Gordon Feller
International oil E&P and refining firms are being drawn to Egypt, as new sources of crude are being found and the government sets out plans to increase output to 800,000 bopd next year, taking advantage of newly discovered fields in the Gulf of Suez and the Sahara, as well as potential new sources in the far south of the country.
There are over 55 international oil and gas companies operating in the exploration, excavation and production of oil and gas in Egypt with investments of over $ 2 billion per annum. Despite some uncertainty over the size of reserves, interest in Egypt’s hydrocarbons remain high, with 12 blocks were awarded in June-July 2007. Key partners and players are BP, Eni, Shell, Apache, BG, Lukoil, Exxon and Chevron.
Egypt produced 678,000 bppd in 2006, down almost 2.5% from the previous year’s 696,000 bpd. Egypt’s production was 994,000 bpd in 1996. Despite this decline, high oil prices have seen oil revenues increase in recent years. While proven reserves have fallen over the past two decades, from 4.5 Bbbl in 1986 to 3.9 Bbbl in 1996 to 3.6 Bbbl last year, production still outstrips consumption in the country. Recent cuts in fuel subsidies, which are likely to be reduced further in the medium term, have created a more favorable market for motor fuel sales domestically.
On September 3 of 2007, UAE-based Dana Gas announced it had discovered an oil field 50 mi north of Aswan in the far south of the country, the first discovery of oil in that part of Egypt. The field could contain 8 million bbl of crude less than 5,000 ft subsurface. The oil field is near the town of Kom Ombo, 560 mi south of Cairo. Further discoveries are possible in this previously unexplored region.
Meanwhile, one major player looking considerably to increase its upstream activities in the country is Qarun Oil Company, the Egyptian oil wing of Apache Corporation. Qarun drilled 42 new wells last year and said it is looking to drill between 75 and 85 wells over the next year and a half. Qarun said it plans to use waterflood extraction to improve recovery.
A major oil discovery in the North Shadwan Concession was announced in January 2008 by BP Egypt and Tri-Ocean Energy. A discovery of high-quality light crude was found in northeast Suez, 4 mi from the existing Hilal Field. The new well is expected to produce 10,000 bopd, and represents the first new discovery in that area for over 10 years. While oil is in long-term decline, gas is fast becoming a major export for Egypt, with exponential increases in output in recent years, led by recent major discoveries in the Sinai.
Egypt is now the sixth-largest producer of LNG in the world. Output from Egyptian LNG Train 1 and Train 2 has already been sold to international consumers. Several international oil companies have announced significant expansion plans for their Egyptian operations totaling around $30 billion through 2012. This includes BP, BG, Edison, Petronas and Shell.
An underwater 63-mi pipeline to Israel began flowing 60 Bcf a year in March. Another export pipeline, the Arab gas pipeline, was completed to Deir Ali in Syria and was flowing in spring of this year. Phase 3 should be completed by fall. Flowrates to Syria will rise from 8.7 MMcfd today to a maximum of 193 MMcfd, depending on Syrian demand. Phase 3 could see nearly 1 Bcfd of gas flowing through 36-in. diameter pipe.
Interest has been equally active on the refining side. Egypt is Africa ‘s largest producer of refined petroleum products. The Government anticipates doubling its current production capacity to reach 50 million tonnes per year, and has embarked on $10 billion in downstream activities involving government and private-sector companies. At the end of August 2007, Japanese trading firm Mitsui & Co announced that it would be working with South Korea’s GS Engineering & Construction Corp. and Egyptian Refining Company on a $1.8 billion diesel oil plant project in Mostorod, north of Cairo. India’s Reliance Industries is reportedly looking into investing $10 billion in Egypt’s oil, petrochemicals and plastics sector. 
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