A key collaborator

Egypt

TOGY talks to Eng. Hesham El Amroussy, chairman and managing director of ExxonMobil Egypt, about advances in Egypt’s energy market due to economic reform measures, the gradual removal of energy subsidies and the company’s return to the upstream business. Present in Egypt for nearly 120 years, ExxonMobil is active in the country’s upstream and downstream sectors.

What is your view on recent economic reforms and their impact on Egypt’s competitiveness?
Egypt’s process of economic reform began soon after the election of President Sisi in 2014. In 2016, the reform agenda was more clearly delineated, and the government embarked on a number of unprecedented macro socio-economic reform measures. These measures demonstrated a strong political will and provided substance for hope that the economy is being fundamentally reformed.
Egypt’s macroeconomic situation has improved markedly since then. The liberalisation of the foreign exchange market, prudent monetary policy and ambitious fiscal consolidation have helped stabilise the macroeconomic environment. Growth has accelerated; external and fiscal deficits have narrowed; international reserves have risen; inflation and unemployment have declined. Fiscal savings were in part deployed to enhance social protection and ease the burden of adjustment on the poor.
Moreover, the government has introduced a series of key legislative reforms in order to strengthen the business climate, attract private investments and promote growth and job-creation. This included a new industrial licensing law, investment law, bankruptcy law and amendments to the companies’ law. There is no doubt that the success of the economic reform has increased Egypt’s competitiveness, and promoted Egypt for business.

What is your take on the oil and gas modernisation programme?
The modernisation of the oil and gas sector comes during the backdrop of the overall nation-wide transformation efforts to achieve Egypt’s 2030 vision. ExxonMobil Egypt is pleased with the relentless efforts to modernise the oil and gas sector, under the leadership of Minister of Petroleum and Mineral Resources H.E. Engineer Tarek El Molla, and the positive impact that is bringing to the industry.
The modernisation strategy aims to improve the performance of the sector across the entire value chain, attract investments and position Egypt as an energy hub. The strategy is founded on a number of pillars that in my view are critical to the success of the sector modernisation. It is great to see this strategy in action and the progress achieved so far.
It is fair to state that, today, the oil and gas sector remains the engine of incoming foreign direct investment, driven by the expansion in exploration and production agreements with international oil companies. It is worth mentioning that the Ministry of Petroleum is engaging the private sector in support of the modernisation. For instance, ExxonMobil Egypt is collaborating with the ministry in the area of the human resource management pillar of the strategy.

How are all of these reforms being accompanied by human resources development?
The oil and gas modernisation strategy focuses on human resources development and capacity building as one of its key pillars. In my view, it is all about people when it comes to driving real improvement and shaping a new business culture. As such, learning and the development of people are critical to the success of the overall strategy.
ExxonMobil Egypt has been actively engaged and closely collaborating with the Ministry of Petroleum, based on our belief that the ultimate goal of modernisation can only be reached by sincere efforts exerted jointly by the government and the private sector. ExxonMobil Egypt sponsored a number of leadership programmes aimed at the development of the Ministry of Petroleum’s middle management. Moreover, the Oil and Gas Committee of the American Chamber of Commerce in Egypt, which ExxonMobil Egypt chairs, has supported the modernisation efforts on the whole and the capacity building objectives in particular.

How do you see Egypt developing as a regional energy hub?
Positioning Egypt as an energy hub is one of the pillars of the modernisation strategy. Egypt is naturally poised to become a hub given its unique geographical position, with direct access to the Mediterranean Sea and the Red Sea, along with proximity to other states where hydrocarbon resources go beyond their domestic need. Moreover, Egypt’s local infrastructure, coupled with its existing export facilities, makes it the most economically viable choice as a regional hub. There is no doubt that the recent gas discoveries in the East Mediterranean provide more significance to the hub strategy.

How do you view the gradual removal of energy subsidies and the move to a free market?
The ongoing energy subsidy reform is critical to support fiscal consolidation and encourage more efficient energy use, and Egypt’s 2019/2020 budget continues to replace sub-optimal energy subsidies with programmes that support poor households. The large fuel subsidies that have been adopted historically have presented a burden on Egypt’s budget and negatively impacted efforts for sustainable economic growth. Therefore, I view fuel subsidy reform policy as a critical component of any meaningful economic development in Egypt.
In July 2019, the government delivered the fifth fuel price increase in five years, marking a significant transition in Egypt’s fiscal balances. This speaks of steadfast commitment to face what was considered one of the most economically crippling challenges. The energy subsidy reform has been highly appreciated by the business community both in Egypt and internationally. Clearly energy subsidy reform is a journey, but we are encouraged with the progress.
ExxonMobil Egypt also values the overall approach where tough economic measures were buffered by effective enhancements in the social safety net. With the fuel subsidy reform, Egypt can enable effective channelling of resources to support inclusive growth objectives and permit the market to reach higher levels of economic efficiency through demand rationalisation.
Additionally, as part of efforts to modernise the sector and transition to free-market fundamentals, Egypt recently introduced an indexation system, where fuel prices will be revised every quarter based on changes in global oil prices, forex exchange rate and refining and marketing costs.

Could you give us an overview of your downstream operations in Egypt?
ExxonMobil has been operating in Egypt since 1902, so we have almost 120 years of successful partnership in Egypt’s growth. We are proud of our history and we look forward to continuing to grow our business in Egypt.
ExxonMobil’s success in Egypt for more than a century is built on a strong foundation of business principles, core values and a deeply rooted culture of integrity. ExxonMobil Egypt operates at the highest standards of operational excellence with a deep understanding of our customer needs and wants. Our world-class workforce, some of the best talents in Egypt and the world, have been instrumental to our success.
ExxonMobil Egypt entertains a solid downstream portfolio. ExxonMobil is the largest IOC operating in Egypt, in terms of fuels, via a network of Mobil branded service stations serving the needs of Egyptian motorists day-in, day-out. For the lubricants marketing business, ExxonMobil Egypt is the market leader with a well-established position. Our state-of-the-art lubricants manufacturing plants serve the Egyptian market as well as 40 export markets all over the world.

Could you tell us more about your return to the upstream arena in Egypt?
The evident development and progress in Egypt’s socio-economic environment in general in the past few years and the modernisation of the oil and gas sector in particular, along with the political stability, have encouraged ExxonMobil to evaluate opportunities for upstream business in Egypt.
ExxonMobil has been awarded exploration rights to the Nile Delta Block 3 (North East El Amreya Offshore Block), following the Egyptian Natural Gas Holding Co. international bid round. The block is located in the Mediterranean Sea approximately 155 kilometres offshore Egypt. ExxonMobil will operate the Block 3 concession area on a 100% basis. We are truly excited about this new opportunity to expand ExxonMobil’s business in Egypt and participate in the development of the country’s resources.

What is your outlook for ExxonMobil Egypt in the coming five years?
ExxonMobil Egypt is proud of our long-standing partnership in Egypt’s growth. We aspire to grow our business even further, continuing to serve Egypt’s economy and the Egyptian people. ExxonMobil Egypt is pleased to witness evident progress in the overall Egypt climate over the past few years as well as the continued momentum. ExxonMobil Egypt will continue to evaluate business opportunities and guide our investment strategy.

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