Revitalised sectors

Egypt

TOGY talks to Brian Essner, Noble Energy’s vice-president of international marketing and Egypt country manager, about Egypt’s upstream potential, how the country’s regional energy hub strategy will be implemented and the market’s role in fostering regional LNG sales. Noble Energy is a leading independent energy company engaged in worldwide oil and natural gas exploration and production.

What is your view on Egypt’s current oil and gas scenario?
It is definitely vibrant. Over the last several years we have seen progress across the board. The upstream, downstream and midstream sectors are all in line with the initiatives of the government: revitalised and energised. It has encouraged us to be more aggressive, coming into the country as both a gas seller and a midstream player with pipeline ownership, but looking for upstream opportunities as well.
Egypt is much more competitive today in the upstream sector than it was three years ago. While it was difficult when the economy was slow, the government has done the right things, making investment more attractive.

What potential do you see in E&P activities in Egypt?
There are a lot of good opportunities. There are still upstream resource plays to be discovered, and we would like to participate in those. We have a proven competitive advantage as a company with a long history in deepwater natural gas plays in the Eastern Mediterranean.

What is your view on Egypt’s regional hub strategy and the country’s leadership on this?
Noble Energy has been in the Eastern Mediterranean since 1998. We have discovered about 40 tcf [1.13 tcm] of natural gas in Israel and Cyprus. To date we have seen the Eastern Mediterranean as a distinct, strong market, even if, as yet, it still lacks infrastructure interconnectedness. We have been very pleased by the steps Egypt’s leadership has taken to connect the larger Levantine Basin. We specifically appreciate the connections between Israel, Egypt, Jordan and Cyprus. As we bring the Leviathan field on line before the end of the year, we will begin selling significant quantities into Jordan and into Egypt. We will truly be implementing the regional hub vision.
The East Mediterranean Gas Company (EMG) pipeline investment is an important first step in that direction. The transaction has been very complex, as you can imagine, but we have been working hand in hand with our partners and with the support of both governments (Egyptian and Israeli). We are making progress and those efforts will soon bear fruit.
As for technical work, gas has been put in the pipe, we have done an intelligent pigging operation and the pipeline is in good shape. We expect to complete the flow test – with gas flowing from Israel through EMG and the GASCO pipeline into the Egyptian grid – over the next couple of months. We will begin full-time gas sales into Egypt through EMG when Leviathan comes on line later this year.
For the Egypt energy hub project, EMG is definitely the first step but not the last. We think it is very important to take advantage of the infrastructure here, and we like the framework the government of Egypt has put in place that will allow the market to liberalise, including by using the GASCO transmission system to move gas, and allowing gas sales to end users. Just as important is using the LNG facilities and exporting via the global LNG market. We expect to do this from Israel and Cyprus, and eventually from our Egypt upstream positions.

What role does Egypt’s existing infrastructure play in the region’s LNG sales potential?
If you think about the scale of it, Egypt’s LNG facilities are a little over 2 bcf [56.6 mcm] per day capacity, and the entire Israel market is about 1 bcf [28.3 mcm] per day. Purely based on the LNG plants, it is double the size of the market that we currently serve, and this doesn’t even begin to cover the significant local market here in Egypt or the one in Jordan.
Egypt’s LNG capacity is really a game changer, as is its expansion capacity. They have three trains of LNG today, and both projects are structured in such a way that you could expand those facilities in a very cost competitive way. To the extent that you continue to find gas, those projects will fill up and eventually have LNG that is very competitive globally.

As an experienced player in East Mediterranean deepwater operations, do you think Zohr’s success could be replicated?
I think it can be from a government approvals process perspective. It shows how quickly the government of Egypt can move. We work in a lot of jurisdictions around the world and we always use the Zohr example as the way we would like governments to engage. They see an opportunity, they clear the path for you to develop it, and work together as a partner. Zohr’s expedited development was encouraging. It shows the government wants to encourage investment.

Could you give us an overview of your portfolio and assets in the East Mediterranean?
As mentioned, we have discovered about 40 tcf [1.13 tcm] of natural gas resources. The first discovery was in 1998, and we have three primary gasfields: the Leviathan field, at 22 tcf [623 bcm] of recoverable gas reserves; the Tamar field, which is currently producing; and Aphrodite, which is about 5 tcf [141.6 bcm]. We would expect that when Leviathan comes on line before the end of the year, it will be able to produce about 1.2 bcf [34 mcm] per day of gas, and it has an expansion capability that could take that up to more than 2 bcf [56.6 mcm].

What is your view on the downstream developments in Egypt taking advantage of the recently achieved gas self-sufficiency?
There is a lot of potential. We are supportive of this industry and this is partly why we want to connect to Egypt. Long-term we think there is a robust, growing market for natural gas in Egypt which we believe our resources play an important role in satisfying.

Are you looking at acquisitions or new bid rounds in Egypt?
We are always open and actively seeking new opportunities. I won’t comment on anything specifically, but at our core we are an exploration company. We create value through the drill bit.

What is your outlook for the coming years for Egypt’s hydrocarbons industry?
We are very excited about 2020, when we will be selling significant quantities of gas into Egypt. We will be working on new projects and opportunities in conjunction with Egypt and we hope to have secured upstream blocks by then.
We moved into our new Cairo office in May 2019 and are staffing-up ahead of the pipeline coming on line. We also have ambitions to grow our exploration presence here. We will have grown our footprint from one person three years ago to about 30 people this year. We have the potential to go higher than that.

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