2 May 2017
Sector will sign five new deals with investments of $154m
The petroleum sector has achieved numerous developments during the current period in natural gas production. Egypt’s total production of gas reached 5 billion cubic feet per day, following a number of new discoveries. Minister of Petroleum and Mineral Wealth Tarek El Molla explains the developments in an interview with Daily News Egypt.
Is the ministry set to sign new petroleum agreements in the coming period?
The Ministry of Petroleum plans to sign five new oil agreements between foreign partners and the Egyptian General Petroleum Corporation (EGPC) to search for oil and gas in Egypt’s Western Desert, with minimum investments of $154m and signing grants worth $63.2m to drill 30 wells.
What are the main new discoveries? And what is the plan for linking output to production?
The fruits of the new gas discoveries in the Mediterranean are already emerging. The first output from north Alexandria gas fields were placed on the production map recently, reaching 650 million cubic feet of gas per day from the first phase of the Taurus and Libra fields.
The north Alexandria project’s output will rise gradually as we go through new phases to reach 1.4 billion cubic feet of gas per day by mid 2018.
This supports the plans of the petroleum sector to increase gas production, which will reach its peak once linking the output of Zohr field before the end of the year.
The petroleum sector is in a race against time to link the production of the first phase of the Zohr field, estimated at 1 billion cubic feet per day, to the national gas pipeline, to meet the domestic demand.
The production capacity of Zohr field will gradually increase to reach 2.7 billion cubic feet per day. The development of the field has become a unique model for giant gas field projects in the world, not only in terms of its size, but also in terms of the record time it took to develop.
The discovery was made only 18 months after signing the agreement. And six months after discovering the field, it translated into contracts for development. About 28 months later, the output began. This is below the worldwide average of 6-8 years for development.
We are working with our foreign partners, including the Italian ENI and the British BP, to increase production of Noras in the coming years. Earlier this year, the field output was about 1 billion cubic feet per day. In the first quarter of the coming year, the Atoll field will be linked to production.
The coming years will witness more gas field projects that will support the increase in gas production, such as the 9B phase in the deep waters west of the Delta, along with the Salamat and Baltim fields.
The latest discoveries achieved are the Katameya find by BP north of Damietta marine area. This area alone witnessed three major gas discoveries in recent years. This reflects the potential and future opportunities in Egypt in the gas sector.
How much did foreign investments amount to at the end of the current fiscal year?
We expect the size of foreign investments in oil and gas to reach $10bn at the end of the fiscal year 2016/2017. Many foreign companies are increasing their investments after the government paid them part of their arrears and assured them they will receive the remaining part.
Moreover, the sums they received are spent in Egypt to develop and expand refineries. There are a number of projects worth over $8.2bn being implemented now in that sector.
What is the ministry’s plan to provide fuel for electricity during the summer?
We completed preparing a comprehensive plan to provide the needs of power plants by 100% in the summer, in which consumption peaks.
The plan includes the provision of all kinds of fuel, whether natural gas as the main fuel or essential alternatives such as fuel oil and diesel. The plan started already in April and will be in place until the end of September.
We will also secure the needs for the new power plants that will begin commercial operation this year, including the Siemens power plants in Beni Suef, Borollos, and the New Administrative Capital.
More gas-fuelled power plants will also become operative this year. Our plan includes providing fuel for 59 power plants including 57 plants linked to the national gas pipeline.
The average daily volume of fuel that will be pumped to power plants in the summer is 142 million cubic feet of gas, fuel oil, and diesel.
The current growth in natural gas production supports our ability to secure fuel supplies for electricity after the new fields become linked to the production.
We estimate the total size of gas pumped to power plants to reach 5.75 billion cubic feet per day, including 5 billion cubic feet from domestic production and 750 million cubic feet imported through liquefied gas shipments.
We will also provide extra quantities of fuel oil and diesel for emergency backup.
The plan does not only include meeting the needs of electricity, but also that of all other consumption sectors.
The petroleum sector succeeded last summer in providing all types of fuel needed by electricity power plants, which contributed to the stability of the national grid.
What about the foreign partners dues?
The Ministry of Petroleum seeks to pay dues to the foreign oil companies operating in Egypt during the coming period, in cooperation with the Central Bank of Egypt and the Ministry of Finance, as to encourage these companies to investment more in Egypt.
The oil sector is abiding to pay regular dues to partners, including buying their shares of oil and gas for domestic consumption. We are also committed to paying accumulated arrears.
