A New Energy Era for Egypt (BP Magazine)
Egypt has faced challenges to its energy supply in recent years, but is looking ahead to new opportunities to revive domestic production. BP Magazine visits the country to find out more.
Report by: Amanda Breen
A new energy era
BP has been helping Egypt to meet its energy needs for more than half a century and today, with its partners, provides almost 10% of the country’s oil production and 40% of its gas. With record investment in major projects in the Nile Delta set to significantly boost the supply of much-needed domestic energy, BP Magazine takes a close-up look at BP’s natural gas operations in Egypt. How is this important fuel for the future reaping rewards for North Africa’s most populous nation?
The world over, Egypt is renowned for the architectural symbols of its ancient history. From Luxor’s Valley of the Kings to Giza’s mythical Sphinx, the North African country is a serious contender for the title of best open-air museum on the planet.
So familiar are these great landmarks that Egypt for the first-time visitor can be a surreal experience, not least when travelling along one of Cairo’s busy five-lane highways and the Great Pyramid of Giza emerges from behind the tower blocks and cranes. Modern life has crept up on this last-remaining Wonder of the Ancient World, but its presence is an ongoing reminder of how great nations achieve great things by making the most of their natural resources.
Back then, it was limestone and granite. Today, Egypt needs to take advantage of a very different kind of natural resource to help realise what’s known as its ‘Vision 2030’. The goal of this strategy is to create a competitive, balanced and diversified economy to achieve sustainable development and improve people’s life quality. The country’s population is growing rapidly, hitting 92 million in November 2016 – an increase of more than 17 million in a decade. That growth means demand for energy is on the rise as well, and the country’s oil and gas sector is firmly in the spotlight.
“Our oil and gas industry is pivotal to the country’s development,” says Minister for Petroleum and Mineral Resources, Tarek El-Molla. “Therefore, our sector’s strategy to become self-sufficient in gas supply, to increase refining capacity and to become a regional energy hub is all geared towards achieving the 2030 vision of Egypt – as a competitive, balanced and diversified economy.
“Everybody knows that we have a fantastic geographical location between the Red Sea and the Mediterranean. But, in itself, this is not enough to qualify us. We also have important infrastructure: the Suez Canal, gas processing plants in Damietta and Port Said, refineries on two coasts, the SUMED pipeline running from the Gulf of Suez to offshore Alexandria, a national gas grid and, of course, the natural resources.
“In this way, we’re well positioned to not only produce our own energy in future, but also process supplies from other countries as well.”
BP’s presence in Egypt stretches back more than half a century, with investments totalling almost $30 billion. “There’s undoubtedly a great history here,” says BP’s regional president for North Africa, Hesham Mekawi. “Through our heritage company Amoco, BP helped to set the foundations of the oil and gas industry from the early-1960s. Our role, alongside our partners, has been to provide the energy the country needs.”
Through the Gulf of Suez Petroleum Company (or GUPCO), its joint venture with the Egyptian General Petroleum Corporation (EGPC), BP has produced some 40% of the country’s oil. Today, with maturing fields in the Gulf of Suez, GUPCO steadily pumps around 110,000 barrels of oil per day from nine main offshore complexes with more than 110 platforms, as well as extensive onshore processing facilities.
After decades in the oil business in Egypt, BP has recently taken steps to build a world-class gas business in-country as well and now has interests in a portfolio of four fields that supply around 40% of the country’s gas production. This comes through its partnerships with EGPC and the Egyptian Natural Gas Holding Company (EGAS), and the Pharaonic Petroleum Company (PhPC), a joint venture with EGAS and Eni created in 2008.
Egypt has been an exporter of hydrocarbons in the past, but, today, is in the position of a net importer of energy, due to turbulent times over the past five years. Minister of Petroleum and Mineral Resources, Tarek El-Molla, explains:
“Our challenges over recent years really began with the revolution of 2011 and its consecutive events that led to political instability, security issues and a general slowdown in the Egyptian economy, which was echoed in the oil and gas industry.
“We started to see a large decline in our production, mainly gas, which has lasted for three years. As a result, we immediately started suffering electricity blackouts. In summary, to have insufficient gas for electricity and for industry has been a real challenge.
“After the second revolution in June 2013, we adopted an aggressive strategy to rebuild Egypt – to do business differently, be bolder and more progressive. On the energy front, we needed to quickly close the gap between supply and demand – and that meant, on a temporary basis, through importation. We received the first cargoes of liquefied natural gas (LNG) in April 2015, after equipping our ports and other facilities with the right infrastructure to receive them.
“We started working on resuming and expediting our own energy projects by signing and ratifying concession agreements that had been put on hold for three years. One of the success stories at this time was resuming the West Nile Delta project with BP that had practically come to a halt due to instability. In 2015, we concluded the amendment to that concession agreement with BP. We have made real progress on this front and, in total, we’ve signed more than 70 new or amended agreements with different partners in the past three years.” says Tarek El-Molla, Minister for Petroleum and Mineral Resources.
For BP in Egypt, the West Nile Delta project represents another major milestone in its long history here. “It is exciting because we’re turning a new page that will be all about gas. And every molecule we produce domestically – at half the cost of imports – is crucial to help rebuild the nation’s economy,” says Mekawi.
The $12 billion investment to develop discoveries in the West Nile Delta will provide around 1.2 billion cubic feet a day of gas for Egypt’s national grid. First gas is due this year from two of the five fields in the development, located about 85 kilometres offshore from Alexandria, the country’s second-largest city.
