When oil solidifies political ties

Too many success stories of the Egyptian petroleum sector crown the celebration of the Petroleum Day this month. Strengthening bridges connecting not only the companies operating in the Egyptian territories, but also connecting the Egyptian petroleum industry to its counterparts, has proven the vitality of the Egyptian industry on all levels

“Smoothing the way for international drilling companies and speeding up the process for the exploration operations are the two main reasons behind the rising number of global companies setting eyes on Egypt lately,” said Ashraf Abdul Hady, Senior Drilling Engineer of Apache Corp, the top American Oil and Gas Company, to Egypt Oil & Gas Newspaper.

Apache, which has believed in the great potentials of the Egyptian territories, made it take a huge step by acquiring BP’s assets in Egypt in a $7 billion deal, through which it takes hold of four development leases and one exploration concession. This acquisition covers approximately 394,300 acres in Egypt’s Western Desert. The assets have estimated proven reserves of 20 million boe (59% liquids), and first-half 2010 net production of 6,016 barrels of oil and 11 MMcf of gas per day.

“This is under-explored acreage in a highly prospective area of the Western Desert; a 3-D seismic acquisition program is under way,” said G. Steven Farris, Apache’s Chairman and Chief Executive Officer. “BP’s holdings also include strategically positioned infrastructure including a natural gas processing plant, a liquefied petroleum gas plant and oil and gas export lines. These facilities will enable Apache to increase production from our existing fields in the Western Desert.”

Apache’s second-quarter net production in Egypt averaged 98,495 barrels of oil per day (bopd) – up 8.5% from the first quarter – and 388 MMcf of gas per day, up 7%. At year-end 2009, Apache had estimated proven reserves of 309 million boe and 11.1 million gross acres in Egypt.

This is one of the success stories of the petroleum sector in Egypt, which demonstrates the progress of the oil and gas sector in the country during, and even after, the global economic crisis.
Strengthen foreign ties
Looking back at a year filled with much prosperity, not only local success stories but also international ones, the name of Egypt has been tightened with so many other countries and multinational companies.

“The ministry influenced the relationships between Egypt and Iraq, through Petrojet and Enppi, the two solid Egyptian companies, by signing contracts to provide maintenance to Iraqi oil fields,” said Taher Abd El Raheem, Assistant Chairman for Operations of Rashid Petroleum Company. “The minister was recently in Cyprus during the celebration of their Independence day, to show Egypt’s appreciation to their country and also to sign a Memorandum of Understanding (MoU). It shows that Egypt soon to be in oil and gas business with Cyprus.” There has been talk of Egypt using Cyprus as a bridge for exports to Europe and on prospects for the training of Cypriot engineers by their Egyptian counterparts on techniques for the extraction of oil and natural gas, he further added.

It was a very smart move from Egypt’s side; to send the minister of petroleum to Cyprus in such day. Mainly to gain their communion in having future projects with Egypt,” highlighted the top official.

Abdul Hady added to the reasons behind placing Egypt among the well known countries in the oil and gas field, “The minister helped in strengthening Egypt’s relationships with other countries through permitting the existence of those countries in the local market, by offering them easy amended contracts and assisting their drilling operations by providing the facilities they need.”

At the beginning of the year, the industry witnessed many projects that reflected the ministry’s continuous efforts to tauten Egypt’s relationships with other countries. For instinct, a joint venture will be established between the Egyptian General Petroleum Corporation (EGPC) and the Ukrainian Naftogaz to start production from HG34-3 well, the Kuwait Energy Company proved its existence more in Egypt by making its 7th discovery in Ras Qattarah block, Dana Petroleum announces new oil field at North Zeit Bay… and many more examples.

The German based Rwe Dea allocated a total of $3.6 billions for the field development in the North Alexandria and West Mediterranean Deep Water concessions, which is considered as the biggest single investment for the company to date. “Our aim is to proceed with this field at a rapid pace, so that we can go into production by 2014,” said Thomas Rappuhn, Chief Executive Officer of RWE Dea AG.

Similarly, Australian-listed Beach Energy announced that it is stepping up for exploration work in Egypt, saying that it plans to spend up to US$33 millions in the country’s onshore play over the next two years. Beach revealed it had sealed a deal with the Kuwait Energy Company, which will hold a 22% stake in the Abu Sennan concession in the Western Desert and a 15% interest in the Mesaha Area concession, effective from January 1st this year.

Additionally, the big negotiations between Italian Edison and the Egyptian authorities to sell its share of the gas produced from the North Abu Qir field, which Edison won with a Signature Bonus of $1.4 billion.

Also, IPR, and its partner, Sojitz Oil and Gas, hit another discovery of oil-bearing structure in the underlying Alam El Bueib sands in the Yidma-Alamein License in the Western Desert.

Dana Gas, another gas strike in Egypt’s Nile Delta, showered the industry with a string of discoveries that have already lifted its Egyptian oil and gas output by 20% this year.
UK-based Circle Oil and Sea Dragon Energy Inc are both known with their good relation with Egypt and their many discoveries this year.
Besides, the Egyptian industry has always been an open gate for new comers. BGP, one of the worlds leading geophysical service companies, awarded its first contract in the country to conduct a gravity survey project by Geofizyka Krakow at Bahariya Block.

