With Covid Ending, Egypt Petroleum Sector Precedes A New Image in 2022: An Interview with H.E. Tarek El Molla Minister of Petroleum and Mineral Resources

With Covid Ending, Egypt Petroleum Sector Precedes A New Image in 2022: An Interview with H.E. Tarek El Molla Minister of Petroleum and Mineral Resources

2021 was a year full of new challenges and promising opportunities. As Egypt’s petroleum sector powered through the pandemic, it worked toward its goal of becoming a regional energy hub. As new windows of opportunity are about to be opened this year, promising the sector a more prosperous future, Egypt Oil & Gas talks to Minister of Petroleum and Mineral Resources Tarek El Molla to learn more about the sector’s strategy in 2022.

Thanks to the oil and gas sector’s commitment and persistence, the industry was able to attract major new investments. How did the ministry manage to gain the trust and attract these investors?

The Ministry of Petroleum and Mineral Resources has continued its efforts to reduce arrears to IOCs to motivate IOCs to pump more investments and intensify exploration and discovery activities. This will act as a catalyst to develop new discoveries that will thereby boost production. Through these efforts, the Ministry has successfully ensured compensation for arrears to IOCs from previous periods. Hence, arrears to IOCs were reduced by 87% to $845 million by the end of June 2021, in comparison to $6.3 billion in 2011.

Throughout the year, Egypt managed to make new discoveries and attract investments. Could you share with us some of the highlights of 2021?

The sector made 52 discoveries, including 39 crude oil discoveries and 13 gas discoveries, in the Western Desert, the Gulf of Suez, the Mediterranean, Sinai, and the Eastern Desert.

Thanks to the sector’s commitment, seven petroleum agreements were signed with a total signature bonus of $16 million, minimum investments of $1.223 billion, and the drilling of 14 wells. Moreover, 17 development leases with a signature bonus of $7 million for the Eastern Desert and the Western Desert were signed. Also, all necessary measures are being taken to finalize 11 petroleum agreements with a total signature bonuses of $177.3 million and minimum investments of $3.5 billion; in addition to the drilling of 39 wells.

With new discoveries and investments in 2021, how did our production of oil and gas in Egypt look like?

In 2021, production in the petroleum sector reached 82.4 million tons of oil equivalent (mmtoe), including 28.3 million tons of crude oil and condensates, 53.1 million tons of gas, and 1 million tons of butane (not including butane production from refineries and investment companies). Petroleum production rose by 8.4%, while natural gas production increased by 17.2% compared to 2020.

On the other hand, liquefied natural gas exports have made Egypt one of the leading Arab countries that have achieved the highest growth in natural gas export volume during Q3 of 2021, with natural gas exports reaching 1 million tons. This is a 900% increase in comparison to the same period in 2020.

And after an eight-year pause, Damietta’s gas liquefaction plant has become fully operational again and has resumed its essential role in liquefying natural gas exports.

Local consumption of petroleum products increased by 6% during 2021. How could you cope with the increasing demands and ensure stability of local market?

During the current year, the petroleum sector managed to achieve complete stability in the local market, as it was able to meet the petroleum and gas needs of local market. Consumption increased by 6% in comparison to the previous year, reaching 75.8 million tons. This comes as petroleum products consumption in 2021 reached 27.8 million tons, which includes 6.8 million tons of petroleum products worth $5.3 billion imported to meet local demand. Overall, consumption in 2021 witnessed a 6.9% increase, compared to the previous year. Meanwhile, local natural gas demands were met by 48 million tons of natural gas, representing a 6% increase in comparison to the previous year. Production of electricity makes up 60% of total gas consumption.

What are the latest updates in Egypt’s efforts to deliver natural gas to households and factories? And how is the ministry reinforcing the national gas grid?

In continuation of the government’s efforts to promote the use of natural gas, several accomplishments were made in 2021, including delivering gas to 1.2 million households, which is equivalent to 21 million cylinders that were replaced. Natural gas was delivered to 75 new areas for the first time. In 2021, gas has been delivered to 96 villages until now, and soon it will be also delivered to 241 other villages. Delivery to the remaining villages will be complete after works on their sewage systems are finalized. Hence, natural gas deliveries reached 2000 consumers and 100 factories. Moreover, Natural gas deliveries to bakeries have tripled in 2021 reaching 2,358 bakeries.

As for the national gas grid, 5 pipelines started operation in 2021 to support the national network for the transporting of natural gas, with a total length of about 185 km and a total cost of around EGP 3 billion.

How did the oil and gas sector develop infrastructure during 2021, and how far did the ministry go in the expansions in CNG projects to maximize its usage as fuel?

During 2021, 4 new pipelines started operation to transport crude oil and petroleum products, in addition to replacing and renewing a number of pipelines in order to maintain the operational capacity of the oil pipelines network. The total lengths of the pipelines amounted to about 295 km at a total cost of around EGP 1.6 billion. Egypt further established two crude warehouses at the Qarun station of the Petroleum Pipelines Company, with the aim of establishing new storage capacities inside the station, by constructing two EGP 195 million crude warehouses, each with a capacity of 10,000 cubic meters. Egypt further established an EGP 98 million unit for receiving, mixing and shipping gasoline at El Nasr Petroleum Company in order to increase the storage capacities of 92-octane benzene to secure the local market’s needs by constructing two naphtha tanks with a total capacity of 43,000 cubic meters.

Meanwhile, Petrojet obtained a certificate from the Guinness Book of World Records for its implementation of a crude oil storage warehouse in RasBadran, which set a record in its field as the largest floating storage warehouse in the world with a capacity of about 1.1 million barrels of crude oil. The initiative falls within the framework of a national project to establish crude oil depots for 29 warehouses in a number of regions across the country. Moreover, the MEED International Corporation awarded the petroleum sector the MENA Oil and Gas Project of the Year, due to the establishment of the RasBadran crude storage depots.

On the other hand, when it comes to the CNG expansions, the sector has made several accomplishments, such as converting 66,000 cars to run on CNG in 2021, which is a 71% increase in comparison to the previous year. This means that as of 2021, a total of 405,000 cars have been converted since the beginning of this initiative. Moreover, efforts to increase the number of natural gas car fueling stations have witnessed remarkable success with 530 stations completed from the beginning of the initiative until the end of 2021. This represents 53% of the total gas stations that have been completed over the past 25 years. The average monthly CNG sales increased by more than 38% to reach 72 million cubic meters (mmcm) in 2021, compared to 52 mmcm during the previous year. This was due to the conversion of automobiles running on liquid fuels (such as gasoline or diesel) to run on CNG.

Throughout 2021, the oil and gas sector managed to successfully complete several projects. Could you highlight some of the production and development projects that were completed in 2021?

Six projects for the development of oil and gas fields have been implemented and completed, with a total investment of about $4.2 billion. Egypt completed the development of the North Alexandria and West Nile Delta fields (the third phase – the Raven field) – in the Mediterranean. This project aims to produce 850 million cubic feet per day (mcf/d) of gas in addition to 24,000 barrels per day (b/d) of condensate. This is set to be achieved through drilling 8 new offshore wells and establishing onshore treatment facilities with a capacity of 900 mcf/dand investments of around $4 billion.

The implemented projects further include the one to complete the development of North Sinai fields (the third phase). The project aims to produce quantities of natural gas amounting to about 45 mcf/d by drilling three wells, with the manufacturing and installation of three offshore platforms and linking them to the main pipeline, with investments of around $87 million. We also worked on the expansion of the treatment facilities in the Atoll field, which aim to recover 5 mcf/d of flare gas by constructing a condensate treatment unit, a gas recovery unit, tanks, and a treated condensate line with investments of about $43 million.

The oil and gas sector also saw the Northwest Seas Gas Exploitation Project (General Petroleum Company). The project aims to produce about 15 mcf/d of gas, 200 b/d of condensate, and 50 tons of propane and butane per day through 4 wells and connecting them to one of the processing plants to maximize the return, separate products, and push the remaining gas into the national grid through the construction of an 8-inches diameter pipeline, with a 15 km length. The project cost around $16.3 million in investments.

On the other side, the refining industry also flourished. Could you share with us a brief on the most important refining project that are being implemented?

One of the important projects is completing the expansions of the MIDOR refinery. The project aims to increase the refining capacity of the plant by 60%. The project cost is $2.4 billion. Moreover, Egypt established a diesel production complex at ANOPC. The project aims to establish a complex for converting low-value mazut into high-quality petroleum products, with a feeding capacity of 2.5 million tons annually. The project’s investments recorded around $2.9 billion.

The projects further included the expansions of SOPC. The project aims to achieve the continuity of the safe operation of the production equipment in the coking complex and to reach the design feeding capacity of 1.5 million tons annually of mazut to maximize the quantities of middle distillates, especially diesel; butane; and gasoline, in order to cover the needs of the local market of petroleum products. The project’s investments are about $1.8 billion.

