer in building capacity programs and the pandemic did not hinder its progress as the company signed four memoranda of understanding (MoUs) with several universities in Egypt “to provide access to our digital platforms, virtual visits to our operational bases, and online technical and non-technical virtual sessions,” Badawi stated. The company also managed to train approximately 1,000 undergraduates from nine universities. Badawi highlighted Schlumberger’s people resilience in the past year denoting that the company “maintained our commitment of developing our people as they remain at the core of our success as a company.”
Egypt’s reforms and strategies put the country in an investor-friendly environment. As leaders in production in Egypt and with an inventory of drillable prospects, Chi affirmed that “this provides a very solid foundation for us to continue investing and generating significant value for all stakeholders.” He added that in the current climate, Egypt bodes relatively well to other investment options. Coupling that with strong leadership and economic growth, Egypt will continue to be a very attractive investment destination for companies around the world.
Despite the hardships faced in the past year, Apex managed to find a silver lining at the Southeast Meleiha Concession with the spudding of the first of three exploration wells in early December 2020. Since then, Apex announced on January 18 that the first two exploration wells in their three well campaign discovered oil at shallow depths in the Bahariya Formation, while the third exploration well was drilling. Playing on the momentum, Maher stated: “We look forward to working together with our partners at EGPC to further explore and develop the considerable potential of our concession and to expeditiously bring online production from this first discovery.”
Moving on from 2020’s limited E&P plans, IOCs are very much looking forward to continuing expanding their presence and operations in Egypt. El-Sawi delved into Kuwait Energy Egypt’s operations in the Abu Sennan concession, stating that the results of the drilling campaign were up to scratch and the company has already begun 2021 drilling plans. For Kuwait Energy Egypt “Abu Sennan is a very promising asset with high value, which encourages the company to continue developing this field,” El-Sawi added.
As for Apex, Maher denoted that the company will continue its “aggressive exploration drilling program at Southeast Meleiha with the goal of finding and establishing commercial production of oil from multiple fields we believe are on this concession.” Not only that, but a second exploration drilling campaign could be on the horizon by mid-2021, which will aim to drill additional prospects in another area of the concession.
Apache’s VP gave an update on the company’s Western Desert concessions saying that Apache acquired a portion of a multi-year, multi-million acres state-of-the-art new broadband 3D seismic project and has re-processed a large amount of vintage seismic data. The company also succeeded in its drilling operations with a success rate of 93%. Meanwhile, in Matruh Basin, Apache recorded 555 feet net pay at Herunefer E-2. Chi boasted about Apache’s efficiency in its operations as well as its finances during the pandemic, saying: “successful companies focus on optimizing the cost structure of their business constantly as this will enable the generation of more financial resources for re-investment while building resilience for challenging times like in 2020.”
When it comes to integrating digital solutions to oil and gas operations, Schlumberger excels at transforming cloud capabilities into E&P solutions. Badawi elaborated that “[Schlumberger] leverages the power and storage elasticity of the cloud, the efficiency of high-performance computing, and the connectivity of the Industrial Internet of Things (IIoT) to create technologies tailored to each domain’s biggest challenges.” Badawi indicated that digital solutions allow users to transform real-time data into knowledge and benefit from it. This leads to the acceleration and automation of operational decisions efficiently. Such technologies include Agora Edge AI and IoT solutions offering “which utilizes the latest advanced in edge computing and the power of IoT to enable the different teams to reduce downtime and HSE exposure, lower operating costs and enhance production,” Badawi explained.
In Egypt specifically, Schlumberger alongside Sensia was awarded to deploy Avocet production operation software across all EGPC JVs. In addition to this, Schlumberger’s Egypt Digital Production Center (EPDC) aims to digitize production data from Egypt’s producing assets. Focusing on Egypt’s Brownfields; Badawi expressed his pride in Schlumberger as it “leverages the best in-class seismic processing technology to design and execute the ocean bottom nodes and streamer surveys in the Gulf of Suez with the first phase completed during the first half of 2020.” This type of technology maximizes operators’ chances in drilling and production activities in addition to unlocking the full potential of their assets. The past year has also nourished a more positive behavior towards the environment as it led to a commitment towards resource-conscious and sustainable products; thus, paving the way to a greener future. Despite the hardships of 2020, Badawi pointed out that “2020 was a great challenge, for the world, for the industry, and the Egyptian oil and gas sector was no exception, however its resilience shows a great future lay ahead.”
Building on the past year’s experiences and challenges, IOCs remain positive about Egypt’s energy future. Maher stated that “we expect 2021 to be our busiest and most successful year in terms of M&A activity, exploration drilling results, and first production.” In the same regard, IPR will pursue M&A opportunities in addition to “focusing on organic and inorganic growth in its Egyptian portfolio of assets with the objective of optimizing performance,” Dabbous, added.
McLeod reiterated Maher’s point, expecting that “we are going to see economic improvement and our goal for 2021 is to grow in Egypt. We have, already, been here for almost 20 years and trust the way our business is executed.” El-Sawi also remained optimistic but cautious, stating that “growth will remain contingent on successful and speedy deployment of vaccines. Hence, different work programs and budget scenarios should be considered for this.”
Badawi hopes that this year will be a continuation of Schlumberger’s success in 2020. “I strongly believe that 2021 will be another strong year for Egypt and the whole sector, carrying on our efforts as strategic performance partner of choice to the sector to continue together to create amazing technology that unlocks access to energy, for the benefit of all,” Badawi affirmed.
For Apache, on a global level, the company plans to move forward with its critical projects and maximize its return on investments (ROI). More specifically in Egypt, “Apache expects to maintain an active drilling and investment program in 2021. Our plan will remain flexible and we will adjust our activity and spending as appropriate,” Chi said. The company remains an ally to the ministry’s Modernization Project which would benefit both parties by higher returns and value creation. On a final note, Chi noted that oil and gas will continue to be major players in the global economy for a long time and that “Egypt is in a great place – in terms of resources, location, and leadership – to provide the energy that helps elevate lives across the globe.”