Political instability has stifled investment in the upstream hydrocarbons sector
Egypt is a net importer of oil and gas, even though hydrocarbons account for about 40 per cent of export revenues. According to the BP Statistical Review of World Energy, the North African giant produced 714,000 barrels of oil a day in 2013 and 56.1 billion cubic metres of gas. Its oil reserves are estimated at 3.9 billion barrels, while gas deposits are estimated at 1.8 trillion cubic metres (as of the end of 2013).
The Gulf of Suez is the main source of Egypts oil production, following the discovery of several large offshore fields in the 1960s. However, much of the new investment in exploration and development over the past 20 years has been in the Western Desert and in the offshore Nile Delta, with an emphasis on natural gas production.
|Refinery operator||Capacity (b/d)|
|Ameriya Petroleum Refining Company||81,000|
|Alexandria Petroleum Company||117,000|
|Alexandria National Refining & Petrochemical Company||16,000|
|Middle East Oil Refineries||100,000|
|Cairo Oil Refining Company||142,000|
|Nasr Petroleum Company||132,000|
|Suez Oil Refining Company||70,000|
|Asyut Refining Company||47,000|
|Cairo Oil Refining Company||35,000|
|b/d=Barrels a day. Source: MEED Insight|
Political instability, dissatisfaction with payment terms and mounting arrears to international oil companies (IOCs) have stifled investment in the upstream hydrocarbons sector since 2011. Combined with rapid increases in energy demand from the power sector, this has led to severe gas shortages in Egypt, with exports having to be halted and imports sought.
Energy minister Sherif Ismail is now addressing these shortcomings and attempting to revitalise the sector. No exploration and development agreements were signed between 2010 and 2013, but since mid-2014, 56 concessions and agreements have been inked for investments worth more than $12bn. He has also set a target of clearing all arrears with IOCs by the end of June.
Egypt has a large downstream oil sector, with nine refineries, but much of the capacity is antiquated and in need of upgrading or replacement. In recent years, many new refinery ventures have been proposed, yet only a handful have materialised. Ambitions to ramp up petrochemicals production to 15 million tonnes a year over 20 years will also go unfilled.
A number of energy projects are expected to be presented to investors at the March economic summit.
The Egyptian oil and gas industry is state-controlled, but includes about 60 IOCs operating as exploration concession holders, or partners with the state in joint-venture operating firms. The Petroleum & Mineral Resources Ministry oversees the sector and is the 100 per cent owner of the Egyptian General Petroleum Corporation (EGPC), the operational and commercial arm of the state in the oil and gas industry. Egyptian Natural Gas Holding Company (Egas) and Egyptian Petrochemicals Holding Company (Echem) operate alongside EGPC.
Direct affiliates of the ministry include a company set up to explore for oil and gas in the south of Egypt, known as Ganoub el-Wadi Petroleum Exploration (Ganope), and the Egyptian General Survey & Mining Authority, which looks after the mining sector.
Foreign companies operate in the Egyptian upstream sector on the basis of production-sharing agreements, usually signed after the award of a concession following a competitive bid round. Typically, the foreign operator commits to a phased exploration investment programme and, once any discovery is declared commercial, forms a production joint venture with EGPC.
Egypt also has a mature fertiliser industry. Production has risen steadily in recent years, reaching 15.5 million tonnes in 2011/12, of which 13.8 million tonnes was nitrogenous and the remainder phosphatic. Domestic consumption was about 8.5 million tonnes, leaving 7 million tonnes to be exported. Exports averaged about $850m a year in 2012 and 2013.
Amsterdam-listed OCI is the key player in the industry through its ownership of Egyptian Fertiliser Company and its shareholding in Egyptian Basic Industries Corporation.
Among the projects expected to be presented to investors are plans for a series of downstream schemes that would produce polypropylene and formaldehyde and their derivatives, as well as fertilisers. Several mining projects are also in the pipeline.
Petroleum & Mineral Resources Minister
(+20) 2 670 6401
This article is an edited excerpt from MEED Insights Egypt Projects Market Report 2014
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