Executive Summary:
Oil and Gas is one of the most dynamic industries in Egypt, and hydrocarbon production is by far the largest single industrial activity in the country representing around 13.6% of the total GDP in 2018.
Egypt has significant energy resources, both in traditional fossil fuels and in renewable energy. Egypt’s proven hydrocarbon reserves stood at 3.3 billion barrels of oil and 77.2 trillion cubic feet (tcf) of natural gas at the end of 2018. The Government of Egypt encourages international oil companies (IOC) to participate in the oil and gas sector, and currently more than fifty IOCs are operating in Egypt.
Egypt plays a vital role in international energy markets through the operations of the two Suez Canal transit points and the Suez-Mediterranean (SUMED) pipeline. Expanded in 2015, the Suez Canal is an important transit route for oil and liquefied natural gas (LNG) shipments travelling southbound from North Africa and along the Mediterranean Sea to Asia. Fees collected from the operation of these two transit points are
significant sources of revenue for the Egyptian government.
Egypt plans to invest around $38 billion developing its petrochemicals sector over the next four years. The
petrochemical sector represents about 12% of industrial production and generates revenues totaling USD 7
billion, equivalent to nearly 3% of GDP. Egypt has the largest refinery capacity in Africa at a nominal 840,000 barrels per day, although it operates well below this capacity, with 508,000 barrels per day processed in 2017. Currently, the government is updating existing refineries, and a new private-sector refinery is also set to begin production.
The petroleum industry in Egypt is managed by the Ministry of Petroleum and Mineral Resources, under which five state owned companies operate.
1- The Egyptian General Petroleum Corporation (EGPC)
2- The Egyptian Natural Gas Holding Company (EGAS)
3- The Egyptian Petrochemicals Holding Company (ECHEM)
4- The Ganoub El-Wadi Holding Company (GANOPE)
5- The Egyptian Geological Survey and Mining Authority (EMRA)
The Egyptian General Petroleum Corporation (EGPC) concludes concession agreements in cooperation with IOCs in the form of production sharing agreements (PSA). Egypt grants concessions in specific areas through the promulgation of a “special law” by the Egyptian Parliament.
Since the 1990s, the Egyptian government has enacted laws aimed at attracting international, regional and domestic investment. These laws seek to address the regulations and procedures that hindered production and inward facilitated investment. One of the challenges that continue to hamper international investors in Egypt’s oil and gas sector is the long history of delayed payments from EGPC. While the government has made efforts to pay out the remaining backlog of arrears to IOCs to encourage more foreign partners to invest in exploration and development activities, the government still lags behind in making payments. The government has reduced arrears to USD 1.2 billion from USD 6.3 billion as of June 2018 and planning to repay all of it by the end of 2020.
The Egyptian Petroleum Show (EGYPS), in its fourth year, is the largest oil and gas exhibition in North Africa and the Mediterranean region. It allows Egypt to showcase the development and modernization of its oil and gas sector and its emergence as a regional energy hub, a GOE 2030 priority. The show hosts hundreds of exhibitors, including major international oil and gas companies and dozens of country pavilions under one roof. In 2020, the show attracted more than 20 U.S. companies as exhibitors and conference participants. Senior representatives from the United States Departments of Energy and State as well as from the United States Trade Development Agency and the U.S. Chamber of Commerce participated.
New Exploration
Egypt has signed around 83 oil and gas exploration deals with IOCs between November 2013 and February 2020, worth about USD 15.5 billion. It has also offered signing bonuses of more than USD 1 billion for the drilling of 319 wells. In 2020, nine petroleum agreements have been signed for oil and natural gas exploration with a minimum investment of around $452.3 in the Mediterranean and Western Desert regions.
U.S. energy giants like ExxonMobil and Chevron entered Egypt’s dynamic upstream sector in 2019 and won additional concessions in early 2020.
GOE investment in natural gas was expanded by 25% in FY 2017, adding to an expansion of 33% from the previous fiscal year. Crude oil projects did not see a similar favorable return on investment, but several multinational firms announced commitments to increase their investment to total USD 10 billion in fiscal year 2018/2019.
