IEOC: Egypt’s energy partner

Egypt

Eni is active in Egypt’s upstream through its subsidiary IEOC, which despite the pandemic achieved an exceptionally productive year in 2021. Below, the company shares its strategy for the Egyptian market, including plans to pursue infrastructure-led exploration, increase oil and gas production via optimisation and EOR, and pursue opportunities in renewables.

The past 18 months have been a challenging period for the energy sector worldwide. However, the efforts put in place by both IEOC and the Egyptian authorities made it possible to mitigate these unpredictable circumstances.
In Egypt as elsewhere, Eni is dealing with the Covid-19 pandemic with one main objective in mind: to guarantee the health and safety of its personnel. To this purpose, the company has put in place a set of measures and a strict protocol, including smart working for office staff and quarantines for those working at operational facilities. An important communication campaign was launched to raise the awareness of both personnel and contractors.
Also, co-operation with Egyptian institutions has played a pivotal role. With the support of the Ministry of Health, and once all priority categories had been vaccinated, IEOC launched voluntary vaccination campaigns for its staff and held four vaccination sessions in its offices and operational sites between June and November 2021. In addition, the Ministry of Petroleum and Mineral Resources issued a call for all sector workers to get shots, and this gave a further boost to the campaign, so much so that today almost 100% of IEOC staff are vaccinated.
During the most challenging times of the pandemic, Egyptian institutions provided adequate support to IOCs in taking safety, regulatory and operational actions to ensure the continuity of the activities and the rearrangement of contractual deadlines and provisions. This, and the strict respect for enhanced health and safety rules, helped ensure operational continuity, guaranteeing the necessary production to support the domestic gas demand along with restarting the Damietta LNG plant. IEOC staff and contactors, especially in the company’s operational facilities, spared no effort to meet this goal.
Finally, in order to support the efforts deployed by Egypt to help prevent and fight the spread of Covid-19 and improve the resilience of local communities, especially the most vulnerable ones, IEOC ensured the provision of personal protective equipment (PPE) in the Port Said governorate and Cairo, and the supply of hospital equipment (including 34 ventilators) to the Ministry of Health.

AN EXCEPTIONAL YEAR: Despite the pandemic, 2021 was an exceptional year for IEOC: the company reached an historical record production of 1 million boepd, a result that was supported by record performance of [IEOC-EGPC joint venture] Petrobel, with 922,000 boepd, as well as Zohr, with 3.2 bcf [90.6 mcm] per day. Gas accounted for approximately 80% of last year’s production, which places IEOC in a very good position considering Eni’s energy transition targets.
These records were driven by both internal and external gas demand. On the one hand, the economic upturn triggered increased domestic gas demand, as well as record electricity consumption over the summer. On the other hand, EGAS and Eni restarted the Damietta LNG facility in February 2021, allowing Egypt to resume exports of LNG from this plant after a nine-year hiatus. Overall, in 2021 Egypt exported over 100 LNG cargoes, a number that was reached for the last time in 2011, and was able to exploit the exceptional gas market prices in the second half of the year.
As for oil, in 2021 IEOC signed two important agreements to rejuvenate our historical concessions of Belayim and Meleiha, which will give new impetus to investments and activities.
As far as exploration is concerned, in 2021 IEOC and the operating companies Petrobel and Agiba, jointly owned with our Egyptian counterparts, have drilled nine wells – plus two are ongoing now, with an overall success rate of 67%, which is a remarkable result. Additionally IEOC has recently been awarded five blocks in the 2021 International Bid Round for Petroleum Exploration and Exploitation organised by the Egyptian General Petroleum Corporation and the Egyptian Natural Gas Holding Company through the Egypt Upstream Gateway.
As for the downstream, IEOC expanded its presence in the Egyptian retail market through Gastec, Egypt’s market leader in terms of CNG sales and vehicle conversion to CNG.
Finally, in 2021 IEOC launched a set of initiatives towards decarbonisation and the energy transition, and completed a number of projects in Port Said designed to enhance economic diversification, access to education and access to health – the “Port Said Sustainable Approach.” These include the recent opening of the Zohr Applied Technology School, which has already enrolled over 260 students; the Youth Empowerment Center, with over 300 youth trained in life skills and practical subjects; the training of medical staff; and health awareness campaigns.
Such a positive year sets a very high bar for the following year – in 2022 upstream activities are expected to keep up with the pace of results provided so far. Furthermore, in the year when Egypt will host COP27, IEOC will pursue initiatives in the areas of decarbonisation and the energy transition, which will be developed around five main pillars: the Egypt decarbonisation masterplan, with the aim of increasing energy efficiency in our facilities and deploying hybrid power generation plants and CCS schemes so as to reach the net-zero target on IEOC emissions; hydrogen projects; renewable energy initiatives; feedstock for biofuel; and other initiatives.
As for sustainability initiatives, in 2022 IEOC plans to expand its “Port Said Sustainable Approach” and apply the models and lessons learned in other areas of operations, namely the Western Desert and South Sinai, also leveraging partnerships with international institutions, development agencies and nonprofit entities.