Over the past three years, in cooperation with the government, driven by political stability and economic growth, the oil sector managed to reduce the arrears from $6.3bn to $3.5bn by the end of 2016.
The political leadership and the government are keen to fulfil their obligations with their strategic partners and to find solutions to deal with one of the major challenges that have had a negative impact on the search and exploration for oil and gas development, and the delay in implementing some major projects in the sector.
This is of special importance because paying back foreign partners encourages them to inject more investments and stimulates research and exploration works, which is for the benefit of meeting the domestic needs of petroleum products and natural gas.
How much does it cost to import monthly petroleum and gas products?
The average value of importing petroleum products and gas per month is $800m. The value is also impacted by several factors, such as global oil prices, the exchange rate, the size of domestic consumption, and the size of local production of oil and gas.
Saudi Aramco secures shipments of 700,000 tonnes of fuel per month to Egypt, valued at $340m, which eases demand on foreign currency. The payment plan is also facilitated.
What are the measures taken by the ministry to provide the needs of the country’s petroleum products?
The domestic market depends on gaining a major part of its petroleum products from local production that is refined in Egyptian labs. We complete the remaining market needs through imports.
The ministry signed a number of commercial agreements with Arab institutions and companies to secure part of the needs to push forward the economy and meet fuel needs.
This includes the deals with Aramco and the Kuwait Petroleum Corporation, which also includes the importing of crude Kuwaiti oil. Additionally, we recently signed a deal with the Iraqi side to import 1 million barrels of crude oil per month from Basra. This is refined in Egyptian labs.
When will Egypt achieve self-sufficiency of natural gas?
The strategy of the oil sector relies on achieving self-sufficiency of natural gas by the end of 2018.
We also plan to achieve a surplus by 2020, which can contribute to achieving added value through the petrochemical industry.
What are the details of joint cooperation with Cyprus and Greece in the Mediterranean region?
We were taking steps to enhance cooperation between Egypt, Cyprus, and Greece over the past two years, with the support of the political leadership in the three countries.
Egypt is interested in developing cooperation with the two countries to maximise the use of energy and resources development, especially after the recent discoveries of natural gas in the Mediterranean, in both Egypt and Cyprus.
We agreed on the need for trilateral cooperation in the field of natural gas transfer from Egypt’s and Cyprus’ fields to Europe. There are agreements between the Egyptian and Cypriot governments in this regard.
This is in addition to the establishment of a natural gas pipeline from Cyprus to Egypt for mutual benefit and to support strategic cooperation in the field of energy, which serves Egypt’s current orientation and strategy to become a regional trading hub for energy in the region.
What are the details of the memorandum of cooperation recently signed with Jordan?
The memorandum of cooperation between Egypt and Jordan was signed early last month during the Third International Conference on Energy in the Jordanian capital. The agreement is related to the field of energy in general and natural gas in particular.
It focuses on cooperation in the fields of training and expertise-exchange in fields of natural gas and re-exporting gas through the natural gas infrastructure in both countries, next to using gasification vessels in Ain Sokhna and Aqaba in emergency situations, and during maintenance periods to cover part of the needs of Egypt and Jordan from gas.
What are the most prominent new petrochemical projects?
The Egyptian Petrochemicals Holding Company (ECHEM) is considering the establishment of a number of new projects in the framework of the national plan for petrochemicals. The value of these projects amounts to $1bn, including projects for the production of propylene and its derivatives in Alexandria, and the project for the production of formaldehyde and its derivatives, as well as the project for the production of resins, in addition to the project for the production of ammonia and its derivatives.
The petrochemical industry in Egypt is currently witnessing a comprehensive renaissance through the implementation of a number of projects to maximise the added value of petroleum wealth, to provide petrochemical products for the domestic market, on which several complementary industries rely.
There is cooperation between the Egyptian Petrochemicals Holding Company (ECHEM) and the Scientific Research Academy to apply the results of studies and research to establish projects that help meet local market needs and using available resources. This includes projects to recycle plastic and strengthening national innovations to support small and medium-sized industries that are based on petrochemical products.
What are the latest developments in the bid for gold that was recently posed?
The Egyptian Mineral Resources Authority (EMRA) received 14 offers from international mining companies in bid No. 1 for 2017 for research and exploration of gold in five areas of the Eastern Desert.
The Ministry of Petroleum and the Egyptian Mineral Resources Authority (EMRA) will form technical, financial, and legal committees to review the bids.