Giancarlo Strocchia
Interview with Tarek El-Molla, Egypt's Minister of Petroleum and Mineral Resources. Thanks to major gas discoveries in the Mediterranean and a vast infrastructure upgrade plan for its crude oil conversion system, Egypt has the opportunity to become a regional energy hub and reach its goal of energy self-sufficiency by 2018
Cordiality and firmness. In the eyes and words of Tarek El-Molla, Egypt’s Minister of Petroleum and Mineral Resources, the country is using all of its willpower to take full advantage, now and in the coming years, of the opportunities offered by its domestic energy industry. Huge gas discoveries in the eastern part of the Mediterranean have led to broad ambitions for the entire sector, and those ambitions are manifest in specific, innovative projects. Moreover, the recent doubling of the Suez Canal has, for Cairo, been another launchpad to project the country towards a future of sought-after and necessary growth. El-Molla is fully aware of the potential offered by these developments and intends to focus his efforts toward taking full advantage of them.
Mr. El-Molla has been Minister of Petroleum and Mineral Resources of Egypt since September 19, 2015, when his predecessor, Sherif Ismail, was appointed Prime Minister. He worked previously for Chevron, where he was regional director for Central and South Africa, and for the Egyptian General Petroleum Corporation (EGPC), where he served as President.
Minister, what are the main energy challenges that your country is preparing to face over the next ten years?
My country has already started working on an energy industry change strategy, launched in 2013, which aims to close the gap between our energy production and local consumption and demand. This strategy is implemented through various actions to accelerate projects already under way. Secondly, our continuing goal is to increase the number of bid rounds so that over the year we enlarge our global exploration agenda and conclude a significant number of concession agreements and contracts. At the same time, we want to adopt a plan to improve our refinery system by expanding and modernizing certain plants. Because this is a project that is already in progress, we will soon be in a position to face the challenges that may arise in the future, problems related to exchange rates, price fluctuations and the increase in consumption and demand. Therefore, in 2014 we began a period of transition that will continue for another five years, combining adequate local production, the structural upgrading of the refining system and governmental reform. This period will see subsidies rationalized and improvements in the product value chain. This in turn will lead to greater efficiency, and therefore, allow us to be ready to address the ambitious plan we have undertaken.
What bearing does the energy industry have on future projects related to your country's economic relaunch?
The energy industry is certainly a key element, capable of contributing to the realization of important projects for our economy. This is equally true for any developing nation, as energy is an engine for growth for all such countries and economies in the world. We are seeking development through our gas discoveries and the acceleration of projects related to this resource. We are working hard to close the gap between consumption and production, a gap that currently forces us to import LNG. We will reach self-sufficiency by the end of 2018, an accomplishment that will enable us to supply energy for all of the country’s strategic sectors. We have already managed to meet industry demands, and in the future, we will meet all domestic and commercial needs. At the same time, if there is a surplus of production, we will consider two strategies in parallel. On the one hand, we will prioritize our commitments to exports and the contractual obligations that need to befulfilled. On the other hand, we will try to use any extra gas for added-value industrialization and transformation specifically in the petrochemical industry. We will also expand and modernize our refinery system, which will enable us to achieve some products in line with the most advanced standards, up to Euro 5, so that we can export them. The position we would like to reach is that of a regional energy hub, not only for gas, but also for crude oil and petroleum products. Egypt benefits from a privileged geographic location between the Mediterranean and the Red Sea. We have oil pipelines, thanks to which we already receive the crude oil that is coming from the Gulf Countries, and also the important contributions of the Suez Canal. With these assets, we can achieve the total interaction that a hub has to offer, whether for trading, storing or consumption. The same situation applies to the electricity industry. We will be regionally connected to North Africa, the Middle East and to neighboring Arab countries. We also plan to connect with Europe by an undersea cable through Cyprus. All of the above are important elements for achieving the role we aspire to play.
The recent major discoveries of Gulf fields off the coast of Egypt suggest a great development of this resource in the coming years, making it possible for Egypt to return to being a net gas exporter. Is this what you hope for?
