Tarek El Molla: Egypt’s upstream visionJanuary 26, 2022
Egyptian Minister of Petroleum and Mineral Resources H.E. Eng. Tarek El Molla talks to The Energy Year about the latest achievements of the ministry’s Modernization Program, recent efforts to integrate with regional gas markets, the country’s potential for new discoveries and the roadmap for its growing downstream sector.
How has the pandemic impacted, and perhaps strengthened, Egypt’s petroleum sector?
The Covid-19 pandemic represented a real test of the success and effectiveness of the Egyptian State’s economic reforms and the measures that coincided with them in the oil and gas sector. This strongly contributed to enhancing investment opportunities in this sector and strengthening the investment and financial status, along with achieving sustainability.
The plans and work programmes implemented during the past few years succeeded in facing the challenges of the pandemic. Indeed, we have succeeded in signing a large number of oil and gas agreements since March 2020, amounting to 14 agreements with giant international companies present for the first time in the Egyptian upstream market, such as ExxonMobil and Chevron, with investments of about USD 1.5 billion. This is in addition to a number of other major companies that boosted their investments, such as TotalEnergies, BP and Shell, and regional companies such as Mubadala and KUFPEC.
Recently, we signed two significant agreements with Eni and Apache in which they have committed to spending a minimum of USD 4.5 billion in their operations in Egypt. Moreover, we succeeded in launching a modern refinery through the Egyptian Refining Company (ERC) in Mostorod, in addition to major expansions in the refineries at Alexandria and Assiut, with total investments of about USD 5 billion. These were inaugurated by President Abdel Fattah El Sisi.
Beyond that, Egypt’s efforts to monetise the gas resources of the Eastern Mediterranean region have resulted in the establishment of the East Mediterranean Gas Forum (EMGF) and its official declaration as an intergovernmental organisation.
What are the latest achievements of the ministry’s Modernization Program?
There is no doubt that the distinguished fruits we are witnessing today in various fields and activities are the result of this pioneering initiative for developing and modernising the petroleum sector. Today, we are witnessing those giant international companies investing in Egypt for the first time in the upstream domain in light of the present attractive investment opportunities in the Red Sea and the Mediterranean Sea, after seismic surveying, data collection and the development of new agreement models with companies.
We launched the first integrated digital platform for upstream activities – the Egypt Upstream Gateway (EUG) – in co-operation with Schlumberger, a company of great experience and advanced technological solutions. It comprises technical data, clarifying opportunities, indicators and possibilities, as well as promoting international bid rounds to investors through the new platform. We have already offered an international bid round for oil and gas exploration for EGPC and EGAS through the gateway.
Our vision is to apply this advanced mechanism, which will help speed up taking decisions for investments in Egypt, through a clear vision based on information and data, which will have a positive impact on investment in the field of research and exploration in Egypt, and continue to attract new international companies that haven’t worked in Egypt before while strengthening the investments of existing companies.
Another great result of the Modernization Program is investing in human resources, with an advanced and different vision through the implementation of non-traditional programmes in co-operation with international companies to prepare the young and mid-level management in the petroleum sector for leadership, as well as programmes to qualify young cadres in occupational safety and health.
Among the fruits of this modernisation are increasing refining capacity, reducing imports of petroleum products after the launch of the refining projects in Mostorod and the expansions of ANRPC [Alexandria National Refining and Petrochemicals Company] in Alexandria and soon the project for producing high-octane gasoline in Assiut, in addition to the implementation of two mega-projects for the production of gas oil in Assiut and the expansion of the Midor refinery in Alexandria. In addition, we have seen the startup of the largest petrochemicals project in Egypt and Africa in the Ain Sokhna region on the Red Sea, and the laying of the foundation stone for the coker and diesel production complex in Suez, which coincided with the startup of trial operations for the asphalt production plant in the same governorate.
The Modernization Program has positioned the petroleum sector among the prominent ones in implementing digital transformation initiatives. We were one of the first sectors that started implementing the digitisation system and the capacity building in the companies to link the ministry and the main entities with the affiliated companies, which has a positive impact on the speed and safety of decision-making.
The energy hub strategy has positioned Egypt as the epicentre of the gas scene in the East Mediterranean, with Cairo hosting the EMGF’s headquarters. What are the most recent diplomatic, commercial and infrastructural efforts to integrate with regional gas markets?
