Egypt, new dimensions, new frontiers

Egypt -
Interview with:

H. E. Eng. Amin Sameh Samir Fahmi
Minister Petroleum

Cairo, May 29th, 2000

El-Mokhaim El-Daem treet, Nasr City, CAIRO-EGYPT
Tel: (202) 263 10 00/40 00
        (202) 263 20 00
Fax: (202) 263 60 60

Could you provide us with an overview of the sector and the major discoveries made recently in petroleum and natural gas ?

The sector is very active at the moment, and we are committed to fulfilling our obligations for Egypt. First and foremost we have to provide the local market with its requirements of oil products and natural gas.

Our second objective is to improve our balance of trade, and to a lesser extent, to attract foreign currency in order to fund the Government's development plans, not just in the oil sector, but in other areas as well. We want a positive balance of trade, and in order to achieve this we need to export gas.

From October 1999 till March 2000 we have made 16 new discoveries , these discoveries are geographically distributed in all parts of Egypt like the Gulf of Suez region , Western desert and the offshore deep water in the Mediterranean which are a good indicator of Egypt's enormous potential for undiscovered oil and gas reserves .

We have very good gas reserves, around 45 TCF of proven gas reserves, and around 75TCF of predominant reserves. According to experts in Egypt and in foreign companies, these predominant reserves are very close to being proven, possibly in the very near future. The national companies are working very hard, and there is a lot of exploration going on. In the last six months the number of rigs has shot up, and now there are around 34 rigs.

Everybody is confident that there are potential discoveries, and there are many different nations involved, including the USA, Great Britain, Spain and Italy. We hope to hear interesting and exciting news in the near future when these companies start drilling and production.

We are also working very hard on the issue of gas exports. Originally we only had two markets , the Turkish market , and the Israeli, Lebanese and Jordanian markets , known as the Eastern Petroleum file. But now we are working very hard in Europe, and we feel that we have a very good opportunity to develop this market.

I understand that the Government policy is to encourage people to substitute oil usage for gas in the local market. How is your ministry working towards this goal?

The strategy is not to substitute gas for oil - both fuel sources compliment each other. We encourage people to use whatever is most appropriate for their needs. In the petrochemical industry we are encouraging the use of both oil and gas. This is another area where we are putting in a lot of effort.

For the first time we are going to have a national master plan for the development of the Egyptian petrochemical industry , and we are developing this with an American / UK consultant, and this plan will be ready within eight or nine weeks. Preliminary reports are excellent, and suggest that we have a good chance to export petrochemicals to the world market, as well as meeting our local demand.

Since our oil reserves are declining, we are looking at new technologies to expand the life span of our reserves. For example, we are looking at gas to liquid technology, which involves refining gas in order to obtain products such as diesel, jet fuel, and kerosene. Moreover, water is a by product of this process, which is suitable for agriculture as well.

There is a licensing round for offshore deepwater acreage, off Egypt 's north-west Mediterranean Coast, which should hold considerable gas reserves. What do you think are the potential reserves in this area, and when do you expect the concession to be up for sale?

BP Amoco has stated that they expect gas reserves to be at least 100 TCF (trillion cubic feet). Shell experts envisage about 50 to 80 TCF. These estimates are all for the same layer, or geological structure, and there may be more gas in other layers and structures. These are not my estimates, but the estimates of experts in the field, whose job is to ascertain these facts.

Could you tell us about the framework that has been agreed for exporting natural gas to Israel?

We do not have an agreement yet, but a framework has been put in place. A new company has been established - EMG - East Mediterranean Gas Company, which is a private company. This company is approaching both Foreign gas producers in Egypt, as well as Israeli buyers, mainly the electricity authority there.

This company is also discussing these same issues with Turkey, in order for the pipeline to be more economical. The proposed pipeline will go from Al-Arish to Cehan in Turkey, and then branch out to other areas. We believe that we can sell gas to Lebanon and Jordan as well.

It seems as though Egypt is following a two-track strategy regarding gas exports - building a pipeline on the one hand and establishing the framework for LNG transportation on the other hand. What is the preferred method of exports?

We are looking to develop all possible means. Gas to liquid, gas to petrochemicals, gas through pipelines, gas as energy. Just name it, and we are doing it. We need an aggressive policy to make the most of available opportunities that may not be present for ever. Just finding the gas is not sufficient; we need to focus on the commercial aspects , to go out and capture the markets, because they are not going to be infinitely available .

As a matter of fact, recent figures suggest that consumption in Europe is going to go from 87 billion cubic feet to 503 billion cubic feet annually in 2010. How are you looking to exploit this massive potential?

We have signed several MOU's and we have signed some principle agreements and letters of intent. We have a good base now, our objectives are defined and we have established strong relationships with our partners. The markets are beginning to approach us now too. We have a good solid plan and we hope to secure our first energy contract within the next few months.

You were talking at a recent conference about the possibilities for expanding into the African markets. What are the processes underway now to ensure that this happens?