Gas Production
In support of its ambitions to become a regional energy hub, the Government of Egypt launched the East Mediterranean Gas Forum in January 2019. The East Mediterranean Gas Forum (EMGF), composed of Egypt, Israel, Italy, Greece, Cyprus, Jordan, and the Palestinian Authority, met in Cairo in January and
approved the organization’s foundation charter, creating a platform for East Mediterranean natural gas cooperation. In addition, Egypt is capitalizing on its strategic location, well-developed energy infrastructure, and discovered large gas reserves in the Eastern Mediterranean, including its Zohr field, to consolidate its position as a regional energy hub. In a deal estimated to be $20 billion a consortium of Houston-based Noble Energy, Israel’s Delek Drilling, and Egypt’s Dolphinus Holdings Ltd, has started pumping natural gas from the Tamar and Leviathan fields in Israel to Egypt in early 2020. In addition, Egypt has concluded an agreement with Cyprus to build a subsea pipeline between the two countries. Egypt plans to use imported gas for domestic use and re-export to global markets through its liquified natural gas (LNG) facilities on the Mediterranean coast.
In December 2017, Egypt’s Zohr gas field started production. The Zohr field is considered the largest discovery ever made in the Mediterranean Sea. Production is estimated at 30 trillion cubic feet (tcf). There is also the Nooros Gas Field in the Nile Delta that produces 32 million cubic meters per day. Atoll is another gas field in the East Delta that produces 350 million cubic meters per day and 10,000 barrels of condensate.
Source: BP Statistical Review of World Energy 2020
Gas Leading Sub-Sectors
- Compressed Natural Gas (CNG) Technology and Peripherals
- Drilling Rigs and Related Equipment and Accessories
- Hi-tech Testing and Measuring Equipment
- Liquefied Natural Gas (LNG) Related Technology
- Natural Gas Vehicles (NGV) Technology and Peripherals
Current Market Needs
The Ministry of Petroleum and Mineral Resources has announced in 2016 a five years modernization plan for the sector. The objective is to design and implement a program to enhance the contribution of the oil and gas sector to the economic growth of the country and to be a leader that other sectors can follow. This modernization plan is divided into seven different programs: Investment Attraction, Sector Structural Reform, HR Management, Downstream Performance, Upstream Performance, Hub Strategy, and Decision Support and Data Flow.
Downstream Performance and Energy Efficiency:
More than 20 projects have been identified to improve their performance. The ministry has started the feasibility study of around six projects, expected to result in more than $120 million in savings Initiatives for energy consumption reduction by 5%: identified low cost opportunities, Waste Heat Recovery, and Flare Gas Recovery.
Upstream Performance
Increasing oil & gas production and pipeline of proven reserves and improve recovery rates and cost performance.
Oil and Gas Hub Strategy
Outlining how Egypt can grow its role in the regional energy sector.
Hub strategy expected to be released in 2019.
Decision Support and Data Flow
Increase digitalization of reporting and decision-making processes across the sector.
Recent Market Trends
Competitive Landscape:
There is competition, and the procurement system is done through open tenders. Decision makers evaluate the proposals according to the technical and commercial merits of the proposals.
Best Prospects for U.S. Exporters:
There are opportunities for U.S. companies in exploration activities, services, sub-contracting, procurement and engineering services, as well as in the petrochemical sector.
Market Entry:
The Ministry of Petroleum and Mineral resources is open for suggestions and recommendations, new technologies and processes.
Tenders:
The Ministry will announce tenders if they are requesting consultants for feasibility studies, EPCs, new concessions, upgrade of refineries, licensing for petrochemicals and all other related projects.
Technical Barriers & Tariffs
There is a free trade agreement with Europe, which makes products from European suppliers very competitive as there are no customs applied. Customs and shipping fees of American products makes the comparison challenging.
Procurement & Tenders
Tenders are announced on the Ministry of Petroleum and Mineral Resources website:
http://www.petroleum.gov.eg/en/Investment/Bids/Pages/default.aspx
