Oil & gas Opportunities in Egypt

An Expert's View about Extraction of Crude Petroleum in Egypt

Posted on: 21 Sep 2010

The Oil & Gas sector is the fastest growing economic sector in Egypt.There are significant opportunities for UKcompanies in most of the products and services.

Sector briefing Oil & gas Opportunities in Egypt Why Egypt? The Oil & Gas sector is the fastest growing economic sector in Egypt. It contributed 17.5% to Egypt?s economic growth in 2008/09. Natural gas reserves rose to 77.2 trillion cubic feet and crude oil reserves to 4.4 billion barrels in 2009. Gas production is 59 billion cubic metres per year and oil production is 700,000 barrels per day. FDI in the sector reached US$9.7billion which represented 76% of the total FDI flow to Egypt. Investment in Upstream activities in 2000-2010 totalled to US$ 34.6 Billion which is double the previous decades? figures resulting in 271 oil discoveries and 156 discoveries of natural gas. than 50 International Oil Companies (IOCs) Opportunities in the sector lie in most aspects from 29 different countries operating in Egypt of activities; onshore & offshore exploration, in addition to 400 service companies and 143 field development machinery and services, with rigs. An unofficial record estimates that more a market value of US$1.5 million/yr. The than 200 agents supply products and services provision of HSE services, training and capacity to the sector. building services is on the rise. Downstream, including LNG pipelines, is booming; Egypt Find general information on Egypt?s market plays an important role in oil & natural gas conditions on UKTI?s website. The Doing transportation. It also hosts nine refineries with Business Guide for Egypt gives an overview of a capacity of 37milion tons in 2008/09. The Egypt?s economy, business culture, potential market for imported equipment and services is opportunities and an introduction to other expected to grow at an annual rate of 10%. relevant issue. In addition to the various government entities and public sector companies, there are more UK Trade & Investment Sector briefing: Oil & gas opportunities in Egypt through their agent/facilitators in order to be Opportunities to be invited / pre-qualified to bid on contracts. Egypt shares second place in Africa in BMI's It is advisable that exporters make detailed Business Environment Ratings table, which presentations to EGPC, as well as to many of combine upstream and downstream scores. the production companies active in the sector This comes as a result of Egypt?s healthy as most of them have their own vendor short proven gas reserves, reasonable gas reserves lists, companies should therefore continue to to production ratio, transparent regulations, update their credentials and visit the relatively attractive licensing terms and sound companies periodically to retain their short list risk environment. status and ensure receipt of relevant tenders. There are significant opportunities for UK In general, there is no statutory requirement in companies in most of the products and services the oil and gas sector that foreign firms related to the oil & gas sector in Egypt driven tendering for the supply of goods and services by the Government's support to exploration should go through registered Egyptian agents. and production activities to enhance the It is, nevertheless, advisable to appoint active economy, maximise exporting, cover for the and well-connected agents to register their increasing domestic demand together with the products with the relevant authorities, provide existence of the major downstream industry. local back-up services, chase applications, help in information gathering and generally ensure The Ministry of Petroleum controls the industry that their principals' interests are adequately through its various arms: The Egyptian General safeguarded. Petroleum Corporation (EGPC) acts as a controller for the industry; it governs all oil production and activi Egyptian Oil & Gas Sector?Main Indicators ties across Egypt except Upper Egypt. Egyptian Natural Gas Holding 1989 1999 2008 2009 Company (EGAS) manages investments in the Oil: Proved reserves 4.3 3.8 4.2 4.4 exploration and production of Natural Gas. (Thousand Million Egyptian Petrochemical Holding Company Barrels) (ECHEM) controls the emerging petrochemical Oil: Production 878 827 722 742 industry. Ganoub El Wadi Petroleum Company (Thousand (Ganope) promotes the recently exploited barrels/day) developments in Upper Egypt. The government Oil: Consumption 461 573 693 720 is also involved in the sector operations (Thousand through subsidiaries such as PETROJET barrels/day) (Construction), ENPPI (Engineering), GASCO Natural gas: Proved 0.35 1.22 2.15 2.19 (Gas Transmission and Distribution), EMC reserves (Trillion (Maintenance), etc. Cubic Meters) Natural Gas: 7.7 16.8 59.0 62.7 Over 40% of Egypt?s Hydrocarbons is produced Production (Billion by British companies. British made products cubic metres) enjoy a very good reputation with regards to Natural Gas: 7.7 16.4 40.8 42.5 