A time to evaluate acreage

Egypt

Tarek El Azhary, CEO of StratoChem Services, talks to The Energy Year about where upstream activity is continuing in Egypt during the pandemic and how well the country is likely to emerge from the crisis. StratoChem Services provides geochemical analysis and consultation to companies in the global oil and gas industry.

Could you give us a snapshot of upstream activity in Egypt during the crisis?
We are currently working with clients in Egypt, as well as North America, South America, and the Far East. Our clients in Egypt have not been as affected as the ones in the US or the Far East. In Egypt, however, people are afraid oil will go further down. Companies in the Mediterranean such as BP and Eni remain active. In the Gulf of Suez, only production activities are going on. In the Western Desert, Apache and EGPC are active, but other companies have slowed down their activities very dramatically.
In the Red Sea, a number of companies are waiting for the seismic acquisition to be completed, including ExxonMobil, Total, Shell and others. We hope that this situation will be sorted out by later this year or by the beginning of 2021.

What sort of opportunities do you see now for local companies?
While there is little activity in this period, oil companies can start looking into their acreage again, doing more studies on enhanced oil recovery or looking for new sites to drill. When you are busy with oil production, you don’t have time for such activities. So now is the best time.
Some oil companies have started to give us evaluation work. We did a small project with Eni and we are waiting for BP’s approval from London to start a big project with them in the Mediterranean.

What is the dynamic of the dialogue between stakeholders in the industry?
The government wanted us to lower our rates as oil went down, but it does not work that way. When oil prices went up, they didn’t give us more. We can give a little bit of a discount, but I cannot take from my employees. We are losing money for the third month now. I still pay the same for my expenses, chemicals, spare parts, etc. and the taxes are also high.

How do you see the local service market evolving in the upcoming period?
Joint ventures are typically formed when a new discovery is made, but I think we already have enough joint ventures. Apart from that, people have to realise that the price of oil will increase. Everything stopped because with concerns over Covid-19 there was no consumption of oil, but when this period is over, everything will be much better.

How will Egypt and nearby markets emerge from this situation?
There are many opportunities in Egypt in oil and gas. We have many gas discoveries, which can also benefit our neighbouring countries. In addition, we have the LNG trains owned by Shell and BP. Personally, I think Israel should pump its gas into those trains and then ship the LNG back to its own market.
We always had a good relationship with Libya, but now the political situation has become very bad there. We did a study there for a company over a year ago, but still haven’t received payment since we can’t reach anyone. For the rest of Africa, apart from Angola and Nigeria, countries really don’t know how to utilise their energy. They have gas and condensates, but they are technologically behind.

Would renewables be a suitable way for local players to diversify?
Egypt is strong in solar and it has started to do some wind projects as well, but the technology is still not advanced enough to satisfy the market’s energy demand. You cannot do renewables for airplanes, for example. At this stage, I think solar is more suitable for houses or small businesses until it is developed more.

What is your message to investors looking at Egypt?
In Egypt, there are always great opportunities for discovering and drilling, and it is cheaper than many other countries, lacks corruption and has many highly educated professionals. Many of our scientists and engineers are in the UAE, Kuwait or Saudi Arabia, but if an opportunity comes up here, they will return and bring that valuable experience with them.

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