Egypt has faced challenges to its energy supply in recent years, but is looking ahead to new opportunities to revive domestic production. The country’s minister of petroleum and mineral resources Tarek El-Molla talks to BP Magazine about a new era of investment, how Egypt is well-placed to become a regional energy hub on the eastern Mediterranean, and the significant role that BP is playing in the country’s energy future
What have been Egypt’s energy challenges over the last five years?
Our challenges over recent years really began with the revolution of 2011 and 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, it’s been a real challenge to have insufficient gas for electricity and for industry.
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.
What are the next steps to a more secure national energy supply?
What are the next steps to a more secure national energy supply?
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 (WND) 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 74 new or amended agreements in the last three years with different partners.
We have also reduced our overdue payments by half and continue that process today – as a result, there has been dynamic activity in our oil and gas industry as partners recognize this as a time to invest for growth – and we’ve seen that through many of the discoveries in our acreage.
BP’s West Nile Delta project is one of the major developments offshore and is set to start pumping gas this year. What impressions did you have when visiting the project?
We have also reduced our overdue payments by half and continue that process today – as a result, there has been dynamic activity in our oil and gas industry as partners recognize this as a time to invest for growth – and we’ve seen that through many of the discoveries in our acreage.
BP’s West Nile Delta project is one of the major developments offshore and is set to start pumping gas this year. What impressions did you have when visiting the project?
Among my ministerial duties is to visit the field for two reasons: to check on progress and to motivate the teams there. And I was pleased and proud of what I saw – really enthusiastic teams on all sides and the project’s execution plan is well ahead of our time schedule. I understand that BP is aiming to deliver gas from the first phase – two fields called Taurus and Libra – ahead of schedule. This demonstrates BP’s commitment towards Egypt and an understanding of how urgently the market needs this gas to make a difference to local supply, reducing imported LNG.
It’s worth mentioning that we also completed an agreement for Atoll gas field in the East Nile Delta in a comparatively short timeframe and the delivery plan for that project aims to see first gas by the end 2017. These projects, together with other gas discoveries such as Zohr and Nooros, the collective actions of the government and international partners will lead not only to closing the supply and demand gap, but we will have a surplus of gas by the year 2021.
Do you envisage a time when Egypt might become a net gas exporter once again?
Do you envisage a time when Egypt might become a net gas exporter once again?
Yes. The gas surplus in our system by 2020 will be used for two things: to satisfy local demand – electricity, industry and so forth – including an expansion of our petrochemical industry. Secondly, it will go towards meeting our contractual obligations for exportation. Between four big gas developments – BP’s WND, Atoll, Zohr and Nooros – total production will amount to more than five-and-a-half billion cubic feet a day. This is more than Egypt currently produces and represents some $30 billion worth of investments.
How do you think Egypt can seize the opportunities in the eastern Mediterranean to become a regional energy hub?
How do you think Egypt can seize the opportunities in the eastern Mediterranean to become a regional energy hub?
We are preparing to become an energy hub; everybody knows 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, Liquefied Natural Gas (LNG) 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, but process supplies from other countries. For example, we’ve signed agreements with Cyprus to bring their gas here, whether for our domestic use or to export on their behalf through our LNG facilities. There’s an opportunity to do the same with any other gas in the Eastern Mediterranean basin.
What part does the energy and petroleum industry have to play in Egypt’s vision for 2030?
What part does the energy and petroleum industry have to play in Egypt’s vision for 2030?
Our oil and gas industry is pivotal to the country’s development. 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.
Together with our colleagues at the Ministry of Electricity & Renewable Energy, we are looking to address our energy mix as well. In 2022, electricity production will come from 80% hydrocarbon feedstock, but by 2030 that will decrease to 70%, with the remainder generated from renewable sources. This shift will relieve some pressure on the oil and gas industry, meaning those resources can be diverted to other ‘added value’ sectors, such as petrochemicals.
Together with our colleagues at the Ministry of Electricity & Renewable Energy, we are looking to address our energy mix as well. In 2022, electricity production will come from 80% hydrocarbon feedstock, but by 2030 that will decrease to 70%, with the remainder generated from renewable sources. This shift will relieve some pressure on the oil and gas industry, meaning those resources can be diverted to other ‘added value’ sectors, such as petrochemicals.
Overall, our industry vision is aligned with the national vision – to establish Egypt as a more deregulated market, working with dynamic supply and demand forces, to become a net exporter of gas with a more diverse energy mix.
BP has been operating in Egypt for more than 50 years. How do you see this partnership continuing to thrive?
BP has been operating in Egypt for more than 50 years. How do you see this partnership continuing to thrive?
We have seen BP’s commitment demonstrated on the ground through the decisions it has taken and the investments committed; WND, Atoll, as well as your non-operated concessions, like Nooros, and your different campaigns for exploration, like in Mocha and Gabal el Bahr. And most recently, BP’s 10% interest in Zohr is another excellent example. BP’s portfolio of operations in Egypt is quite huge and we are proud of that.
Also, it’s important to mention that BP did not stop operations through challenging times and we recognize BP’s commitment through a continued presence and the number of Egyptian staff in jobs at all levels. This is what a true partnership and a powerful success story looks like.
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