Additionally, ASORC, Enppi, and Petrojet signed a memorandum of understanding (MoU) to establish a new atmospheric distillation project at the Assiut Refinery at an investment cost of about EGP 6 billion and a design capacity of 5 million tons of crude annually. This project aims to contribute to the sustainability of the operation of current and future projects, including a gas recovery unit (butane).

As the EMGF is gaining more momentum, how did the oil and gas sector contribute to Egypt’s leading role in the Eastern Mediterranean region?

Egypt initiated the idea of the Eastern Mediterranean Gas Forum (EMGF) two years ago during the tripartite summit between Egypt, Cyprus and Greece on the island of Crete. The idea was widely accepted by most of the countries in the region, whether producers, consumers or transit countries.

On July 6, 2021, the Egyptian government signed the forum headquarters agreement with the EMGF, which was approved by the House of Representatives in its session on November 2, 2021.In addition to the launch of the forum’s website, 2021 witnessed the nomination of the Egyptian Osama Mobarez as the first Secretary-General of the forum for a period of three years, starting from January 2022.

since its launch, the forum has attracted global interest, represented in the desire of several countries such as France, the United States and the United Arab Emirates, to join the forum. While France joined as a member, the United States of America, the European Union and the World Bank participated as observers. In addition, many international companies and entities took part in the forum through the Gas Industry Advisory Committee launched in November 2019 to allow effective cooperation between the governments of the member countries and the gas industry leaders in the region. The EMGF’s participants have reached 32 of the largest companies and international entities.

In 2016, the Egyptian petroleum sector started an ambitious program aiming at comprehensively updating and modernizing the sector in order to increase its contribution to the comprehensive development of Egypt. Could you share with us some of the recent updateson the sector’s Modernization program?

In 2021, many achievements have been fulfilled in this regard. The sector managed to boost investment climate in oil and gas exploration and production (E&P) allowing giant IOCs to enter E&P field in Egypt for the first time such as ExxonMobil and Chevron. Also, there are other companies working in Egypt such as Eni, BP, Apache and others, which continue to pump investments confirming their continuous trust in the Egyptian petroleum sector. This comes as the petroleum sector has used new solutions to promote its E&P opportunities. On 17 February, the Egypt Upstream Gateway (EUG) was launched to provide all needed geological data for the companies interested in investing in Egypt.

We also launched the Mop Stations application, which is the first of its kind, to find the locations and places of the fuel supply stations. It can be used by all types of smart mobile phones. Also, an electronic system has been launched to control and follow up the trade and distribution of butane locally at all its phases to monitor the transported quantities.

In the frame of enhancing the performance of NOCs, reducing expenses, and maximizing the benefits of sector’s assets and resources, some companies working in the same activity, have been merged such as the merge of companies Gas Regions, Sinai Gas, and Cairo Gas under the name of Modern Gas as well as the merge of Khalda Petroleum Company and Qarun Petroleum Company.

What does Egypt plan for the upcoming period?

We are interested in having an opportunity to maximize the value of our current resources, such as natural gas, which is considered a fossil fuel yet is an important factor in the energy transition. Natural gas emissions are less harmful than those of typical fuels and coal. At the same time, we are committed to the Paris Agreement and the UN Framework Convention on Climate Change, and we are committed to reducing greenhouse gas emissions. Therefore, we are only asking for reasonable and doable measures for the outcome of decisions made in climate summits to have a reasonable timeframe.

Which initiative does Egypt plan to highlight in COP27?

We have several initiatives we are preparing like carbon-capturing, utilization, energy efficiency, which are among the initiatives we would like to highlight in COP27.

How does Egypt coordinate its efforts with international partners regarding COP27 preparations?

I held a series of key meetings with the world’s energy leaders at the UN Climate Change Conference COP26 in Glasgow. For instance, I met with the US Secretary of Energy Jennifer Granholm to discuss energy cooperation. In addition, I participated in the Net Zero World Initiative, launched by the United States.

During a ministerial panel discussion, U.S. Special Presidential Envoy for Climate John Kerry praised Egypt’s efforts to combat climate change as well as its key role at relevant conferences and initiatives. He stressed U.S. support for Egypt, especially in the fields of capacity building and technological applications.

Most importantly, I had a meeting with the European Union’s (EU) Commissioner for Energy Kadri Simson. This meeting mainly reviewed ways of cooperation with the EU to support Egypt’s hosting of the upcoming COP27. The energy cooperation between Egypt and the world powers, such as the US and EU, would contribute to making this Climate ChangeSummit a success, as most of the discussions and negotiations in this event revolve around the pivotal role of energy in driving the global climate pledge. It can be said that these discussions helped in forming a clear vision for Egypt’s future energy strategy.



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