Phase one of the West Nile Delta (WND) project is set to be operational a little more than two years since agreements were signed, with two fields – Taurus and Libra – being ‘fast-tracked’ to reach production in 2017. The key to expediting this section of the project is making the most of existing infrastructure. The three other fields – Giza, Fayoum and Raven – are being developed at the same time, involving dedicated, longer-distance tie-backs to the shore.
Once gas is flowing from the five fields, their output – together with other major projects, such as Atoll – will help BP Egypt to achieve its target to triple its current net production level by 2020. Moreover, the WND project signals a milestone for BP in the country, not simply because of its scale, but it is the first operated by the business in its 54-year history here. “This is a mega-project in terms of investment and there is complexity in its execution,” says Mekawi. Effectively splitting the project in two and fast-tracking two of the five fields will allow the team to meet what Gerry McGurk, BP’s vice president for projects, West Nile Delta, describes as “a tight schedule in gas production commitment.” Although Taurus and Libra are a subsea greenfield development – with nine wells and a 38-kilometre tie-back – there is capacity in a nearby export pipeline and an onshore processing facility to accommodate the gas, after extensive modifications. When Giza and Fayoum also come into production sometime in 2019, their gas will be processed in a neighbouring plant that, in a first for BP, has now been purchased by the business from a joint venture. The Rosetta plant will be modified and refurbished to make it fit for purpose for the incoming gas. The final piece in the onshore jigsaw puzzle is the brand-new plant to be constructed on adjacent land for Raven, the only field with high-temperature, high-pressure resources.
While the overall concept for the five-field project may seem complex, there are economic and social benefits to this approach. In fact, it clearly represents a development ‘of its time’ – in a low-cost business environment, when a country needs domestic energy as swiftly as possible.
Job opportunities are prioritised for skilled local people from the surrounding communities of Idku and Rashid. During the peak construction period, 5,000 people will work directly or indirectly on the project, with a focus on upskilling programmes for subcontractors and suppliers. Through these and other social investment initiatives, the project aims to make a difference on both a national and local level – during the production period and beyond.
Developing young, local talent is a priority for BP in Egypt and a new generation of geoscientists has been at the heart of a string of hydrocarbon discoveries across the Nile Delta. In fact, the past five years have been among the company’s most successful for exploration activity.
“Many of BP’s big discoveries announced since 2012 in Egypt have been led by our younger generation, who have developed through our Challenge graduate programme and are taking on responsibilities early in their careers,” says exploration director for Egypt, Ahmed Hagras.
Among the recent discoveries in the East Nile Delta, the Atoll field has been ‘fast-tracked’ to bring gas swiftly into the Egyptian market as well, through BP’s joint venture, PhPC. Discovered in March 2015, the Atoll field is expected to produce up to 300 million cubic feet a day during its first phase, starting in the first half of 2018.
“Atoll is an important project in the North Damietta concession, that is about 40 kilometres from existing Pharaonic infrastructure,” says Mahmoud Mossad, BP general manager for PhPC. “The early production facilities will incorporate three subsea wells that will be tied back to a pipeline, with gas coming onshore into an existing processing facility. Production from this phase alone should almost match the volume that Pharaonic produces today.”
For BP’s technical team in Egypt, the Atoll deepwater discovery highlighted the geological significance of the Oligocene rock layer, as Hagras explains: “BP started exploration in the Nile Delta very early and made big discoveries in the shallow stratigraphy, mainly in the Pliocene and Messinian.
“However, within these layers of rock, the size of the discoveries became smaller and smaller over time – meaning you need to drill deeper for more resources. The deepest layers, such as the Oligocene, are very rich, and they balance out the decline in the shallower areas. Not only do they provide larger volumes of hydrocarbons, but they are also liquid-rich in the form of gas condensate. In this state, the gas is very versatile and requires less processing, making it more valuable.”
Hagras and his team have also shifted exploration focus towards near-shore and onshore opportunities since 2013. Although they’re studying the same geological structures as farther offshore, the emphasis switches to a lower-cost environment. One early result with this strategy came with the Nooros-1 discovery in the Central Nile Delta in July 2015, with partner Eni, just 22 kilometres from the coastline and in water depths of 25 metres.
The joint venture drilled a further five wells to test the area, with four resulting in discoveries. First production came only 10 months after the initial find, in what Hagras describes as “a great example of exploration opportunities delivering resources in shorter cycle times.”
BP is also drilling its first Onshore Oligocene well, called Mocha, where it hopes to replicate the success seen in the offshore prospects. The target depth of around six kilometres will make this the deepest well drilled in the Onshore Nile Delta. With the complexity of these high-pressure, high-temperature wells, reaching target could be a lengthy process. But, the team is encouraged by encountering a gas pay in the Messinian reservoir on the way to the target.
Summing up BP’s view on future exploration opportunities in Egypt, Mekawi says, “We believe the Nile Delta is a world-class basin and there is a lot of gas to be discovered here. So, we’re investing here because we believe there’s more to come and because we’re confident that we can bring the know-how, technology and finances that fit with the country’s needs.”
For BP, a business that has operated through joint ventures in Egypt for more than half a century now, the future looks assured, as a new era of gas becomes a reality. With a wave of projects due to come onstream, an interest in the super-giant Zohr – the biggest discovery in the Mediterranean – and continued exploration set to take place in and around incumbent fields, it is hoped that the Nile Delta will yield further resources in the years to come.
(Source: BP Magazine)
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