As regards the latest gas discoveries and the way in which we want to go back to being net gas exporters, the answer to this would have to be yes and no. No doubt in the future we will be in a position to achieve energy self-sufficiency—thanks to the work carried out with our strategic partners, such as Eni and BP, we have been able to discover the supergiant gas fields of Zohr and Nooros. With the implementation of the first phase of the project for entering these gas fields into production in 2017/2018, total domestic gas production is expected to exceed 5.5 billion cubic feet a day. Therefore, we will achieve self-sufficiency and we will become an export country; however, this is not what we hope for. What we want to develop through the gas surplus are value-added industries such as the petrochemical products and transformation sectors. Therefore, essentially, we are working in parallel with the development of our industrialization and modernization strategy for the petrochemical sector.
The revolutionary discovery of the Zohr gas field appeared to open a new chapter for your country's, and indeed the entire Mediterranean basin's, energy development. Are we in fact witnessing a new energy era for the entire region?
Within the Mediterranean, Egypt benefits from an excellent geographic position. We have the Suez Canal, and also other important infrastructure, such as the LNG plants in Damietta and Port Said, the refineries on the coasts, the Sumed oil pipeline that travels from the Gulf of Suez to offshore Alexandria, a national gas network and, of course, our natural resources. We are also expanding our refineries and increasing their capacity. The combination of these factors, in addition to the partnership launched with the Eastern Mediterranean countries, will lead to the development of a regional hub for gas production and export. In fact, we are working on developing a legislative framework to move in this direction, both as regards the gas market regulator and in terms of legislation for investments that the government is soon expected to approve. We are also working through the Supreme Committee to give an executive perception to this ambitious project, in collaboration with its ministries and state agencies, in order to initiate the implementation process. I think that we are moving in the right direction and we will not be working alone. We have a big market, as well as good facilities and infrastructure. We are also ready to cooperate with the private sector.
The discovery of the Zohr gas field was a testing ground for the use of new and increasingly sophisticated exploration technologies. Do you think it is right to proceed along the technology-sharing path on a regional level?
The discovery of the Zohr gas field has proven that adopting new exploration models can lead to exceptional results. Considering the cutting-edge technologies and the operational approaches used for this successful exploration, this discovery has acquired even greater value since it originated in Egypt. So, I think that the energy potential of the region and of the Mediterranean basin has been released in some way and at the same time I believe that the new technologies make a difference and enable potential resources to turn into concrete results. Proof of this is the announcement of new rounds of bids by all neighboring countries. This is an era of new technologies and new exploration models.
What collaborations have you launched with Eni and how do you expect these collaborations to continue in the future?
Our collaboration with Eni started many years ago. The company has been our strategic partner since 1954, so they have been with us in Egypt for over 60 years. Eni is working in all the most important areas in the country, in the Western Desert, in the Eastern Desert, in the Sinai, in the Gulf of Suez, and offshore. The company has an excellent understanding of the context, the operating environment and the business models in Egypt. I genuinely believe this cooperation will continue for many years to come. We are very happy and proud of this partnership, and we hope to develop it further in all sectors, in the upstream and downstream, and even midstream.
The Arab Fund for Economic and Social Development will provide approximately $80-85 million for the reconstruction of a photovoltaic plant in the Egyptian governorship of Aswan. How important is the development of alternative resources for your country's energy mix?
This is something that we are focusing a lot of attention on. The use of fossil fuels as a primary energy source is not sustainable. Therefore, along with our colleagues at the Ministry of Energy and Renewable Resources, we have adopted a strategy for 2035 with which we aim to increase the renewable component of the energy mix from its current level (9 percent) to up to 30 percent by 2035. Doing so, we will move towards the introduction and expansion of other renewable resources, such as wind and solar power. This will help us to achieve the energy mix the country needs and will also reduce the amount of fuels used in energy production. It is therefore a positive intervention for all. We have to work hard and we are adopting and implementing some of the policies approved by the government, and the Ministry of Energy and Renewable Resources is implementing some policies to encourage investment in renewable resources. At the same time, we have plans for combined-cycle energy production, rather than simple open-cycle plans, so as to improve efficiency. We are all working together through this very comprehensive energy strategy that was approved by the Supreme Council of Energy a few months ago.