A BENEFICIAL MERGER AT MELEIHA AND NEW TERMS FOR THE GULF OF SUEZ: The Western Desert is a core area of IEOC’s asset portfolio. For this reason, the company has invested in recent years in a number of assets in the area, amongst which are the South West Meleiha Concession, the South East Siwa Concession, and more recently the Merged Meleiha Development Area. Thanks to the new exploration discoveries, the company managed to fight the decline of historical fields and maintain the Agiba gross production at high levels.
The enhanced contractual terms of the Meleiha and Meleiha Deep merger concession agreement will trigger new investments on the licence, as well as shifting the focus to gas in an area that has been mainly producing oil over the last few years. A new gas treatment plant will indeed allow IEOC to further exploit the licence’s gas reserves, contributing to Egypt’s gas and LPG production.
In addition, new high-resolution 3D seismic will be acquired in 2022 and an intensive exploration and development drilling campaign will be launched.
The Gulf of Suez represents one of the historical and most mature areas in Egypt. IEOC has a strong presence in the area through the Belayim Concession Agreement, which is IEOC’s legacy concession in Egypt. It has a historical and symbolic importance for Eni as it was the company’s first field in Egypt, with participation starting about 70 years ago. The aim of the new concession agreement is to rejuvenate the mature fields, fighting the decline by intensive infill drilling, aggressive reservoir management, produced water reinjection and deployment of new EOR technologies.

GAS HUB PROSPECTS: Egypt is at the crossroads of the region’s energy dynamics, and not only geographically. The launch of the East Mediterranean Gas Forum (EMGF) is a step towards establishing Egypt as a gas hub. The forum was set up to foster a structured policy dialogue between countries, IOCs and NOCs, and financial institutions on natural gas, in order to develop a sustainable regional gas market and to unlock the full potential of gas, in respect of the rights of its members over their natural resources.
The Zohr discovery has been a real game changer for Egypt. Today the field is responsible for 40% of the country’s gas production. Moreover, the Zohr discovery itself, and its record time-to-market development, resonated far beyond Egypt’s borders and helped put the country in the spotlight, acting as a catalyst for the interests of major energy players and sparking a renewed interest in the country’s prospects and gas resources. With Zohr, Eni identified a new geological play for the region while also triggering significant economic benefits for the country.
Zohr’s contribution is crucial and will remain even more so in the future. However, with the natural decline of other fields in-country, the optimisation of existing developments and continuous new exploration in the region are essential for sustaining current production levels in order to fulfil Egypt’s aspiration as a regional energy hub. The gas imports from neighbouring countries, the gas exports both via pipeline and Damietta and Idku LNG plants, and the electricity exports, along with the ambitious plans in terms of growing renewable energy generation capacity, will all contribute to this strategic objective.

EXPLORATION STRATEGY: Eni’s exploration strategy in Egypt stems from the company’s just energy transition strategy, which gives gas a pivotal role in the shift towards a decarbonised energy mix. A set of economic and infrastructural conditions grant Egypt a central role: on the one hand, IEOC has a wide infrastructural network of gas pipelines and treatment facilities, while on the other hand gas demand is bound to increase, and has already increased, both locally and internationally.
These elements induced the company to focus on specific blocks within the bid round which are strategically located in its core areas, so as to leverage a fast and efficient tie-in of any future discovery.
This is Eni’s trademark infrastructure-led exploration: exploration activities that are quick and lean and allow us to monetise resources and cater to the increasing demand for gas and LNG. The same principle has been applied for the more oil-prone areas: focus was placed on those who are close to existing infrastructures, and which would therefore allow the maximisation of oil production, maintaining the production level of the company’s facilities. The framework for this is that Egypt’s oil production is declining, and current production levels are not sufficient to meet the country’s needs.

A JUST ENERGY TRANSITION: IEOC is a major contributor to Egypt’s current energy mix, which relies mainly on natural gas. In the near future Egypt’s energy mix will change substantially, capitalising on the country’s vast solar, wind, industrial and human capital resources to grab the different opportunities arising from the energy transition.
Being part of the Eni group, IEOC is strongly committed to a just energy transition that ensures efficient and sustainable access to energy for all. In Egypt especially, the company is looking at renewables, carbon capture and storage (CCS), blue and green hydrogen, biofuels and other areas. To this end, IEOC has joined forces with EGAS and EEHC [Egyptian Electricity Holding Company] to explore viable opportunities in using hydrogen as an energy source. The area of Damietta is especially promising for decarbonised hydrogen since there is availability of natural gas, an industrial hub, depleted fields and access to the sea.
In addition, IEOC is working hard to reduce the emissions of its assets by generating renewable energy for auto-consumption and exploring the possibility of capturing and reinjecting CO2 in depleted reservoirs. In this regard, some opportunities have been identified, such as the 15-MW solar plant in the Abu Rudeis field and the CCS pilot in Meleiha.
IEOC’s strategy is to confirm its role as the leading energy company in Egypt, walking hand in hand with the country on the path towards an energy transition. IEOC strongly believes that natural gas exploitation will pave the way for the energy transition, gas being the cleanest hydrocarbon energy source, while in parallel renewables and decarbonised products will play an increasing role.
In a nutshell, IEOC strives to continue to be Egypt’s main energy partner as it is now, leveraging resources and skills.

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