Egypt – The opportunity to become a crucial regional energy hub: Self Sufficiency by 2020 (ABO Oil)
According to Tareq al-Mulla, Minister of Petroleum and Mineral Resources, the start of production at new natural gas fields, led by Zohr—planned for 2017—offers the opportunity to achieve this goal.
Tareq al-Mulla has been Egypt’s Minister of Petroleum and Mineral Resources since September 19, 2015, when his predecessor, Sherif Ismail, was appointed Prime Minister. He previously worked at Chevron and at the Egyptian General Petroleum Corporation (EGPC), where he rose to hold the office of Executive Chairman.
Egypt is on course and tells of an ambitious future, made particularly rosy by the discovery, in August 2015, of the Zohr gas field. A treasure of 30 trillion cubic feet of gas, Zohr should enter into production in 2017. This important event, as explained to Oil by Egypt’s Minister of Petroleum and Mineral Resources Tareq al-Mulla, offers the country “the opportunity to become a key regional energy hub,” and to focus, with the entry into production of various discovered gas fields, “on achieving self-sufficiency in the natural gas industry by 2020.” Not to mention foreign investment, which, if the rest of the world were to suffer a setback, would continue to be made in Egypt and, with Zohr, are expected to increase. Ultimately “this discovery should persuade international oil companies to invest and intensify exploration activities in the region, opening new horizons to other discoveries.”
At the end of August, Eni’s discovery of the Zohr gas fields caused a stir around the world. What are your expectations in relation to this resource, and when will this gas field become operational?
The discovery of the Zohr gas field, announced by our partner Eni in El Shorouk, within the concession area belonging to the Egyptian EEZ [Exclusive Economic Zone] in the Mediterranean Sea, has revealed the existence of 30 trillion cubic feet of gas that will mainly be used to cover part of the needs of the local natural gas market. According to the development plan, agreed between the Egyptian Natural Gas Holding Company (EGAS) and Eni, the gas field is expected to enter into production in 2017. Currently, activities are underway for the construction of onshore facilities for receiving gas through the offshore pipeline linking Zohr to the refining zone in Port Said, so that it can be injected into the national gas grid. The formation of the Petro-Shorouk Development Corporation is also being provided for in order to accelerate the development of the first phase of production of wells and in order to make them fully operational by the end of 2017. Moreover, the drillship Saipem 10000 has already reached the gas field and begun its drilling operations on the Zohr–2 well, which will be completed shortly. This discovery—a new hydrocarbon rich geological formation, in an area in which gas has never before been discovered, neither in Egypt, nor in the Mediterranean—should persuade international oil companies to invest and intensify exploration activities in the region, opening new horizons to other discoveries, which will help to increase natural gas production rates in Egypt. There is no doubt that the discovery of Zohr will encourage international companies operating in the Mediterranean region to reconsider their operations and existing exploration facilities, and will lead to an acceleration of processes and drilling activities by virtue of the excellent results that can be achieved in the region.
What is your view on the front line role that Egypt might play in the region, in light of its current and future potential?
In effect, Egypt has the opportunity to become a key regional energy hub by virtue of several advantages, including its geographic location, the Suez Canal projects (opening of new horizons, greater and more interesting future investment opportunities) and the Sumed oil pipeline, in addition to the availability of oil and infrastructure for gas within an integrated network of oil pipelines for the transport of oil, gas and LNG, projects in the refining and petrochemical industry and, above all, qualified, expert human resources.
What can you tell us regarding new Egyptian projects in the gas industry over the coming the years?
