2020: Exceptional Year for the Egyptian petroleum sector

The year 2020 was exceptional for the Egyptian petroleum sector with important achievements at several levels. In an interview done by “Egypt Oil & Gas” with the Minister of Petroleum and Mineral Resources TAREK EL MOLLA some of these achievements were highlighted.

New Discoveries in 2020

The most prominent and important achievement in 2020, as an exceptional year for the upstream activity, was definitely adding the Red Sea and the West Mediterranean to the world investment map for the first time, representing promising untapped areas, full of opportunities and potentials. In fact, those areas attracted investors and mega players to invest in the Egyptian oil and gas industry, which would be of great returns and positive outcomes over the next few years.  Hence, in 2020, and despite the COVID-19 pandemic and its effect on the world oil prices decline, 62 new oil and gas discoveries were made in the Mediterranean Sea, Western and Eastern Deserts, Nile Delta and the Gulf of Suez; 15 of which were natural gas and 47 were crude oil discoveries.

New Hydrocarbons Production Heights  

In 2020, Egypt has completed major gas production projects, such as North Alexandria fields and Phase 9B at the deep waters of the West Delta, Baltim gas field, Katameya gas field, and others. This comes within the framework of putting five major projects of gas and crude production along with more than 200 new wells on the production map successfully over the whole year, with total natural gas production of about 1.5 billion cubic feet (bcf) and more than 190,000 barrels of crude oil and condensates. Egypt’s current average production of crude oil, condensates and liquefied petroleum gas (LPG) is 638,000 barrels per day (bbl/d), whereas production of natural gas is about 6.6  bcf/d, knowing that our production capacity allows us to produce about 7.2 bcf/d.

Structural reforms

The success and effectiveness of the country’s economic reforms, as well as the measures that have been taken in the oil and gas sector paid off with the signing of 14 upstream agreements, in the midst of the pandemic’s peak months from March till date, with major international oil companies (IOCs) that work in the Egyptian upstream domain for the first time, such as ExxonMobil and Chevron, with investments of about $1.5 billion. Egypt inaugurated the Egyptian Refining Company (ERC) in Mostorod, along with the major expansions in one of Alexandria’s refineries, with total investments of about $4.5 billion. Upgrading Egypt’s infrastructure that supports the efforts of transforming the country into a regional energy hub were carried on. Furthermore, Egypt’s efforts for utilizing the East Mediterranean natural gas resources paid off with the signing of the East Mediterranean Gas Forum (EMGF) Statute to become a regional intergovernmental organization.

Over 22 agreements Signed in 2020

Egypt signed 22 upstream agreements with IOCs in 2020, with minimum investments of about $1.6 billion and a signature bonus of about $139 million, for drilling 74 wells. These agreements give hope in the near future, representing a key pillar for achieving more discoveries, as well as maximizing Egypt’s production and reserves from new areas within its exclusive economic waters in the Red Sea and the Mediterranean Sea. Moreover, the focus on Egypt is obvious, particularly after the decision of Chevron and ExxonMobil companies to invest in nine blocks together. This provides the petroleum industry with the advanced technologies these companies possess for upstream operations in the new areas.

More than 80% of arrears paid to IOCs

Egypt succeeded in reducing the arrears gradually by 86%, from about $6.3 billion in 2013 to $850 million at the end of the last fiscal year despite COVID-19 pandemic. This led to increasing the partners’ confidence and stimulating their investments in oil and gas upstream operations.

Digital transformation: Egypt Upstream Gateway (EUG)?

Egypt is working on launching Egypt Upstream Gateway (EUG) to promote Egypt’s promising oil and gas blocks internationally through availing the geological and technical data for the interested IOCs. This project is one of its kind in the Egyptian petroleum industry and was implemented under the first program of the sector’s modernization project (Upstream). This gateway is a modern quantum leap in promoting the oil and gas potentials via an integrated digital portal for the activity of exploration and production of oil and gas resources. It was implemented with the assistance of Schlumberger, a major IOC with expertise and advanced technological solutions. The gateway comprises the technical data of such activity and works to maximize its value, development and marketing worldwide. It displays opportunities, indicators, and potentials together and promote them via the new portal of the international bid rounds, offered by the petroleum sector over the coming period, with the aim to explore for new promising areas. This advanced mechanism will assist in taking investment decisions rapidly.

Boosting local natural gas demand

The rapid expansion in natural gas utilization and its various services nationwide is on the top priorities of the Government, due to its high economic and environmental returns to the citizen’s daily life. Therefore, the ministry has doubled the rates of natural gas connections to residential units annually to be 1.2 million new residential units per year, compared to only 600,000 units per year, previously.

In 2020, natural gas reached more than one million residential units, despite COVID-19 pandemic. In addition, the Government is collaborating with the state’s ministries for expanding the replacement and converting vehicles to use natural gas as a fuel. It is an integrated and excellent initiative, in which citizens will feel the difference, as the natural gas cost stands for 50% of the gasoline cost per liter. Moreover, in order to increase the expansion of gas fueling stations, the country is currently constructing 325 new stations until next December, which is an unprecedented number, along with the replacement and conversion of 400,000 vehicles to use natural gas within three years, in addition to providing stimulating programs, facilities and soft loans for the initiative beneficiaries.

Working on becoming a regional energy hub

Egypt has a strong strategic system in the field of natural gas, as it owns two plants for liquefying natural gas in Idku and Damietta, privileged by their location on the coasts of the Mediterranean, in addition to the presence of a Floating Storage Regasification Unit (FSRU) in Ain Sokhna and an extended and flexible pipeline network. All this enables Egypt, in spite of the challenges of the COVID-19 pandemic, to continue LNG exporting activities and to become a starting point for the Eastern Mediterranean gas. Natural gas is considered the cleanest fossil fuel and one of the green energies that have low emissions, and Egypt, as part of its commitment to international agreements regarding reducing emissions and preserving the environment.

Founding member of the East Med Gas Forum (EMGF)

The member countries of the EMGF share one joint interest, which is achieving the maximum economic benefit from their natural gas resources of the East Mediterranean region, through forming an integrated regional, cooperative system that utilizes the potentials and infrastructure of each country to benefit all producers, consumers and transit countries. In fact, signing the forum’s statute is a significant step towards achieving this goal and will definitely contribute to the East Mediterranean region as an additional and reliable source of natural gas for Europe and worldwide with competitive prices. This will certainly change the dynamics of the international gas market. Moreover, other countries increasing willingness to join and participate in the activities of the forum is evidence that the forum has succeeded in setting a distinct model for international regional energy cooperation, which attracted the world’s attention, as France has formally applied to join the forum as a member, in addition to the requests of the US and the United Arab Emirates (UAE) to join as observers. The high-level working group of the Forum has held its 8th meeting to review the forum’s roadmap during the year 2021 and approved the requests for joining two additional members to the Gas Industry Advisory Committee (GIAC) to be 29 members from the most significant companies and institutions concerned with gas industry in the region, compared to 16 members since its establishment in November 2019.