The most salient obstacle currently facing Egypt is accumulated debts to foreign partners in the oil sector as well as a decrease in natural gas production rates. In an interview with Daily News Egypt, Petroleum Minister Sherif Ismail outlines the government’s plan to stimulate investment in different sectors and solve obstacles faced by the state. He also details the Ministry of Petroleum’s plans to offload debts and garner new streams of income.
It was previously announced that the Ministry of Petroleum intends to repay $1.5bn of dues to foreign partners. What are the details of this plan?
The ministry aims to repay some $2bn of debts to foreign partners during the year, and part of this will be paid in Egyptian pounds. An estimated $1bn of debts to foreign partners in the oil sector will be paid back during the month of September.
The ministry aims to borrow about $1bn from foreign banks by the end of this year in order to pay back foreign partners. In FY 2013/2014, $11.2bn of debts were paid, while the estimated value of partners’ shares in oil and gas was approximately $11.7 bn.
These measures confirm petroleum’s commitment to paying dues to foreign partners on a regular basis in the form of petroleum product shipments, price adjustments, or money.
Can you tell us about the Emirati Ministry of Petroleum’s request that remaining payments to foreign partners be guaranteed?
This was, in fact, requested, and the UAE government is currently studying Egyptian guarantees to pay of dues to foreign partners in the oil sector, which amounted to about $5.9bn by the end of June.
Will there be another tender offered for oil and gas exploration in the coming months?
The Ganoub El-Wadi Petroleum Holding Company (Ganope) in partnership with EGAS [Egyptian Natural Gas Holding Company] will launch a new international tender for oil and gas exploration during the coming months, which will encompass areas in the Delta and the Mediterranean but not deep water areas. For the first time, Egypt will offer two zones for shale gas exploration in the Western Sahara, with special conditions.
Preliminary estimates indicate that Egypt has around 500tn cubic feet of shale gas and 100tn feet are extractable, according to the US Energy Information Administration.
When will the results of the bid offered by EGAS be announced?
EGAS will announce the results of the bidding during the month of September, and currently, submissions from foreign companies are being evaluated.
I expect that 15 new agreements will be signed by the end of this year, bringing the total number of agreements signed this year to around 50.
What happened with the idea to import the gas needed by power plants in the coming years?
An international tender has been offered to import about 350m cubic feet of gas per day over the next three years. These figures may be increased to serve power plants, and several international companies specialising in the field have responded to the tender. The price will be determined by the market, and will not be fixed.
An agreement was also be undertaken to rent a gas tanker for the next five years. The winning company will be announced after the final signing in the coming months.
Importing gas will cost about $170m in order for us to supply three or four LNG shipments per month. We are currently in the final stages of signing a contract with Sokhna Port, and annual fees have been agreed upon in exchange for ship parking.
Will price adjustments be issued for gas produced from new projects other than RWE’s Desouk?
An unconventional gas prices adjustment is taking place for another project in the Western Desert with a foreign partner. One of the companies operating in Mediterranean deep waters has requested an adjustment for gas prices for the agreement, and the measure is being studied.
New gas price adjustments are calculated according to studies of the project and are completed in a manner that suits the economics of each region, therefore achieving revenues for the foreign partner.
Gas prices were adjusted in order to stimulate investments in the area, as prices have held steady at $2.5-$2.65 since July 2000, and required an adjustment for production-linking projects due to the increased costs of investment for partners. Price adjustments will be considered occasionally in order to push foreign partners to increase investments in the region.
What are some of the most prominent projects underway in the field of oil and gas research and exploration during FY 2014/2015?
British Gas (BG) is investing approximately $1.6bn in gas production during FY 2014/2015. Investments in British Petroleum’s North Alexandria project, which aims to add 1.25bn cubic feet of gas production, may exceed $9mn.Good opportunities exist for exploration Abu Rudeis, which will play a positive role in increasing crude oil production over the coming months and conducting assessments of the area.
How much are the investments that will be injected in the refining and petrochemical sectors during the coming months?
A range of projects are now underway for the next phase with investments of $9m in the fields of petrochemicals and refineries. Capital and bank loans will finance the projects in accordance with the results of feasibility studies.
The Egyptian General Petroleum Authority (EGPC) contributes 23.8% of financing for hydrocracking unit projects for the Egyptian Refining Company, supplying investments totalling $3.7mn. The remaining funding will come from foreign banks. The Islamic Bank is financing the establishment of a gasoline production unit for the Assiut Oil Refining Company.