We are currently proceeding, in collaboration with our foreign partners, with the implementation of programs for the development of gas fields discovered in the deep waters of the Mediterranean, which involve 3 new projects—for a total investment of USD 27 billion—aimed at drilling wells and creating infrastructure required to cope with expected production. As regards the projects for Zohr, North Alexandria and Atoll, these are expected to enter into production by the end of next year, with a capacity of 1.9 billion cubic feet per day, so as to help offset the natural decline in production of “mature” gas fields and to increase Egypt’s total gas production in order to bridge the current gap between production and consumption. With the entry into production of the newly discovered gas fields, we are aiming to achieve self sufficiency in the natural gas industry by 2020. At the same time, we are developing and expanding infrastructure for transporting gas to consumers in order to ensure their needs through a series of projects aimed at expanding the national network. Moreover, the construction of new gas pipelines to transport natural gas to areas where it is consumed will meet the needs of residential units and electrical power plants, including the large electrical power plant built by Siemens Co. which will supply the new administrative capital and other areas.
The global fall in oil prices has prompted many large companies to reduce their investments in various countries of the world. What consequences has this had for production and investments in Egypt’s oil and gas industry?
Despite the current fall in oil prices on the global markets and despite concerns regarding the possible negative impact that this may have on investments in the field of exploration and development, there are positive signs for Egypt’s oil industry. The international companies operating in Egypt have confirmed their commitment in relation to previously agreed work programs and are investing in accordance with planned projects, in order to take advantage of the price reduction to seize the opportunity offered by low drilling costs and low oil services costs. Also, the high rates of success of explorations in Egypt, the balanced conditions of agreements, the short periods for supplying new areas and new contracts, and the extensive efforts of the oil industry aimed at providing new solutions, are encouraging foreign oil companies to maintain their investments. With regard to flows of investment in the oil industry, we can say that these are currently proceeding normally, since the minimum investments of foreign companies operating in the upstream sector over the last fiscal year 2014/2015 in Egypt amounted to approximately USD 7.5 billion. Moreover, it is expected that the figure relating to investments from foreign companies will grow over the coming years, following the launch of major projects–such as Zohr–in the oil and gas fields of the Mediterranean and North Alexandria. Since November 2013, we have signed 64 new oil agreements with major international companies aimed at oil and gas exploration in the regions of the Mediterranean, the Nile Delta, the Western Desert, the Gulf of Suez and the Sinai, with minimum investments of around USD 14.3 billion and with the drilling of 274 wells; all this thanks to the constant oil industry policy aimed at increasing the number of agreements with major international companies and inviting them to invest in promising opportunities in Egypt. In fact, we have already begun to reap the benefits of these agreements, for instance, with the recent discovery of Zohr in the concession area of El Shorouk, in the Mediterranean, which was the result of an agreement signed with our partner Eni in January 2014.
Moreover, over the coming months, we are aiming to close ten new agreements after completing the required legal procedures, with minimum investments amounting to USD 441.95 million and a bonus at the time of signing of USD 61.7 million for the drilling of 28 wells, specifically, eight agreements with EGAS and Ganope, resulting from previous rounds of tenders from the two companies in 2015, and two agreements with EGPC.
In addition to the historical role played by Eni, what can you tell us about the Italian companies operating in Egypt: how can current cooperation be improved?
The collaboration between Italy and Egypt in the oil industry, which dates back to the fifties, is considered a clear and reliable model, which has contributed positively to promoting bilateral relations between the two countries, and there are many Italian companies operating in Egypt, such as Eni, Edison, Technip. Eni has been operating in Egypt since 1954, through its subsidiary IEOC, which is one of the main oil companies in Egypt and, it is thanks to this fruitful collaboration that the discovery of Zohr was made. In January 2014, Eni signed an agreement with the Minister of Petroleum and (EGAS) after being awarded exploration rights during the international round of tenders organized by EGAS. This discovery confirms the importance of the strategic partnership between the Egyptian oil industry and Eni: a collaboration as long as the history of Italian companies in Egypt.
By Hend Soliman [Agenzia Nova]:
She has worked at Agenzia Nova since 2013 as a correspondent in Cairo. As a professional journalist and member of the Egyptian Journalists’ Union, she started her professional career with the Cairo daily newspaper, Youm7, where she worked for six years, dealing with internal politics and social policies.
From ABO Oil Magazine #31:
Gas – the Mediterranean at full throttle
View the full magazine at: