Minister details oil, gas transformation
"Working with the private sector, we were able to deliver some good achievements via our modernization program ... over the past five or six years," said Minister of Petroleum and Mineral Resources Tarek El Molla in a June 28 webinar.
During that time, the Ministry overcame natural gas shortages that led to queues in front of gas stations and physical fights over LPG bottles. In addition, the slowdown of investments in exploration, underdevelopment of infrastructure and facilities, and interruptions of projects meant the sector "was in crisis."
During those six years, Egypt became one of "the major importers of oil and liquified natural gas" to meet local demand.
In 2016, the Ministry announced a "comprehensive government program" as part of Egypt's Vision 2030 to improve the sector and "achieve financial sustainability, become a leading regional oil and gas hub and a role model for the future," El Molla says. "We delivered what we sought."
The modernization program comprises seven sub-programs: upstream investment and attraction, sector structure reform, HR management, downstream performance and energy efficiency, upstream performance, hub strategy and digital transformation.
Promoting upstream investment includes increasing exploration areas, deploying advanced technology and attracting FDI. To attract midstream investments the ministry expanded the oil, gas and petroleum products pipeline, upgraded petroleum ports and terminals, and increased storage capacities for petroleum products. For the downstream, there are "ambitious plans" as many projects are in the works, including developing a refining strategy, meeting local market demand, and expanding and upgrading existing transportation and storage infrastructure.
El Molla also announced a massive increase in petroleum agreements from just seven between fiscal years 2010/2011 and 2012/2013 to 99 between fiscal years 2014/2015 and 2020/2021. Some of those investors include Chevron, Total, Shell and ExxonMobil, among others.
Over the past few years, the $27 billion investment budget for oil and gas projects "took us from a -11% to a 25% growth rate in the sector." As a result, the total production output from oil and gas reached 1.9 million barrels per day by the end of 2019. "This is a record," El Molla says. The previous all-time high was 1.7 million barrels per day 10 years ago.
However, the sector could not export due to the COVID-19 pandemic. As a result, while the industry still has the same production capacity, it has more reserves, El Molla noted. That would mean more revenue in the coming period compared to 2019, given that "the market is improving quickly," says the Minister.
Digitalization is a recurring theme in Egypt Vision 2030, and it is a factor in the oil and gas industry. Accordingly, the ministry has been trying to implement an enterprise resource planning system to facilitate and integrate business processes. However, that "has been a challenge," El Molla says, as it was difficult to "unify to have one consolidated balance sheet."
A "key milestone" on the road to 2030 is that Egypt becomes an oil and gas hub. According to El Molla, the creation of the East Mediterranean Gas Forum in 2019 was a vital first step toward achieving that goal.
The oil sector is a significant player in the country's economy, accounting for 24% of Egypt's GDP last year. More investments will come as El Molla revealed that almost $74 billion in projects announced over the past five years are under development or still in the pipeline.