quality and reliability. British Standards are Consumption often used in purchasing orders. (Billion cubic metres) Natural Gas Exports - - - 5.50 by Pipelines (Billion International Oil Companies (IOCs) exploring Cubic Meters) for oil and gas are required to use short-listed Natural Gas Exports - suppliers agreed by EGPC when calling for - - - 12.8 LNG (Billion Cubic tender for goods and services of values 2 Meters) exceeding US$ 5000. EGPC involvement is Electricity generation because investment costs in exploration are - 70.7 127.9 133.3 (Terawatt-hours) recovered from the production stream if Source: Compiled by UKTI from BP Statistical World Energy commercial exploitation results. Review - 2010 British companies offering goods or services to this sector and willing to do business in Egypt are advised to present their credentials and register with EGPC and/or EGAS directly or UK Trade & Investment Sector briefing: Oil & gas opportunities in Egypt ? Bid Rounds decade to reach above 70% due to improved exploration techniques, ability to explore deep Exploration activities take place through a water wells and targeting lower risk prospects. bidding system in which EGPC/EGAS/Ganope This resulted in a number of new discoveries offer concession areas based on a Production and a steady stream of new field Sharing Agreement (PSA). In the PSA, the developments. New exploration areas such as contractor undertakes all exploration activities Upper Egypt and offshore the Mediterranean at his expense. If commercial discovery is are also expected to bring new successes. achieved, the IOC bears all the development costs and recovers them from the revenue Opportunities for UK companies specialised in generated from production (cost recovery). offshore and onshore exploration equipment, This mechanism allows the contractor to retain supplies and services include studies, pipes, a certain amount of the total production of the pumps, engines, valves, etc. There is huge oil or gas discovered. The remaining demand for deep sea exploration equipment production is distributed between EGPC and the and services as well as well recovery IOC according to production percentages set in technology. the agreement. There is also an increasing number of small ? Joint Venture Operation field developments in addition to a potential for One unique aspect of the industry is the joint larger offshore gas developments. Most of the venture operating system, whereby upon development is in the hands of Eni, Apache, declaration of commercial discovery, EGPC BG, BP and Shell, the so called ?Big 5?. In joins hands with the relevant IOC to form a addition to other players such as Dana Gas, joint venture operating company. This new Dana Petroleum, Petronas, Melrose, Circle Oil, entity?s top management is equally staffed by Kewait Energy Company, Aegean Energy and employees from both companies and joint others. The market for field machinery and approval is required for all decisions and services reached US$1.5 million/yr in 2009 operations. increasing at a 10% annually. The resultant companies are known by their ? Operations And Maintenance joint venture names; GUPCO (BP), BAPETCO, Many of the oilfields in Egypt are over 30 years (Shell), RASHPETCO (BG), Khalda (Apache), old with relatively declining production rates. etc. Driven by the boom in oil prices, BP - among other IOCs, has implemented programmes to MAIN OPPORTUNITIES IN THE SECTOR rehabilitate many of these oilfields. These developments attracted new investments and Egypt is a significant market for UK exporters has resulted in increased levels of production. of oil & gas products and services due to the current & anticipated high levels of investment Recently, the sector has seen significant in the sector. Prospects of further large upgrading its the existing systems (particularly reserves of gas and a need for economic onshore) to improve deliverability and growth to match the high population growth reliability specially in areas like the Gulf of (almost 80 million in 2009 and expected to Suez fields. Enhanced oil recovery is another double in 25 years) ensure that this market high investment area in Egypt. represents long-term business prospects. O&M activities are also demanded in the The sector has ongoing development of new expanding gas transmission and distribution fields, infrastructure, gas export facilities, etc system. The Government of Egypt has to maintain oil production for export earnings achieved natural gas connectivity to 3.3 million and also the capacity of the country's refining domestic customers in June 2009 and plans to and petrochemical sector. Below is a summery reach 5.5 million households by 2015. of the main opportunities in the sector: ? Provision of Services: Health, Safety ? Exploration and Field Development and Environment, Training Exploration is revived with attempts to reverse Training and sustainable developmen is a t the decline in oil production and explore major area of concern for the Ministry of opportunities in natural gas. Exploration Petroleum and state organisations due to high success rates has improved over the past UK Trade & Investment Sector briefing: Oil & gas opportunities in Egypt unemployment and a rapidly growing young DOWNSTREAM ACTIVITIES population (50% of the population are Egypt has a well established oil refining and currently under 35 years old). distribution system, including significant Increasingly, there is local demand for foreign transportation links such as the Suez Canal. companies to offer training to their Egyptian The gas transmission and distribution market employees or widen it to different Egyptian has been established since 1990s and is now nationals through their CSR obligations. characterised by an integrated system. Opportunities for UK companies specialised in the provision of education and training for the ? Refining sector are on the rise. Egypt has by far the largest refining sector in Africa with an estimated refining capacity of Health Safety & Environment: For most IOCs 730,000 b/d through its nine refineries. It and their JV companies, health and safety is a represents 22.61% of the total African region priority and much time and effort is spent on capacity. Its market share is forecasted to implementation of international standards. reach 17.98% by 2014 according to a BMI Most local companies engaged in the sector study. have basic health and safety management systems and preventative measures. Both The refining sector is predominantly state segments have an increasing demand for HSE dominated with only one active private sector consultation and staff training. refinery and more in the pipeline. Major projects include: (i) a JV between Egyptian, Key Players -- Egyptian Energy Sector Saudi Arabian and Kuwaiti investors to build a 500,000b/d facility near the Suez Canal. (ii) Chinese investment of $2 billion to build Egypt's largest oil refinery with output capacity of 15 million tonnes per year planned to reach 30 million tons/year in a future expansion. The project will supply the domestic market as well EGPC na na na na 100% as export to China. (iii) The International state Financial Corporation, the World Bank?s Shell na na 1250 1911 100% investment arm, agreed to invest $120 million Egypt Shell in the Egyptian Refining Company as a part of the largest project-financing transaction in BP na na 500 1961 100% Egypt. This equity investment will be used to Egypt BP build a $3.7 billion hydro-cracking and coking GUPCO na na 4000 na 50:50 refinery that will allow Egypt to transform BP/EG locally available fuel oil into lighter fuel PC products, such as ultra-low sulfur diesel, for the domestic market. (iv) A 130,000b/d plant Eni na na 4215 1953 100% to be built at Ain Sukhna on the Red Sea coast. Eni Opportunities for UK companies lie in almost all Apache na na 184 1996 100% aspects of the industry especially in the Egypt Apach development and supply for new projects, e upgrading the old refineries to cope with BG 23270 na 850 1989 100% Egyptian crude, updating refineries basic Egypt BG design, supply of new technologies, various equipment and supplies and learning and Misr na na na na 100% development services for refinery staff. Petroleu state m ? Oil Pipelines ExxonM na na na na 100% Egypt has strategic importance because it obil Exxon operates the Suez Canal and Sumed (Suez- Mobil Mediterranean) Pipeline, two main routes for na = no export of Persian Gulf oil. t available/applicable. Source: BMI UK Trade & Investment Sector briefing: Oil & gas opportunities in Egypt Company 2008 Sales (US$mn) % share of total sales No. of employee s establishe d Ownershi p The Sumed pipeline is an alternative to the Opportunities for UK companies lie with the Suez Canal for transporting oil from the Persian LNG supply chain and providing Gulf region to the Mediterranean. The 322km products/services as these two plants expand. pipeline runs from Ain Sukhna on the Gulf of Suez to Sidi Kerir on the Mediterranean. ? Gas Pipelines - The Arab Gas Pipeline Sumed's original capacity was 1.6mn b/d, but (AGP) with completion of additional pumping stations, Egypt has been expanding its gas pipeline capacity has increased to 2.5mn b/d. The network along the east Mediterranean coast to pipeline is owned by the Arab Petroleum open up new markets for its rapidly growing Pipeline Company (APP), a JV between Egypt gas production. There are ambitious plans to (50%), Saudi Arabia (15%), Kuwait (15%), the extend the Arab Gas Pipeline (AGP) to Turkey UAE (15%) and Qatar (5%). The APP has been and onwards to Europe with speculative increasing storage capacity at the Ain Sukhna extensions to Iraq, Cyprus and Eastern Europe. and Sidi Kerir terminals. The AGP linked Egypt to Jordan since 2003 ? Service Stations with capacity of 10.3bcm of gas per annum Egypt's downstream fuels sector is dominated and was then extended to Syria. The Jordan- by the state owned Misr Petroleum, with a Syria section runs from El Rehab in northern network of 810 retail outlets. Foreign players Jordan to Damascus then to the Al