A bright future for activity in EgyptJuly 7, 2021
Amr Farrag, chairman of Saknafta Petroleum Services, talks to The Energy Year about managing the impact of Covid-19, the best approach to developing Egypt’s brownfields and expectations for the country’s energy hub strategy. Saknafta Petroleum Services is a privately owned provider of oilfield, pipeline and process services.
How should Egypt deal with its brownfields?
They should be under the umbrella of one company, unifying their management. This would improve production and performance. If, for instance, you are a company that has 10 big fields and one brownfield, you are definitely not going to pay much attention to the brownfield. But if you transfer that brownfield to a company that has nothing but brownfields, they will do better. This happened in Oman and the results were positive. In Oman, Shell gave the small fields to smaller companies and they did well.
What kind of technology are you looking to incorporate in your portfolio?
Indeed, we’d like to introduce new technology to our business, as there is something new in the coiled tubing business every day. We are looking at technology related to fibre-optics, which will allow us to improve interactions with the well and to acquire knowledge of the well through more specific data.
What is your view on Egypt’s energy hub strategy?
It’s a great move, especially after the discovery of the Zohr gasfield. The East Mediterranean has proven to be very rich in gas. Many countries will probably find gas, such as Israel, Lebanon and possibly Syria. They can find gas, but if they decide to develop it, it will probably not make commercial sense. Their best option is to send it here, where we can treat it. There is a bright future for the East Mediterranean gas hub.
In Egypt, we have the necessary assets, but these have not been operating at full capacity. As a result, the country had to face many penalties because we couldn’t supply enough gas. Now that is in the past, and moreover, we will be able to process our neighbours’ gas when it becomes available.
As Saknafta, we are in the gas business too, commissioning plants. We have been engaged, as contractors, in commissioning plants for WND BP [BP’s West Nile Delta project]: we finished the plant for Giza-Fayoum [WND’s second stage] in 2019 and are now working another WND project, the Raven processing plant, which is due for completion about now – in fact, the first gas is already in.
We are also maintaining the BAPETCO plants and supplying nitrogen to Petrobel’s Zohr project – for nitrogen purging and leak tests.
What interest do you think there will be in the recently announced bid rounds?
There will be a lot of big exploration companies coming, such as Chevron or ExxonMobil. Also, companies like BP and Shell – they are becoming more and more keen on exploration. The bid rounds, especially the offshore ones in the Red Sea and the Mediterranean, will be very attractive for the majors. Onshore, I don’t think too many of the big operators will be interested – maybe Apache and also Eni in Sinai.
How have you navigated the impact of the Covid-19 pandemic?
At the beginning of 2020, when the pandemic started, companies reduced their operations. We had about three months – from March to June – with activity levels varying between extremely low and none at all. Afterwards business picked up slowly.
In Saknafta, luckily, we have two types of operations: well services and commissioning of plants. In well services, we do well-stimulation and tubular running services, which are all connected to drilling and production activities. We have day-to-day operations servicing oil wells and these were affected for two reasons.
One was that companies’ approaches varied during the pandemic. At the beginning, everybody was paranoid about it and didn’t want to take any risks, so operations were affected. Then oil prices dropped badly – and even went negative at one point. Things were bad and there was no point in servicing the wells.
Luckily, we had other projects, including commissioning of plants and services for plants and pipelines. These are time-related more than oil price-related. If a company has a project, it has a time limit for finishing it. We have one big contract that allowed us to survive. We were indeed affected, but we still made some progress in 2020.
In October 2020, we also started to do business in Abu Dhabi, where we provide coiled tubing and stimulation services. Eventually, we would like to be a regional company within MENA.
What are your expectations for the near term?
While prospects for 2021 remain uncertain, I’m sure the oil sector is going to boom after the pandemic – maybe by the end of 2022. Activity will increase globally. Prices may not rise too much, but activity will because national economies have suffered shrinkages and countries need to offset this with some economic development. And to achieve that they will have to use a lot of oil and gas.
I don’t think the price of oil is going to increase a lot, though, because when it increases shale oil will again become profitable and will start coming onto the market, so the price will drop again. I think current price levels will be sustained, more or less. If this price is sustained, countries like Egypt, which is not in OPEC, might benefit and activity might increase moderately.
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