Egypt: Eyeing opportunities

18 May 2006

How important is Egypt to Petronas’ international business?

Petronas embarked on its international expansion in the early 1990s, a drive that has intensified in the past few years in selected markets such as the Middle East and Africa.

In Malaysia and elsewhere, we have built our experience and capability in both the upstream and downstream sectors of the oil and gas industry. That has enabled us to compete in the international arena, earning the trust and confidence from partners and host governments.Egypt is an important market for Petronas as it positions itself to become an integrated global liquefied natural gas (LNG) player to enhance our already established leading role in the Far East LNG markets. Petronas also regards Egypt, the Middle East and the African regions in general as one of the key focus areas to build our upstream position.

From a geographical standpoint, Egypt’s location in the Mediterranean region means that it is a natural gateway for Petronas to enter the European and North American gas markets. From a marketing perspective, Egypt’s gas resources and strategic location offer one of the strongest incentives for any LNG player to market their product to buyers in the Atlantic basin, including the huge US and European markets.

What activities is Petronas Egypt presently involved in?

Petronas’ foray into Egypt began in 2001, when it signed its first farm-in agreement with the Royal Dutch/Shell Group to explore and develop gas fields in the North East Mediterranean Deepwater (Nemed) concession area.

Two years later, Petronas acquired [Italian company] Edison’s stakes in both the ELNG projects at Idku and the West Delta Deep Marine (WDDM) concession block. Then in July 2005, Petronas signed a co-operation agreement with Tharwa Petroleum Company of Egypt to create and add value to oil and gas resources in and outside Egypt, and to assist in the development of the human resources capability of our Egyptian partner.

Currently, we have interests in several other blocks in Egypt, namely El-Burg, the Western Desert, where we have four blocks, and North Sidi Krier, all of which are still in the exploration stage.

How will Petronas expand its operations in Egypt’s upstream and downstream oil and gas industry?

As Petronas moves forward, it will continue to seek viable new opportunities in the oil and gas industry for growing its future business in Egypt. Building on the partnerships and foundation it has established in the country’s petroleum industry, Petronas hopes to be able to continue contributing to the value-added development of Egypt’s oil and gas resources through long-term synergistic partnerships.Petronas plans to invest up to $700 million over the next three years into the upstream oil and gas sector in Egypt. This amount is the cumulative Petronas share of its upstream interest in WDDM, Nemed, El-Burg, the Western Desert and North Sidi Krier. We are also evaluating a few blocks that are open for bidding and will consider bidding if the prospects are good.

Cairo places a high priority on the development of Egypt’s gas reserves and has set out some very ambitious plans for the gas sector. Do you share the government’s optimism?

We share the Egyptian government’s optimism and are extremely encouraged by the efforts that are being put in place to develop the gas industry and related sectors.Egyptian oil fields are maturing and production is declining.

In your view, is this trend irreversible?

Any operator will continuously strive to optimise a field’s production to be economically viable. With the application of new technology - secondary recovery and enhanced oil recovery, for example - there will be more opportunities in the future to delay the effects of declining production from brown fields.

What role do you see in Egypt for international oil companies such as Petronas? We hope

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