OBG talks to Sherif Ismail, Minister of Petroleum and Mineral Resources

Interview: Sherif Ismail

In which areas do you see the greatest commercial potential for new upstream activity?

SHERIF ISMAIL: Oil production in Egypt is promising as numerous oil discoveries have been made, including gas in the Mediterranean Sea, the Nile Delta and the Western Desert, much of which recently began producing. Among them are West Delta Deep, with investments worth $1.6bn, Dennis and Karawan (worth $556m), Desouk ($300m), and El Aseel ($307m). Some projects were scheduled to add to the production map, while others were implemented to broaden it – as was the case with the North Alexandria natural gas deepwater project in the Mediterranean, an investment worth $9bn. The ministry is also working on projects to boost production of crude oil in the concession areas of the Delta, the Gulf of Suez and the South Valley.

As for boosting investments upstream, a number of incentives have been introduced and new bid rounds offered for oil and gas exploration. The ministry has recently signed 35 new exploration deals with $2bn minimum investments for drilling, and there are 13 more still under preparation. An international bid round was also launched by the Egyptian General Petroleum Corporation and the Egyptian Natural Gas Holding Company for 21 blocks, to be signed by the end of 2014 with investments of $1bn, and the sector is preparing to launch new rounds to attract foreign direct investment. Additionally, it was agreed upon to modify the price of gas in new contracts with a number of foreign partners, as well as for newly produced gas from deep-water and geological layers. This provided an incentive for firms to accelerate discoveries and production, and we continue to work to overcome the obstacles that hinder investment, as there are great opportunities in refining, petrochemicals and mining projects.

What can be done to better address rising domestic energy consumption?

ISMAIL: The ministry is working on several axes to deal with consumption increases. First, we intend to boost production for oil and condensates from around 680,000 barrels per day to 690,000 over the next year, and second, to raise natural gas production from new projects to 5.2m cu feet per day. Third, we must raise awareness of the importance of rationalising consumption, and reduce the risk of depending on a single source of fuel supply, especially in electricity and industry.

What are the necessary measures to expand import capacity for natural gas?

ISMAIL: With regard to natural gas imports, the procedures of the floating storage and re-gasification unit are in the process of being completed. In addition, it was initially agreed to import 14 shipments, seven of which will be from Algeria and the rest from Russia, with the first shipment of liquefied natural gas scheduled to take place by December 2014. A new tender has been offered to a large number of specialised international companies to import the rest of the shipments throughout 2015 to meet the country’s demand over the next three years and bridge the gap between production and consumption, along with securing supplies for power plants and industry. Finally, we will complete the new gas projects over the next 36 months, which will be added to the production map and will contribute to providing all the domestic needs in natural gas.

What are the plans for repaying existing debt owed to foreign oil companies?

ISMAIL: We seek to pay the remaining arrears of foreign partners working in the upstream domain, which are the result of accumulations from a number of previous years. This should spur these partners to continue pumping their investments into exploration and development activities. Negotiations with our foreign partners have resulted in agreeing to schedule these dues and follow on our success in partially paying them, including $1.5bn in December 2013 and $1.5bn in October 2014, thus reducing arrears to $4.9bn. We intend to make another payment by the end of 2014.

In which areas do you see the greatest commercial potential for new upstream activity?

ISMAIL: Oil production in Egypt is promising as numerous oil discoveries have been made, including gas in the Mediterranean Sea, the Nile Delta and the Western Desert, much of which recently began producing. Among them are West Delta Deep, with investments worth $1.6bn, Dennis and Karawan (worth $556m), Desouk ($300m), and El Aseel ($307m). Some projects were scheduled to add to the production map, while others were implemented to broaden it – as was the case with the North Alexandria natural gas deepwater project in the Mediterranean, an investment worth $9bn. The ministry is also working on projects to boost production of crude oil in the concession areas of the Delta, the Gulf of Suez and the South Valley.

As for boosting investments upstream, a number of incentives have been introduced and new bid rounds offered for oil and gas exploration. The ministry has recently signed 35 new exploration deals with $2bn minimum investments for drilling, and there are 13 more still under preparation. An international bid round was also launched by the Egyptian General Petroleum Corporation and the Egyptian Natural Gas Holding Company for 21 blocks, to be signed by the end of 2014 with investments of $1bn, and the sector is preparing to launch new rounds to attract foreign direct investment. Additionally, it was agreed upon to modify the price of gas in new contracts with a number of foreign partners, as well as for newly produced gas from deepwater and geological layers. This provided an incentive for firms to accelerate discoveries and production, and we continue to work to overcome the obstacles that hinder investment, as there are great opportunities in refining, petrochemicals and mining projects.

What can be done to better address rising domestic energy consumption?

ISMAIL: The ministry is working on several axes to deal with consumption increases. First, we intend to boost production for oil and condensates from around 680,000 barrels per day to 690,000 over the next year, and second, to raise natural gas production from new projects to 5.2m cu feet per day. Third, we must raise awareness of the importance of rationalising consumption, and reduce the risk of depending on a single source of fuel supply, especially in electricity and industry.

What are the necessary measures to expand import capacity for natural gas?

ISMAIL: With regard to natural gas imports, the procedures of the floating storage and re-gasification unit are in the process of being completed. In addition, it was initially agreed to import 14 shipments, seven of which will be from Algeria and the rest from Russia, with the first shipment of liquefied natural gas scheduled to take place by December 2014. A new tender has been offered to a large number of specialised international companies to import the rest of the shipments throughout 2015 to meet the country’s demand over the next three years and bridge the gap between production and consumption, along with securing supplies for power plants and industry. Finally, we will complete the new gas projects over the next 36 months, which will be added to the production map and will contribute to providing all the domestic needs in natural gas.

What are the plans for repaying existing debt owed to foreign oil companies?

ISMAIL: We seek to pay the remaining arrears of foreign partners working in the upstream domain, which are the result of accumulations from a number of previous years. This should spur these partners to continue pumping their investments into exploration and development activities. Negotiations with our foreign partners have resulted in agreeing to schedule these dues and follow on our success in partially paying them, including $1.5bn in December 2013 and $1.5bn in October 2014, thus reducing arrears to $4.9bn. We intend to make another payment by the end of 2014.