AN INTERVIEW WITH H.E. MINISTER OF PETROLEUM AND MINERAL RESOURCES TAREK El MOLLA

With the world working towards achieving a carbon-free future, Egypt leads the African continent’s efforts to realize a just and realistic energy transition that shall guarantee a sustainable economic growth for the African countries. Egypt Oil and Gas sits with Minister of Petroleum and Mineral Resources Tarek El Molla to discuss Egypt’s decarbonization strategy and the steps that the country has taken to meet the objectives of The Paris Agreement.

Your excellency, how would you describe the current status of the global energy transition?

The world demand for energy is rapidly increasing, being one of the main engines for economic development and the welfare of societies. However, to achieve sustainable development, energy sources must be also sustainable, meaning that it is all about energy transition: transitioning to produce more energy with fewer emissions. The energy transition is a crucial step to enhance the energy system’s global socio-economic footprint, global welfare, gross domestic product (GDP), and employment. Yet, the trilemma of providing affordable, reliable, and clean energy while tackling climate change is complex and sometimes divisive.

All countries are currently heading for the transition to a low-carbon economy in the context of climate change and global warming. The Paris Agreement marked the first global treaty to combat climate change, control greenhouse gas emissions, and limit the rise in global temperature. It was adopted by world leaders at the United Nations (UN) Climate Change Conference (COP21) in Paris in December 2015. Egypt signed the Paris Agreement in 2016 and ratified it in 2017. The agreement’s goal is to substantially reduce global greenhouse gas (GHG) emissions to 2 degrees Celsius while pursuing efforts to limit the increase even further to 1.5 degrees Celsius.

The world needs more than one energy transition pathway to consider the different circumstances of all countries according to the principle of “Common but Differentiated Responsibilities and Respective Capabilities” (CBDR-RC). In 1992, the principle of CBDR-RC was officially formalized in the UN Framework Convention on Climate Change (UNFCCC). This principle recognized that countries have different duties and abilities to address the negative impacts of climate change, but all countries have an obligation to address climate change.

Egypt is accelerating its decarbonization pace and working on energy diversification as it is committed to its “Sustainable Development Strategy: Egypt Vision 2030” and “Integrated Sustainable Energy Strategy 2035”, which were launched in 2015. The Egyptian oil and gas sector has a significant role to support this strategy through a number of projects and initiatives. The Ministry of Petroleum and Mineral Resources (MoPMR) also organized the “Decarbonization Day” at COP27 which highlighted the local, regional, and global success of decarbonization in the oil and gas sector and hard-to-abate industries.

We understand that in order to advance emissions reduction’s objectives, the Egyptian oil and gas sector had to sustain the global rapid pace. What are the main pillars of the sector’s energy strategy?

The Egyptian oil and gas sector is a main driver of economic and social development. The sector strategic pillars are centered around three main pillars for Energy Security, Financial Sustainability and Sector Governance. In line with the holistic approach for sustainable development, decarbonization and transition to low carbon energy sources were embedded within these strategic pillars to complement Egypt’s oil and gas sector activities in this respect. Accordingly, the sector is working to promote decarbonization activities, monetize decarbonization opportunities and instill a sector wide focus on decarbonization.

Your Excellency, would you tell us more about the sector’s efforts towards decarbonization?

The oil and gas sector is working to implement decarbonization projects to progressively lower the carbon footprint (carbon intensity) of the sector. The sector developed a six-year decarbonization projects plan with expected reductions of 8 million tons (mmt) of CO2 equivalent with investments reaching $600 million.

In line with Egypt’s leading regional role in climate action, H.E. President Abdel Fattah El Sisi announced that Egypt joined the Global Methane Pledge in the oil and gas track at the Major Economies Forum on Energy and Climate Change in June 2022. A methane measurement campaign was also conducted in 2022, which covered six gas facilities and one tank farm. A second methane measurement campaign was also recently completed in more than 25 facilities.

