Through the path to become a regional natural gas hub, Egypt was able to balance its performance in natural gas Exploration and Production (E&P) activities within one of the most tragic periods facing the global petroleum market. While the international oil and gas markets suffered from the COVID-19 negative effects, the Egyptian Natural Gas Holding Company (EGAS), in the latest annual report of fiscal year (FY) 2019/20, remarked an annual increase of 53.3% in the number of natural gas discoveries in Egypt. This is in addition to keeping a significant production rate of approximately 6.6 billion cubic feet per day (bcf/d).

The petroleum sector is considered one of the engines of the Egyptian economic growth. Over fiscal years (FYs) 2014/15-2018/19, the petroleum extraction’s contribution to the gross domestic product (GDP) significantly amounted to about EGP 342 billion, on annual average. Meanwhile, the sector outstandingly succeeded to attract average investments of about EGP 70 billion annually, representing more than one-eighth of the total investments, according to the Ministry of Planning and Economic Development’s (MPED) data. This was a result of the ministry of petroleum’s (MoP) plan to encourage and promote the Exploration and Production (E&P) activities in different regions. From the country’s Balance of Payments (BOP) side, the petroleum sector’s exports accounted for $8.5 billion (EGP 143.31 billion), on annual average, exceeding one-third of the total exports, according to the Central Bank of Egypt’s (CBE) data.

Egypt is the second largest oil refining country in Africa, acquiring about 23% of the total domestically-refined crude oil in Africa. There are 12 refineries in Egypt, operated by the Egyptian General Petroleum Corporation (EGPC), with a total capacity of 795,000 barrels per day (bbl/d) in 2019, according to BP’s Annual Statistical Review of 2020. The Ministry of Petroleum and Mineral Resources (MoP) has been working on fulfilling self-sufficiency of petroleum products since 2016, when imports reached 10 million tons (mmt) annually at a cost of $4.5 billion (EGP 75.9 billion), noting that these rates declined during 2020, reaching 3.5 mmt with $1.5 billion (EGP 25.3 billion).

Egypt has reclaimed its position as the hydrocarbons regional hub, especially when it comes to natural gas. In fact, the country has converted from being a natural gas net importer to being a net exporter in 2018. This phenomenon happened as a result of the major natural gas discoveries that increased natural gas production levels. The major developments in natural gas production were combined with the exceptional infrastructure that paved the country’s path to become a regional natural gas hub. Egypt has one of the largest liquified natural gas (LNG) infrastructures in the region, which include two liquefaction plants located in Idku and Damietta.

The Gulf of Suez and its surrounding areas are among the oldest known hydrocarbon provinces in the world in which crude oil was first discovered in 1868, according to Hamdy El Banby’s book entitled “The Egyptian Crude Oil: Past Experience and Future Insights”. The Gulf of Suez, along with the Eastern Desert and Sinai, are among Egypt’s main crude oil producing areas. The Gulf of Suez, the Eastern Desert, and Sinai produced a total of 87.7 million barrels (mmbbl) and 87.16 mmbbl of crude oil in the Fiscal Years (FYs) 2018/19 and 2019/20 respectively, according to the Egyptian General Petroleum Corporation (EGPC) data.

Downstream activities in the petroleum sector are essential for securing and meeting the domestic demand of natural gas. With this regard, the Egyptian Natural Gas Holding Company (EGAS) started natural gas connection activities in 1981. The activities target connecting natural gas to the consuming sectors, represented in industrial, commercial, and residential sectors, to replace butane with natural gas.

BY AMINA HUSSEIN, REHAM GAMAL, AND TASNEEM MADI
Transporting hydrocarbon products, from fields to refineries to end users, plays a vital role in facilitating both upstream and downstream activities. Globally, there are various means of transporting petroleum products including Railway tanks, pipelines, coastal tankers, and trucks. Likewise, Egypt depends on a variety of means and channels to transport petroleum products on both domestic and international levels.

The spread of the COVID-19 pandemic crippled global oil demand and led many petroleum companies to suffer significant losses. Accordingly, they were forced to slash spending and cancel projects. As per a press release by Rystad Energy published in April, before the outbreak, the expected total revenues of exploration and production (E&P) companies were $2.35 trillion in 2020 and $2.52 trillion in 2021. Post the outbreak, the revenues are expected to fall to $1.47 trillion in 2020, and to $1.79 trillion in 2021. Consequently, the companies cut their spending by an average of 20% in early 2020. The spending is expected to further fall by 25%, from $530 billion in 2019 to $410 billion in 2020, with most of the projects being delayed.

The international petroleum industry has been facing major threats since the global spread of the COVID-19 outbreak in January. Brent crude price has been falling, reversing the increase in prices achieved in the last four months of 2019. On March 18, Brent crude oil and Organization of Petroleum Exporting Countries (OPEC) Basket prices hit their lowest value since the first Gulf war in 1991, as they remarkably declined to about $20 per barrel, according to Bloomberg. Meanwhile, on April 20, West Texas Intermediate (WTI) oil prices witnessed an unprecedented decline of about 300%, to reach below $0 per barrel.

Egypt is quite rich with mineral resources as it has reserves of 48 million tons (mmt) of tantalite, which is the fourth largest reserves in the world, in addition to 35 mmt of coal, according to the Australian Trade and the Investment Commission. Such resources support various industrial activities. Most of the mineral resources are found in the Eastern Desert, Sinai, and the Red Sea, according to the Egyptian Mineral Resources Authority (EMRA).