Egypt hits the gas to become independent in oil, after having regained self-sufficiency at the end of 2018. This year Cairo is looking to attract 10 billion dollars’ worth of capital investments. To this end, they are studying a new type of contract for the sector that will provide investors with incentives for exploration in underdeveloped areas. The Egyptian Minister of Petroleum and Mineral Resources, Tarek El-Molla, stated in an interview with Bloomberg: “we are improving the cost recovery process to be faster, less bureaucratic and more efficient”. The government will soon launch a new round of tenders for the Red Sea, while a dozen exploration concessions are being awarded.
According to rumors, the new contracts set up by Cairo would allow investors to control their production quota instead of selling to the government at predefined prices. Current agreements give investors about a third of a project’s production to cover exploration and production costs. But this type of contract is not acceptable to international oil companies. The review of sector contracts is part of a broader plan to liberalize the energy industry.
Eni discovered a giant offshore Zohr field in 2015 and gas production started in December 2017, allowing Egypt to regain its self-sufficiency in the gas sector after having lost it in 2011. Zohr also marked the beginning of a new wave of offshore exploration which gave way to the discovery of other fields. Many projects for the development of gas fields other than Zohr, Atoll, Noras and North Alexandria, contributed to the increase in production by 60% compared to the average in 2015 and 2016.
Between 2015 and 2018, Egypt signed about 60 energy agreements with investments for $14 billion that led to a turning point. Current natural gas production is between 6.4 and 6.6 billion cubic feet per day. Almost one third of production (2 billion cubic feet a day) comes from Zohr. Tarek el Molla confirmed this during the press conference at Egypt’s fair (Egypt Petroleum Show) that was held in Cairo from 11 to 13 February.
Egypt now plans to become a regional exportation hub of liquefied natural gas (LNG) that is luckily not far away from Europe. Recently, Egypt bought eight ships to transport LNG and intends to create a platform for energy trade in the region.
The Egyptian government is investing heavily to expand the capacity and efficiency of refining plants and expects to no longer need to import fuel for over four years. The Egyptian Refining Company held by Qalaa Holdings, which is led by Ahmed Heikal, cost $4.3 billion and will have a “capacity of 4.7 million tons of refined products a year and will produce up to 2.3 million tons of gas and kerosene, allowing Egypt to reduce its current level of gas imports by 40%” , writes Qalaa on their website.