Egypt also endorsed the World Bank initiative of “zero routine flaring by 2030” and the oil & gas sector is cooperating with the World Bank program for “Global Gas Flaring Reduction (GGFR)” to achieve this target. In this respect, the sector succeeded in implementing more than 20 flare gas recovery projects. Reducing flaring is a key element of Egypt National Determined Contributions (NDCs) to achieve flaring GHG reduction of 65% in 2030 compared to BAU.

So, what are the pillars of the decarbonization strategy?

The Ministry’s plan and activities towards supporting decarbonization and energy transition are based on six main pillars, which include energy subsidy reform, energy efficiency, renewables and green petrochemicals, decarbonized natural gas to complement renewable energy, carbon intensity reduction, and hydrogen.

The Egyptian oil and gas sector is renowned for being one of the most proactive sectors, Your Excellency, what initiatives are underway when it comes to energy subsidy reform?

In line with the economic reform program launched by the government of Egypt, an energy subsidy reform program was implemented in order to address chronic challenges of the energy subsidies borne by the government and to ensure a more sustainable approach for fuel pricing. Such challenges included the heavy fiscal burden on the government’s annual budget, disproportionate benefit of rich households due to their relatively higher energy consumption, and absence of a motive for energy efficiency.

Through the energy subsidy reform program, the subsidies are now specifically directed to vulnerable groups and increased programs for targeted social protection measures (social safety nets) were implemented.

Moreover, prices of liquid petroleum products are now subject to quarterly review through the Automatic Fuel Indexation system. Egypt’s successful implementation of the energy subsidy reform program received acclaim and recognition from leading international organizations.

What role does natural gas play in Egypt’s energy transition?

As a cleaner and more environmentally friendly fuel, Egypt took a strategic decision more than 20 years ago to use cleaner, less carbon intensive, and more environmentally friendly fuels. Decarbonized natural gas has increasingly become Egypt’s fuel of choice to complement renewable energy generation, which is in line with Egypt’s energy sector strategy for energy transition and boosting decarbonization. The sector managed to place Egypt on the global map of major players in the natural gas industry particularly in the East Mediterranean region, and after resuming exports.

Would you say that promoting the use of natural gas in Egypt has been a success?

Absolutely. Natural gas consumption increased more than threefold from fiscal year (FY) 1999/2000 to 2022/23. This increase came in light of Egypt’s vision to diversify its energy mix, enhance the transition towards green fuels, and boost decarbonization in the energy sector. more than 14 million households are now connected to natural gas and close to 500,000 cars were converted to CNG as a cleaner & environmentally friendly fuel for sustainable mobility. Natural gas usage has also expanded in other industrial sectors to increase its added value, including petrochemicals and fertilizers production.

How is energy efficiency affecting the acceleration of the energy transition in Egypt?

The Egyptian oil & gas sector considers energy efficiency as the first fuel and the most cost-effective way to achieve emission reductions. The sector has managed to achieve significant successes and achievements in this respect.

For effective governance, the Ministry established a robust institutional setup for energy efficiency across the sector companies to enhance and support energy efficiency activities. In this regard, the MoPMR inaugurated the Center of Excellence of Energy Efficiency and Process Optimization, which will provide its services to improve energy efficiency in all energy sectors within Egypt and Africa. The Ministry also organized three editions of the “Egyptian Petroleum Sector Energy Efficiency Conference” while the fourth-edition preparations are ongoing. This is in addition to developing an energy efficiency capacity building plan for more than 1,000 trainees, and implementing the first energy efficiency middle management program for 247 Engineers. It also established a database for Energy Consumption and Emissions covering all sector operations. Moreover, it implemented five energy audits across refineries, upstream and petrochemical companies that identified energy efficiency improvement projects with potential to reduce energy consumption and emissions by 15%.

Apart from energy efficiency, how does hydrogen factor into Egypt’s decarbonization ambitions and what economic potential does it have?

