What’s Next For Egypt’s Burgeoning Oil Industry? (21.02.22)
Egypt is expecting major investments in its oil sector this year as national and foreign oil companies increase operations across the country. The development of Egypt’s energy sector has been further supported by increasing petrochemical output and a strong export market. Its geographic location could make it a hub in the MENA region and its efforts to decarbonize will help it sustain its position in the international oil market.
After a successful year in oil and gas in 2021, Egypt is expecting between $7.5 to $8 billion in foreign investment in exploration this year, according to Petroleum Minister Tarek el Molla.
In 2021, Egypt saw its LNG production increase substantially. A historically strong natural gas producer, Egypt came to rely on imports in 2015 after a drop in production levels following instability after the 2011 Arab Spring. However, under the current political administration, Egypt is rapidly increasing its gas output, hoping to ensure its energy security in the coming years.
Several oil and gas firms are looking to profit from the government’s investment in its energy sector, using President Sisi’s openness to foreign companies to increase their presence in the oil-rich country. Egypt had 3.1 billion barrels of proven crude reserves at the end of 2019, down from 4.5 billion in 2010. However, it is thought the greater investment in exploration could lead to more discoveries, as many operations were put on hold or abandoned during the years of instability and are picking up once again.
American oil firm Apache announced this month that it is aiming to boost its oil and gas output in Egypt by between 10 and 15 percent within the next five years. In December, Apache updated its production sharing contract with China’s Sinopec, placing Egypt at the top of its global portfolio. Apache CEO, John J. Christmann IV, stated that the joint venture “reinforces Egypt’s commitment to responsible economic development and public-private partnerships.”
The UAE’s Dragon Oil is also hoping to build on Egypt’s oil momentum, making its first discovery in the Gulf of Suez this month. The find is said to be one of the biggest in the region in the past two decades and could contain as much as 100 million barrels of crude. Petroleum Minister Molla believes there are around 45 to 50 million barrels that can be extracted, potentially in less than a year.
Dragon emerged in the Egyptian oil market in 2019 when it acquired BP’s oil concessions in the Gulf of Suez, as well as its interest in the Gulf of Suez Petroleum Company. In 2021, the oil firm announced an output of 60,000 bpd and is hoping to boost this production substantially based on the new discovery.
Saeed Mohammed Al Tayer, Chairman of Dragon Oil, stated this week “We are glad to announce our first oil discoveries in Egypt, and we aspire to more success during the coming period. We will continue to work for more discoveries sustainably in the promising Egyptian market to create long-term value for the benefit of all.”
In addition to producing oil and gas for energy purposes, Egypt is also looking to expand its petrochemical sector. Due to its strategic location, Egypt believes it can become a hub for petrochemicals in the MENA region. And it has already begun work on developing the industry, producing 3.34 million tonnes of petrochemicals in 2020-21, with revenues increasing by 50 percent annually. The sector is thought to have grown by around 11 percent between 2015 and 2020, according to a Fitch Solutions report, with exports achieving $5.2 billion in 2019.
Egypt is also developing its oil and gas sector at the national level as Egyptian General Petroleum Corp (EGPC) has partnered with Baker Hughes to manage the country’s gas flaring and improve its emissions going forward. As Egypt enhances its reputation as a world oil leader, it must consider the effect that greater fossil production will have on the environment, as many global powers turn their backs on oil and gas. Pressure from major world powers and international organizations is changing the shape of oil production going forward, encouraging oil-rich states to reduce the greenhouse gas emissions associated with energy operations.
This year, Baker Hughes signed a Memorandum of Understanding with EGPC to establish and carry out a flare recovery initiative to help recover and reduce emissions in Egypt’s upstream and downstream oil and gas operations. This plan is expected to support EGPC’s decarbonization strategy.
Molla explained of the partnership, “As part of Egypt’s sustainable development vision, we are actively exploring opportunities that support our strategy of using clean energy and reducing emissions to accelerate our journey towards net-zero” Further, “We are proud of EGPC’s collaboration with Baker Hughes to deploy technologies that can help us manage and recover emissions across oil and gas operations, which is a key pillar in driving the energy transition in Egypt,” he stated.
Egypt’s energy sector appears to be going from strength to strength as the government invests heavily in achieving energy security and attracting greater foreign investment. Several international oil companies are expanding their operations and Egypt is successfully beginning to diversify its oil products, while also seeking decarbonization solutions to maintain its appeal heading forward.
By Felicity Bradstock for Oilprice.com
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