In addition, Sureclean, the international industrial cleaning and waste management firm, announced expansion into the North Africa and Middle East region with the launch of a new base in Egypt. “Our presence in Alexandria and Cairo will ensure we have resources in place to meet the needs of the market. Winning our first contracts so quickly is a clear indication of the high demand there is for our services,” said Paul McAlister, Sureclean Business Development Director.

On the international level, South Africa eyes possible business cooperation with the Egyptian authorities. South Africa President Jacob Zuma plans to visit Egypt later this month to discuss possible future oil deals. International Relations and Cooperation Minister Maite Nkoana-Mashabane confirmed that further discussions for oil exploration by the largest national oil company PetroSA to be carried out in Egypt.

Correspondingly, Jordan and Egypt ties are closer than ever because of the Egyptian natural gas supplies to the Kingdom. With Libya, the two countries have been working together to jointly develop their oil and natural gas industries.

Following the same goal to expand oversea ties, the Egyptian Ministry of Petroleum held intensive talks and meetings with India, China, UK, Azerbaijan, Iran and Poland to boost relationships. Currently, the Ministry is negotiating the establishment of a natural gas-operated fertilizer plant with an Indian company. Also, the Egyptian Minister of Petroleum Eng. Sameh Fahmy studied with President of China Petroleum & Chemical Corp (Sinopec) means to bring China’s mega company oil services into Egypt.

Moreover, BG Group’s Egyptian subsidiary, the country’s largest natural gas producer, announced it would invest $2 billion to install a pipeline and drill new wells off Egypt’s Mediterranean coast to help meet the country’s growing demand for gas. “Egypt is a core area for us … and we will continue to look at new blocks,” said BG Egypt President Arshad Sufi.

The ministry reached out also to Azerbaijan, when Fahmy held talks with the Azerbaijani Minister of Industry and Energy Natig Aliyev Fahmy to discuss the possibility of marketing Azeri gas through existing pipelines in Egypt. The two also reviewed a proposal regarding the refining of Azeri crude in Egyptian refineries and its transport from Egypt to African and Asian markets. “We may also collaborate on exploration ventures and in technology and knowledge sharing in the oil and gas sectors,” added Fahmy.

As a matter of fact, the Egyptian Petroleum Ministry was successful in something that many others failed in, which is to bring good relations between Egypt and Iran. The good news came when an Iranian official said that Tehran has exported its first petrochemicals to Egypt, “The first shipment of 25,000 tons of petrochemicals was sent to Egypt,” Iran’s Mehr news agency quoted Reza Hamzelou, Director of Petrochemicals Commercial.

Poland’s State Gas and Oil Company (PGNiG) also announced that it would invest some of its $70 million budget to prospect locations of oil deposits in Egypt. An initial gravimetric assessment has been made already and if the gathered data confirms the economic feasibility of the project, drilling may be completed in 2015 and regular exploitation of the source may commence. PGNiG’s licensing agreement with the Egyptian government speaks of an 18% company share on condition extraction reaches the level of at least 500 thousand tons of crude oil annually. Estimates speak of some 22 million ton deposits in the Bahariya region covered by the agreement.
Egyptian operational success abroad

Proudly, Enppi (Engineering for the Petroleum & Process Industries) and Petrojet (the Petroleum Projects and Technical Consultations Company), the governmental-fully owned major companies had the biggest share in building Egypt’s relationships with other countries. The Minister announced that Enppi and Petrojet won contracts in 14 different countries with investments worth $4.7 billion. Recently, Petrojet secured its first project in UAE, worth 220 million Egyptian pounds for establishing nine gas pipelines. In addition, Petroject will work on the water pipelines to the Habshan area, which is known for its Habshan 5 Gas Processing Plant. The project is owned by Gasco Abu Dhabi.

Furthermore, Enppi was awarded a$30-million contract in Syria in Al-Furat oil field to increase production from two clusters of oil fields in the Deir al-Zor region. In addition, it won $400-million project to install petroleum storage tanks at Yanbu in Saudi Arabia and build 47 tanks of various sizes with a combined storage space of 12 million barrels for Saudi Aramco’s new Yanbu oil refinery.

A look to the future
Dr. Hamdy Abu El Naga, the well-known petroleum expert, said that in his opinion, the country should keep it close with African countries, such as Sudan and Yemen, “They should be in Egypt’s future schedule.”

Moustafa Mohamed, Operation Manager of Agiba Petroleum Company, highlighted “The Ministry was never low on providing all the assist to Egypt’s relation with other countries. The ministry was keen on boosting production to attract more international companies into the local market to explore. It also provided all the investments for both explorations and development”.

Dr. Shawky Abdeen, PICO International Petroleum said that the most successful method to attract foreign investments into the country is by increasing reserves, “If the investor looked in the numbers of the country’s reserves and found it high, then they will surely have the confidence to invest in such country.”

“Egypt is still full of many explorations, we just need to look in the right place, and that will not come without foreign investments with contracts that would bring more prosperity, whether on the revenue wise or the relation with other countries,” added Abdeen.

By Sama Ezz Eldin


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