Egypt has several assets and strong points for leveraging its hydrogen potential, including a strategic location with access to potential global markets in Europe and East Asia, significant renewable energy resources, well developed infrastructure, as well as capitalizing on Egypt’s human capital. Accordingly, low-carbon hydrogen will be an integral part of Egypt’s energy transition. In this respect, hydrogen is a key pillar in Egypt’s oil and gas sector decarbonization pillars to capitalize on the sector’s expertise and potential across the hydrogen value chain. The MoPMR is supporting leading efforts to develop Egypt’s low-carbon hydrogen strategy in collaboration with an international leading consultant. Within this strategy, a vision was crafted to realize Egypt’s ambition to become a global leader in the low-carbon hydrogen economy.

To enhance collaboration with partners and share best practices, The MOPMR continues to cooperate with leading countries and entities to advance hydrogen efforts. The Ministry co-signed a declaration of intent with the German Ministries of Economic Affairs and Climate Action, and Economic Cooperation and Development Cooperation in the field of green hydrogen, emphasizing the common goal of creating a suitable environment for sustainable economic and environmental development for both countries. The sector’s entities also signed a number of MoUs with leading organizations to cooperate in the field of hydrogen. Furthermore, the Ministry is participating in the “Hydrogen for Development Partnership” that was launched by the World Bank during COP27, which aims for developing human capacity, regulatory solutions, business models, and technologies toward the roll out of low-carbon hydrogen in developing countries.

The Ministry of Petroleum and Mineral Resources is actively engaged in developing the anticipated incentives package for green hydrogen projects and its derivatives, and has played a major role in developing the proposal for Egypt’s National Council for Green Hydrogen and its Derivatives, which was recently established.

Do you think that Egypt’s hosting of COP27 succeeded to highlight the country’s commitment to global climate action?

Yes, COP27 witnessed the participation of over 100 heads of state and government, and more than 50,000 people. COP27 came as a key opportunity for strategists and experts to have open discussions on decarbonization, energy transition, and policy-making. The international community praised Egypt’s success in organizing the COP27 climate conference.

The Egyptian oil and gas sector succeeded in organizing the first ever “Decarbonization Day” as part of the official thematic days at COP27. This was the first time ever in COP summits that those who participated in COP27 had the opportunity to take part in Decarbonization Day, a day that not only seeks to highlight the importance of decarbonization as a cause but was a clear demonstration of Egypt’s firm commitment to achieving the objectives of the Paris Agreement while pushing for a just energy transition.

I personally had the pleasure of opening Decarbonization Day which also witnessed the participation of H.E. John Kerry, U.S. Special Envoy for Climate, and H.E. Gerd Muller, United Nations Industrial Development Organization (UNIDO) Director General. It covered eight sessions and showcased efforts, commitments, and enablers for accelerating decarbonization in hard-to-abate industries. This is in addition to 20 bilateral meetings with a number of ministers, officials from international companies, as well as leading experts from global and regional energy institutions.

What were the main outcomes of COP27 Decarbonization Day?

By the end of COP27, the oil and gas sector was able to achieve a number of outcomes as a result of its participation, including the Egyptian Petroleum Sector Energy Efficiency Strategy (2022-2035), Sharm El-Sheikh Oil and Gas Methane Reduction Roadmap, Low Carbon Hydrogen Strategic Framework, and the EMGF Decarbonization Initiative.

I am also proud that seven MoUs were signed between Egypt’s oil and gas sector and a number of international companies specialized in the energy transition, decarbonization, and hydrogen fields. The MoPMR also signed an MoU with the EU in partnership with the Ministry of Electricity and Renewable Energy on green hydrogen.

Your Excellency, as our interview comes to an end, what are your expectations for the future of the Oil and Gas Industry?

I would say that the emergence of a sustainable, low-carbon and circular economy is possible. The support of all stakeholders from governments, private sector, international organizations and financial institutions is essential to achieve this transition. The energy sector will play an essential role in the global energy transition. The Egyptian oil & gas sector is committed to continually advancing its decarbonization agenda to contribute to satisfying both local and energy demands with lower carbon intensity. The Sector will continue to collaborate with all stakeholders and partners to advance energy transitions that are both pro-climate and pro-growth. Moreover, the MOPMR will continue working to execute specific projects to realize its vision and strategy for emissions reduction to fulfill both local and regional energy demands while considering our environment.