Rayan gas such as ExxonMobil, Shell, Caltex, Total, compressor near Homs. This section became Emarat Misr and OiLybia are also active in the operational in 2008 followed by the Lebanese market. branch started in 2009. ? Gas Transmission and Distribution If you have any questions on the opportunities Projects above, contact the UKTI contacts named in this report. Business opportunities aimed The natural gas industry has moved during the specifically at UK companies are added daily to last decade towards deregulating and UKTI?s website. These leads are sourced by our privatising the gas distribution sector. This staff overseas in British Embassies, High resulted in an increase in the percentage of gas Commissions and Consulates, across all sectors utilisation, which led to a number of new gas and in over 100 markets. transmission and distribution projects being approved. The midstream projects are You can be alerted to business opportunities on dominated by the state transmission company a regular basis by registering on the UKTI Egyptian Natural Gas Company GASCO which website. Find out more on UKTI?s business governs the national natural gas grid. While opportunities service on the UKTI website. distribution to domestic customers lies in the hands of eight companies most of which are private sector. Currently, 3.3 million domestic customers are connected to the grid with plans to reach 5.5 million households by 2015. This opens huge opportunities for UK suppliers. ? Liquefied Natural Gas LNG Egypt is ranked eighth worldwide in terms of LNG exports, with potential to solidify its position among the world's gas elite with two operating LNG plants: a. Egyptian LNG (ELNG) ideally situated in Idku capturing gas from the western part of the Delta. It comprises two trains producing a total of 7.2mtpa of LNG. It is operated by BG and Malaysia's Petronas. b. GEGRS is operated by the Spanish electric utility Union Fenosa. It is well positioned at Damietta for gas in the eastern half of the delta with one large train of 5.0 mtpa. UK Trade & Investment Sector briefing: Oil & gas opportunities in Egypt Major events and activities UKTI contacts Gas Tech Cairo 2010 Suzan Labib http://www.wpcexh.com/exhibition.htm Adviser, Trade & Investment Email: wpceg@yahoo.com British Embassy Cairo Time: 2-4 October 2010 Tel: + 202 2791 6000 Location: Cairo, Egypt Email: suzan.labib@fco.gov.uk www.ukti.gov.uk The Tenth Offshore Mediterranean Conference Gary Hunt http://www.omc.it/2011/ Deputy Director, Trade & Investment Time: 23-25 March 2011 British Embassy Cairo Location: Ravenna, Italy Tel: + 202 2791 6000 Email: gary.hunt@fco.gov.uk Offshore Europe www.ukti.gov.uk http://www.offshore-europe.co.uk/ Time: 6-8 September 2011 Location: Aberdeen, UK Include this text as final paragraph: Find full details of all events in this country and sector on the UKTI website. New export events are added daily to the site and you can register to be alerted to them on a daily, weekly or monthly basis UKTI?s Tradeshow Access Programme (TAP) provides grant support for eligible Small & Medium Sized Enterprises (SME's) to attend trade shows overseas. Find out more about UKTI support for attendance at overseas events UK Trade & Investment Sector briefing: Oil & gas opportunities in Egypt Next steps - How UKTI can help ? Arranging appointments British companies wishing to develop their ? Organise seminars or other events for business in the Egyptian market are advised to you to meet contacts and promote your undertake as much market research and company in the Egyptian market planning as possible in the UK. UKTI?s team in Egypt, with its wide local knowledge and This work is available via our Overseas Market experience, can provide a range of services to Introduction Service (OMIS) a chargeable British-based companies wishing to grow their service which assists British-based companies business in global markets. wishing to enter or expand their business in This can include: overseas markets. ? Provision of market information ? Validated lists of agents/distributors To find out more about commissioning this ? Key market players or potential work, or accessing other UKTI services and customers in the Egyptian market specialist advice, please visit the UKTI website ? Establishment of interest of such to find contact details for your local UKTI contacts in working with you office. Whereas every effort has been made to ensure that the information given in this document is accurate, neither UK Trade & Investment nor its parent Departments (the Department for Business, Innovation & Skills, and the Foreign & Commonwealth Office), accept liability for any errors, omissions or misleading statements, and no warranty is given or responsibility accepted as to the standing of any individual, firm, company or other organisation mentioned. Published 2010 by UK Trade & Investment. Crown Copyright © UK Trade & Investment Sector briefing: Oil & gas opportunities in Egypt
Posted: 21 September 2010

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