We have met some of our counterparts in Africa to discuss these issues, and we are now sending some experts to investigate the possibilities. We cannot neglect Africa. It is potentially an important market for Egyptian natural gas and petrochemicals.
What is your ministry doing to encourage foreign investment in this industry? For example, are you looking to amend petroleum agreements in order to ease potential restrictions?

No, I think that the restrictions are excellent, and all sides are satisfied . We are looking for better agreements with foreign companies, so we can develop more of a win-win situation. It is important to keep modifying these agreements, as things are changing fast in this industry. In the past all of our agreements were based around meeting local needs, because at one time we had reserves of only 12 TCF, and nobody was even dreaming of exporting natural gas.

We are very credible, and we stick by our agreements. We only change any agreement after consultation, and with the consent of all concerned parties . One of Egypt's main advantages is that there have never been any need to resort to legal rulings concerning our agreements . Egypt has honored each and every agreement it has signed with foreign partners.

Privatization is the word on everybody's lips at the moment. What companies in the petroleum sector are likely to be privatised?

Out of the 55 companies in the oil sector, only 12 of them are public. Many people are surprised to discover how little public sector activity there is in this field. The remaining 43 companies are either investment companies or joint venture companies. The Egyptian government does not interfere in the operation of non public sector companies .Selling shares in our companies is not an objective in itself, it is a means of raising funds, which we need in order to meet our objectives. Like any other industry we are trying to utilise the open market policy , and the consultation is going to be in areas such as the investment companies like Midor, Midtap and Gasco, as well as two of the public distribution companies . Everybody wants to have shares in these companies, so we should take advantage of that situation.

When do you expect this to happen?

We are working on this already. For four months we have been talking with market specialists by way of preparation. All I can say at the present is that you will hear the news very soon.

You were working with EGPC for 25 years, and then you worked with MIDOR before coming back to the public sector as a Minster. What did you learn during your time in the private sector, and how has this changed your perspective?

I learned to work very hard, and that timing is crucial . Making the required decisions is not a problem, the difficult thing is deciding when to make them. In the private sector you need to be very dynamic , open minded and adaptable, as the industry is unpredictable and you constantly need to be on the look out for the best possible opportunities.

You need to be aware of everything that is happening around you, and be up-to-date on the global situation. Working for the public sector is easier in some respects because your resources are not as limited as they can be when you are working for an individual company. In EGPC I learned to love my country, and I really want to do the best I can to help realize Egypt's development plans.

I have noticed in a lot of your speeches that I have read, and in our interview last year, that you are very dedicated to developing the industry for the benefit of the country...

Yes, this sector is very important to Egypt. We have the resources, and these are very useful indeed, so everybody working in the sector needs to make sure that the maximum benefit from these resources is obtained for the nation. We have great human resources, and they are helping achieve the maximum possible utilization of available resources.

What are some of the major changes you have made in the Ministry since you were named to the position of Minister of Petroleum?

When I started we had to develop a strategy, which is of fundamental importance. Now we have developed a ten-year plan - we have master-plans for the gas, oil , petrochemical and refining industries. It is important to plan, and not simply to be dragged forward by the course of events. We have a very exciting strategy, with some challenging objectives.

We work weekends here too, because there is so much to be done, but we are happy doing this. Everyone who works here is satisfied , and we feel that this is very important. We are optimistic, and we feel that we can bring success to the industry. Every three months we draft a progress report, which is very forthright , in order for those concerned to view the industry's progress . But at the same time we are open to criticism, and keen to develop and improve the industry and the Ministry.

What is the biggest challenge that you anticipate in the coming years, and how do you intend to overcome it?

There are two challenges facing us at the moment . First of all we have to increase our oil production, either from present fields, or by discovering new fields. We are working on this on a daily basis, pulling out the old files and maps, even for areas which have not been considered for years. We are very ideas-based, and we rely a great deal on the support of our partners. It is not just finding the oil, but working out how to utilise it to the best advantage.

We are not worried about the gas reserves, but we do need to develop the markets, since without the markets you cannot start to exploit the resource. This is the difficult part. We believe that we can secure two or three markets in the next ten months or so. We have signed MOUs , but I am not much of a believer in these. I believe in signing contracts - these are the accomplishments which are most important. The MOUs are good, but they are not the final destination.

To develop a huge field you are talking about US$ 1-2 billion, and for an LNG plant you need around US$1.2 billion. If you have the resources and the market you only have one challenge left, which is to be open-minded, fair, and to sign a good deal.

What advice would you give anyone who is keen to take on the challenges of your office?

You have to work intensely hard. You have to know what you are doing, and cooperate and synergize with others. You need to be a good team worker, and be discerning about the people working with you. You need to be patient, and of course, you also have to be lucky!

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© World INvestment NEws, 2000.
This is the electronic edition of the special country report on Egypt published in Forbes Global Magazine.
August 7th 2000 Issue.
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