What are targeted production rates for gas and oil during FY 2014/2015?
I expect our natural gas production rate to rise to 5.3bn cubic feet per day by the end of FY2014/2015, compared to the current 4.8bn cubic feet now. The Ministry of Petroleum aims to raise production rate of crude oil to more than 700,000 barrels per day by the end of FY2014/2015 compared to the current 690,000 barrels.
What are the details of UAE financing petroleum product shipments worth $9bn? Will grants that do not need to be paid
back be part of the package?
This is simply a commercial agreement with the EGPC and ADNOC to provide 65% of petroleum product shipments that we will import for FY 2014/2015. They are offering us payment facilities only and the package does not include any grants. The details of the facilities will be announced through an official statement made by both the UAE and Egypt.
When will the second phase of the smart card project be approved?
Petroleum product smart cards are currently being printed and will be distributed after this process is completed. Consumers and stations will be granted a grace period of two months and then partial approval will be given, according to the Minister.
He stated that the second phase of the smart card project has no relation to prices, and this phase is targeted at citizens who drive cars using the cards to obtain fuel. The goal of the cards is to regulate the market.
We want to know who the actual beneficiary of the products is whether it be industry, agriculture, tourism, or ordinary citizens, so that we can account for actual use on the part of each sector.
The goal of the smart card collection system is to create clear and accurate databases so that we are able to determine the best and most accurate methods for dealing with fuels.
Are negotiations taking place with partners in the Damietta Liquefaction Plant in order to waive international arbitration?
There are no negotiations taking place between the ministry and partners in Damietta regarding a waiver of international arbitration.
How do you view the influence of increasing petroleum product prices on the local market?
Increasing prices for petroleum products is a positive step toward improving Egypt’s economic situation, and part of the liquidity needed by the Ministry of Petroleum has been provided through this process. We hope for the best and will increase fuel prices gradually.
What is the current situation for opening gas imports to the private sector?
The private sector was permitted to import its needs for natural gas without the Ministry of Petroleum getting involved, and the role of EGAS will be limited to receiving the gas on the national gas line and transporting it to suppliers.
No private sector companies have approached EGAS on the subject of importing gas, and the allowance for private sector imports will apply to groups of companies, not each company separately.
He stressed that the importer will enter into agreements with suppliers and pay the prices to be agreed upon without any material support from the government, and the private sector must construct the infrastructure necessary to receive the liquefied gas.
What is the current situation regarding the creation of two agencies, one to take care of gas affairs and the other for petroleum products?
A study will take place regarding the establishment of an agency independent from all government agencies to organize affairs relating to gas another for petroleum products by the end of 2014. The goal is to organise interactions with consumers.
The two agencies’ missions will be to regulate the relationship between the producer, consumer, and distributor in all cases, as well as to monitor the process of trading and petroleum product use in the markets.
What petroleum sector companies will be offered for an IPO?
A study is underway to offer an IPO to petroleum sector companies on the Egyptian Exchange, and the needs of the companies to be offered will be reviewed with a special focus on restructuring, improving their financial status, the availability liquidity and assets, and the proportion of the company that will be offered.
The Ministry will utilise financial advisors from Egyptian banks like National Bank of Egypt and BanqueMisr.
How do you view the investment market in the Egyptian petroleum sector in light of the current situation?
Egypt is a large and promising market with great potential in terms of crude oil and gas reserves. Egypt has good human resources as well, and investment opportunities in the sector abound. They include work in research and exploration for petroleum and gas, which are considered the cornerstone of the sector. New agreements are continuously expected to be signed for the sector.
We also have investment opportunities to develop petroleum infrastructure, which entails the construction of pipelines to transport petroleum products as well as refineries to increase refining capacity and provide for market needs. Sector infrastructure has grown old as a result of a lack of new investments for some time.
The petrochemicals sector in Egypt contains many investment opportunities, and we strive to attract investments in order to provide value-added for petrochemical products like propylene, ethylene, and other products.
Investment opportunities in the mineral resources sector are also available. We will offer bids as soon as the new law is issued, and we are working to construct industrial complexes based on mineral resources in order to maximise benefit.
What is the current situation regarding the Mineral Resources Law?