Revamp or replace: Egypt’s ageing hydrocarbons infrastructure

Egypt

DNV GL Regional manager for Egypt and North Africa Hisham El Grawany speaks to TOGY about the opportunities Egypt’s ageing hydrocarbons infrastructure offers for services companies and what factors will contribute to the growth of the market. International classification society DNV GL provides technical advisory services for the marine and energy sectors, as well as the oil and gas industry.

What are the primary drivers of growth in Egypt’s oil- and gasfield services market?

Growth in this market is a reflection of both initial capital expenditure and operational expenditure on the part of oil and gas operators. From 2012 to 2015, capital expenditure growth in Egypt is projected to average 10 percent per year for both onshore and offshore developments, while operational growth in the same period is estimated at 8 percent onshore and 7 percent offshore.

Other factors that will contribute to growth include the increasing need for safety regulations, as the adoption of globally standardised maintenance practices in the industry related to preservation of ageing assets and infrastructure is driven by the government. The majority of offshore structures and associated pipelines in Egypt are more than 40 years old. The main concern for international oil companies and local operators is determining whether ageing structures are fit for use and, if not, updating them as necessary.

Finally, energy demand is continuously increasing as a function of population growth and expanding industrial production. This will drive deepwater investment, growing refining capacity and additional pipeline infrastructure to support increased use of gas.

Do brownfield assets represent an important market for services companies?

For ageing assets such as production platforms and related infrastructure, specifically those that are more than 40 years old, structural integrity assessment requires high-tech methods.

Exploration and production clients need to know at what point it is more economical to squeeze production out of an existing platform or to perform an overhaul on the asset, including replacing or refurbishing equipment where necessary. When receiving brownfield services, a client is getting a tool to control their assets and mitigate the chances of complications.

What opportunities will the planned expansion of the Suez Canal present for services providers?

This development will not only affect vessel traffic, but also the associated industrial zones that will be constructed alongside the expanded canal. This will include petrochemicals facilities, container-handling terminals, container-construction warehouses and, very importantly, testing labs.

These kinds of operations offer numerous opportunities for inspection or quality assurance experts to provide third-party consultation. While it is hard to quantify the impact, I expect the project to contribute to a nominal GDP growth for Egypt of 15 percent through 2015, tapering down to 10 percent by 2020.

How important is it to bring skilled workers from other markets to Egypt?

The transfer of experience is not just important for our local operations, but for Egyptian society at large. For example, hiring an expert in design review working in the North Sea to evaluate a Mediterranean development project can be quite expensive, but that person contributes to our overall knowledge about operations.

This is essentially a poaching technique to bring in additional independent reviewers. The method is beneficial for project operators because it improves their operational methodology, and the inspector increases their expertise.

How can services companies use new product lines to adapt to market shifts?

Internationally backed companies can differentiate themselves by relying on back-office support, including technical and managerial expertise, for quick entry into specialised market categories.

For example, around 12 local companies and international organisations that conduct inspection and certification for petroleum companies in Egypt compete for the same market share. To set ourselves apart from the competition, we became Egypt’s sole provider of independent certification, verification and quality assurance for deepwater projects.

Another promising segment is refinery inspection and certification. This is currently a very fragmented market, with different companies responsible for inspecting different facilities.

About DNV GL: DNV GL celebrated the one-year anniversary of the merger of Norway’s Det Norske Veritas and Germany’s Germanischer Lloyd on September 12, 2014. The companies came together to combine their expertise in maritime, energy and business assurance services and the oil and gas industry. DNV GL provides integrated services in technical and marine assurance, risk management and offshore classification in more than 100 countries.

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