Day after day, the EMGF asserts its strong presence in the regional and international arena. Recently, the EU and World Bank have joined as observers, and before them France as a permanent member and the USA as an observer, which points to the growing significance and stature of this forum, both politically and economically. The EU is the final consumer of the East Mediterranean gas, and thus for them to join officially is an important step on the road to the success of regional integration in the gas domain.
The forum now includes producer, consumer and transit countries, as well as private-sector investors and international companies that co-operate with governments through the forum’s Gas Industry Advisory Committee. Currently, the efforts are oriented towards setting a long-term strategy for the forum and its executive plans, to carry out the strategy’s terms in a way that serves member countries’ interests. The international institutions and the private sector will fund these plans.
What is your assessment of the latest bid rounds and agreements?
Our priority in attracting investments mainly relates to upstream activity in new areas, such as the Egyptian West Mediterranean and the Red Sea, in addition to continuing the exploration activity in old areas like the Gulf of Suez and the Western Desert, to continue developing the brownfields or fields in the initial stages of development and production.
However, in just a few months of the year , we succeeded in assigning three blocks in the Red Sea and a number of other areas in the East and West Mediterranean to several IOCs. This includes attracting new major companies for the first time or reinforcing and increasing current investments. After that, we announced a new bid round for EGPC and EGAS – for the first time held digitally through the EUG – that covers a large number of areas, whether offshore to explore for gas in the Nile Delta and Mediterranean, or in onshore areas in the Eastern and Western deserts.
Furthermore, through the 2021 bid round we have sought to attract the necessary investments for developing oil and gas resources in the medium term to ensure future supply sustainability.
How do you evaluate Egypt’s 2021 production performance?
Over the last period, world oil and gas prices have dropped in line with the Covid-19 pandemic and its repercussions. In general, we all witnessed the decrease in E&P investments for oil and gas worldwide, but we were able to maintain production levels through continuous co-operation, meetings and discussions with our partners.
In 2021, production levels exceeded the target, with gas production increasing by 17%, which led to an increase of 8.4% in the total petroleum resources production. We are looking forward to achieving new discoveries through attracting more investments, so we signed some important agreements with new partners during the pandemic and we offered an international bid round to explore for oil and gas in 24 areas.
After the great recovery and continuous rise in world oil prices, we are currently working on investing in these opportunities in co-operation with our partners in order to speed up pumping in new investments and accomplishing new projects to utilise the high prices opportunity, which makes the companies more enthusiastic about investing.
Furthermore, the OPEC+ decisions to adjust production to ensure control of the prices’ decrease have clarified the amount of support and collaboration between all parties in the industry in order to achieve balance.
How do you evaluate the potential for new discoveries and what role can international operators play in redeveloping Egypt’s brownfields to optimise future oil production?
Of course, as you may know, the easy-to-get oil and gas resources are on the brink of ending. Thus, as we need more discoveries, we have focused on deep offshore blocks and new areas that never witnessed exploration activity, and we also signed several agreements with major IOCs.
All this makes us very confident that the medium-term future holds important discoveries, God willing, which is considered the awaited fruits of those agreements. They will include extensive efforts in the upstream domain in Egypt’s economic zone in both the Mediterranean and Red seas. These agreements and partnerships represent the beginning of a new phase, of which the most important results would be achieving new discoveries that strengthen Egypt’s oil and gas production and reserves.
In addition, through the Modernization Program, we were able to implement the latest technologies in the seismic and geo-seismic domains and there are promising opportunities starting to show. When we get the data, our partners will be very pleased. In the meantime, we are working with major service companies like Halliburton, Schlumberger and Baker Hughes to achieve maximum utilisation from brownfields using state-of-the-art technologies to better utilise those fields.
What is the country’s roadmap for the downstream sector in the coming five years?
There are 12 refineries and one complex for refining and processing oil in Egypt. These include the Cairo Oil Refining Company facilities in Mostorod and Tanta, as well as Alexandria, Amreya, Suez, Nasr, Assiut, Midor, ERC, ANRPC, AMOC [Alexandria Mineral Oils Company] and ELAB [Egyptian Linear Alkyl Benzene Company]. They are distributed in four main geographical areas: Cairo, Alexandria, Suez and Assiut.
The ministry is applying a strategy to develop the refining industry: increasing refining capacity and oil manufacturing to optimise current production of petroleum products to decrease imports. This is through a number of projects, some of which have been executed, such as the project for production of high-octane gasoline at ANRPC, the ERC refinery, the gasoline production complex in Assiut, the asphalt plant in Suez, the vapour recovery unit (VRU) in the Assiut Oil Refining Company, the establishment of a pre-flash column system at the Midor refinery in Alexandria and the ANRPC hydrogen-treated naphtha unit in Alexandria.
