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
In 2016, the Ministry of Petroleum and Mineral Resources announced a five-year modernization plan for the oil and gas sector. The objective is to design and implement a program to enhance the contribution of the 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. The Ministry of Petroleum and Mineral Resources in collaboration with the Ministry of Electricity and Renewable energy are developing a green energy strategy to decrease the hydrocarbon resources and develop other areas such as decarbonization, and energy efficiency.
Downstream Performance and Energy Efficiency:
More than 20 projects have been identified to improve their performance. The ministry has started feasibility studies for around six projects; they are expected to generate more than USD 120 million in savings. Initiatives to reduce energy consumption identified low-cost opportunities, such as waste heat recovery and flare gas recovery.
Upstream Performance
In order enhance the upstream performance, the Ministry of Petroleum and Mineral Resources started by promoting seismic data acquisition at the Red Sea waters. Then Red Sea bid round was announced. Another seismic data collection occurred on the East of the Mediterranean Sea followed by another bid round. Also there is a focus on the Gulf of Suez.
In order to build trust with IOCs and attract more investment in the upstream sector, the Ministry of Petroleum has committed to pay its arrears to the IOCs. The arrears has reached $6.3 billion in 2012, and it has decreased by above 80% to reach $850 million by end of June 2020.
Egypt has launched in February 2020 “Egypt Upstream Gateway – EUG” as a platform to promote E&P concessions and attract more bidders.
Upstream performance is one of the pillars of the modernization plan and the aim is to increase oil & gas production and pipeline of proven reserves and improve recovery rates and cost performance.
Oil and Gas Hub Strategy
Part of the Modernization Program is having Egypt as a Regional Energy Hub. Given the strategic geographical location. There is a Hub team under the Ministry of Petroleum and Ministry of Petroleum that work the strategy. Outlining how Egypt can grow its role in the regional energy sector.
An MOU was signed in 2016 involving Egypt, Jordan and Iraq where Egypt will be transporting Iraq gas and crude oil to Jordan. In 2018, an intergovernmental agreement was signed between Egypt and Jordan to promote a construction of a submarine pipeline to transport natural gas from Cyprus to Egypt to get it processed and then re-exported to neighboring countries. Another MOU was signed in 2018 between Egypt and European Union where they both will develop their cooperation during 2018-2022 while assisting Egypt becoming a Mediterranean O&G hub including offering technical assistance and know-how in increasing network capacities. Other agreements were signed with Kuwait Oil Co., Iraq Oil Co., and Saudi Aramco.
The Hub strategy expected last draft was discussed in March 2019. The final strategy was approved early 2020 but not yet shared with the public.
Decision Support and Data Flow
In line with Egypt’s Vision 2030, the Ministry of Petroleum and Mineral Resources is implementing a comprehensive digitization plan. Automation, for example, is helping EGPC process production data in minutes as opposed to the hours it used to take manually. The Ministry of Petroleum and Mineral Resources has announced earlier in 2021 the launch of the Digital Upstream Gateway and it is currently used for the current concessions bid round that will end by September 30, 2021.
The Ministry of Petroleum’s Information and Communication Technology vision for the O&G sector is based on four different pillars: integrate and simplify, enable digital integrity, build workforce capabilities, and deliver functional efficiency. To maximize efficiency, the ministry is digitalizing reporting and decision-making processes across the sector.
Health Safety and Environment
Health, Safety and Environment (HSE) is a vital pillar of the modernization program, helping ministry employees meet international standards and maximize efficiency safely. The ministry has established a strategic roadmap to ensure HSE measures and practices are standardized. It has also allocated USD 1 million for capacity building in this field.
Recent Market Trends
Competitive Landscape:
There is competition, and the procurement system is done through open tenders. Decision makers evaluate proposals according to their technical and commercial merits.
NOCs
Egyptian General Petroleum Corporation – EGPC is an SOE under the Ministry of Petroleum. Founded in 1956 under the name, General Petroleum Authority, EGPC switched from exploration activities to issuing exploration licenses to foreign contractors in 1973.
EGPC has affiliations with 12 public sector companies, 41 joint ventures, and 87 investment companies. EGPC has shares in all, either directly or through an affiliated entity.
EGPC’s main activities are exploration, development, production, refining, processing, transportation and distribution, drilling, engineering, construction, fabrication, maintenance, and capacity building.
Any entity that wishes to work in Egypt’s petroleum sector must register with EGPC to be participate in tenders and receive notifications of new opportunities.
Egyptian Natural Gas Holding Company – EGAS was established in 2001, also as an SOE under the Ministry of Petroleum. EGAS focuses on natural gas activities and has more than 25 local business partners and several multinational partners.
EGAS is engaged in a variety of activities, including upstream projects in gas E&P and drilling, and downstream projects in processing, transmission, distribution, liquefaction and LNG marketing and export.
IOCs
Numerous international oil companies operate in Egypt. Many have offices in Egypt, while others work through a partner. IOCs operating in Egypt include:
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Apache (USA)
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Halliburton (USA)
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Apex (USA)
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Hellenic Petroleum (Greece)
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ARGAS (KSA)
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INA (France)
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Baker Hughes (USA)
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Kuwait Energy Company (Kuwait)
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Bechtel (USA)
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Maersk Oil (Denmark)
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Bilfinger (Germany)
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McDermott (USA)
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BP (U.K.)
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Noble Energy (USA)
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CEPSA (Spain)
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Petroceltic (U.K.)
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CHC – (Cyprus)
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Petronas (Malaysia)
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Chevron (USA)
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Repsol (Spain)
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Dragon Oil (UAE)
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Rosneft (Russia)
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Edison International (U.S.)
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Royal Dutch Shell (Holland-U.K.)
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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
Egypt has a free trade agreement with Europe, which makes products from European suppliers very competitive as there are no customs applied. Higher customs fees and shipping costs can put American products at a disadvantage.
Procurement & Tenders
Tenders are announced on the Ministry of Petroleum and Mineral Resources. Any entity that wishes to be notified of current tenders; they need to register the company under the Egyptian General Petroleum Corporation (EGPC).