The strategy comprises projects under construction such as the Midor Refinery Expansion Project, the ANOPC [Assiut National Oil Processing Company] diesel production complex at Assiut and the coker complex in the Suez Oil Processing Company.
As for the petrochemicals sector in Egypt, it is witnessing a comprehensive revival through the execution of a number of projects to maximise the added value from petroleum resources to make the petrochemical products available for the local market, on which a number of complementary industries depend.
The Red Sea petrochemicals complex is to be executed as the largest complex in Egypt and Africa. Besides that there are a number of new projects under construction such as the medium-density fibreboard (MDF) project in the Beheira governorate and the methanol derivatives project in Damietta. The Alamein petrochemicals project on the Mediterranean carries total investments of about USD 8 billion, and is currently being developed at a fast pace as it’s considered one of the most powerful addition projects for the national petrochemicals strategy.
In the past, a number of projects were executed and started production after President El Sisi’s inauguration, such as the MOPCO [Misr Fertilizers Production Company] fertiliser production expansion in Damietta, the Ethydco complex for ethanol production and the derivatives project in Alexandria, with total investments of about USD 4 billion, to provide petrochemical materials to the local market to fulfil part of the requirements of industrial projects that utilise these materials. That is besides securing the foreign currency through marketing part of the production abroad.
The petroleum sector strategy aims at maximising the petrochemical materials and products locally through establishing small- and medium-scale projects that produce final products to achieve two benefits. The first is making an Egyptian final product available to the local market instead of importing. The second is providing a huge number of job opportunities to achieve high revenues and added value for the Egyptian economy.
What steps is the ministry taking towards reducing the industry’s carbon footprint and promoting sustainability across the country’s energy value chain?
Since the 30 June Revolution, Egypt’s policy has been clear in moving towards achieving sustainable development. The political leadership has clarified that energy is the pillar of development. Energy serves development goals and economic growth. It involves developing new and renewable energies, including wind, solar and nuclear energy.
All of this contributes to producing electricity, which currently depends on gas with about 60% in power stations; increasing production of electric cars; and the project of converting vehicles to run on natural gas, in light of the president’s initiative for achieving sustainable development and maximising clean energy utilisation. Natural gas is considered a significant transitional fuel in Egypt’s energy strategy and the main resource to facilitate transition towards cleaner energy usage.
We also participate with the Ministry of Environment in the environmental sanitation programme for a number of petroleum companies’ performance. There was a technical session for presenting the distinctive experiences in the HSE domain within the activities of the last edition of the EGYPS conference. We are also effective participants in the national strategy on hydrogen, in which the State’s entities are integrating under a direct supervision of the political leadership.
How will digitalisation and big data fit into Egypt’s sustainable energy picture going forward?
As for the digital transformation, when we designed the sector’s Modernization Program, launched in 2016, the digital transformation was one of the most significant pillars of this programme. Through it we launched our first project with Schlumberger, the EUG, and promoted the bid round of 2021. The gateway is responsible for launching all technical data and geological maps digitally, which is a new phase in dealing with technology in the upstream domain, whether in launching bid rounds or receiving offers.
Now, we are implementing the project of connecting all of the sector’s entities digitally through the enterprise resource planning (ERP) system, and I believe that we are transforming in line with international modernisation standards, along with adopting some of the latest technologies and tools. In addition, we have already launched electronic services, such as the application of “MoP Stations” and the employee social portal.
What is the role of public-private partnerships in further strengthening the country’s petroleum sector?
The private sector is a vital partner in developing the petroleum industry. There are distinct models for that in the recent period, such as the major and modern refinery in Mostorod, established in partnership with the private sector. Its production contributed, effectively, to rationalising a significant part of the imported diesel and gasoline.
Additionally we have the Sonker project for trading and storing petroleum products at the Ain Sokhna port, which is one of the projects established for enhancing the infrastructure required in this domain, preparing Egypt to be a regional hub for oil and gas trade.
Within this context, we opened the door for the private sector’s participation for the first time in the natural gas trading market in order to be a competitive market, after issuing the law on gas market activities regulation and establishing the Gas Regulatory Authority, changing the nature of the market to competitiveness and participation of the private sector, which is a main requirement of the regional hub.