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Egypt: Oil & gas





Egypt Oil & gas Profile

Oil & gas Opportunities in Egypt

The Oil & Gas sector is the greatest growing economic sector in Egypt. It contributed 17.5% to Egypt’s economic increase 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 meters per year and oil production is 700,000 barrels per day. FDI in the sector reached US$9.7billion which represented 76% of the total FDI flow to Egypt. Investment in Upstream activities in 2000-2010 totaled to US$ 34.6 Billion which is double the previous decades’ figures resulting in 271 oil discoveries and 156 discoveries of natural gas.
Opportunities in the sector lie in most aspects of activities; onshore & offshore exploration, field development machinery and services, with a market price of US$1.5 million/yr. The provision of HSE services, training and capacity building services is on the rise. Downstream, including LNG pipelines is booming; Egypt plays an significant role in oil & natural gas transportation. It as well hosts nine refineries with a capacity of 37milion tons in 2008/09. The market for imported equipment and services is expected to grow at an annual rate of 10%.
In addition to the various government entities and public sector companies, there are additional than 50 International Oil Companies (IOCs) from 29 different nations operating in Egypt in addition to 400 service companies and 143 rigs. An unofficial record estimates that additional than 200 agents supply products and services to the sector.


Egypt shares second place in Africa in BMI's Business Environment Ratings table, which combine upstream and downstream scores. This comes as a result of Egypt’s healthy proven gas reserves, reasonable gas reserves to production ratio, transparent regulations, relatively attractive licensing terms and sound risk environment. There are significant opportunities for UK companies in most of the products and services related to the oil & gas sector in Egypt driven by the Government's support to exploration and production activities to enhance the economy, maximize exporting, and cover for the increasing domestic request together with the existence of the major downstream industry.

The Ministry of Petroleum controls the industry through its various arms: The Egyptian General Petroleum Corporation (EGPC) acts as a controller for the industry; it governs amount oil production and activities across Egypt except Upper Egypt. Egyptian Natural Gas Holding Company (EGAS) manages investments in the exploration and production of Natural Gas. Egyptian Petrochemical Holding Company(ECHEM) controls the emerging petrochemical industry. Ganoub El Wadi Petroleum Company (Ganope) promotes the recently exploited developments in Upper Egypt. The government is as well involved in the sector operations through subsidiaries such as PETROJET(Construction), ENPPI (Engineering), GASCO(Gas Transmission and Distribution), EMC(Maintenance), etc. Over 40% of Egypt’s Hydrocarbons is produced by British companies. British made products enjoy a very good reputation with regards to quality and reliability. British Standards are often used in purchasing orders. International Oil Companies (IOCs) exploring for oil and gas are required to use short-listed suppliers agreed by EGPC when calling for tender for goods and services of values exceeding US$ 5000. EGPC involvement is because investment costs in exploration are recovered from the production stream if commercial exploitation results. 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 through their agent/facilitators in order to be to be invited / pre-qualified to bid on contracts.

It is advisable that exporters make detailed presentations to EGPC, inclunding to a lot of of the production companies active in the sector as most of them have their own vendor short lists, companies should therefore continue to update their credentials and visit the companies periodically to retain their short inventory status and ensure receipt of relevant tenders.
In general, there is no statutory requirement in the oil and gas sector that foreign firms tendering for the supply of goods and services should go through registered Egyptian agents. It is, nevertheless, advisable to appoint active and well-connected agents to register their products with the relevant authorities, provide local back-up services, chase applications, help in data gathering and generally ensure that their principals' interests are adequately safeguarded.

Bid Rounds Exploration activities take place through abiding system in which EGPC/EGAS/Ganope offer concession areas based on a Production Sharing Agreement (PSA). In the PSA, the contractor undertakes amount exploration activities at his expense. If commercial discovery is achieved, the IOC bears amount the development costs and recovers them from the revenue generated from production (cost recovery).This mechanism allows the contractor to retain a certain amount of the total production of the oil or gas discovered. The remaining production is distributed between EGPC and the IOC according to production percentages set in the agreement.


  • Joint Venture Operation unique aspect of the industry is the joint venture operating system, whereby upon declaration of commercial discovery, EGPC joins hands with the relevant IOC to form a joint venture operating company. This new entity’s top management is equally staffed by employees from both companies and joint approval is required for amount decisions and operations. The resultant companies are known by their joint venture names; GUPCO (BP), BAPETCO, (Shell), RASHPETCO (BG), Khalda (Apache), etc. MAIN OPPORTUNITIES IN THE SECTOR Egypt is a significant market for UK exporters of oil & gas products and services due to the current & anticipated high levels of investment in the sector. Prospects of further large reserves of gas and a need for economic increase to match the high people increase (almost 80 million in 2009 and expected to double in 25 years) ensure that this market represents long-term business prospects. The sector has ongoing development of new fields, infrastructure, gas export facilities, etc to maintain oil production for export earnings and as well the capacity of the country's refining and petrochemical sector. Below is a summery of the major opportunities in the sector:
  • Exploration and Field Development Exploration is revived with attempts to reverse the decline in oil production and explore opportunities in natural gas. Exploration success rates has improved over the past decade to reach above 70% due to improved exploration techniques, ability to explore deep water wells and targeting lower risk prospects. This resulted in a number of new discoveries and a steady stream of new field developments. New exploration areas such as Upper Egypt and offshore the Mediterranean are as well expected to bring new successes.

Opportunities for companies specialized in offshore and onshore exploration equipment, supplies and services include studies, pipes, pumps, engines, valves, etc. There is huge request for deep sea exploration equipment and services inclunding well recovery technology.
There is as well an increasing number of small field developments in addition to a potential for larger offshore gas developments. Most of the development is in the hands of Eni, Apache, BG, BP and Shell, the so called ‘Large 5’. In addition to other players such as Dana Gas, Dana Petroleum, Petronas, Melrose, Circle Oil, Kewait Energy Company, Aegean Energy and others. The market for field machinery and services reached US$1.5 million/yr in 2009 increasing at a 10% annually.

Operations And Maintenance

A lot of of the oilfields in Egypt are over 30 years old with relatively declining production rates. Driven by the boom in oil prices, BP - part other IOCs, has implemented programmes to rehabilitate a lot of of these oilfields. These developments attracted new investments and has resulted in increased levels of production.
Recently, the sector has seen significant upgrading its the existing systems (particularly onshore) to improve deliverability and reliability specially in areas like the Gulf of Suez fields. Enhanced oil recovery is another high investment area in Egypt.
O&M activities are as well demanded in the expanding gas transmission and distribution system. The Government of Egypt has achieved natural gas connectivity to 3.3 million domestic customers in June 2009 and plans to reach 5.5 million households by 2015.

Provision of Services: Health, Safety and Environment, Training

Training and sustainable development is a major area of concern for the Ministry of Petroleum and national organizations due to high unemployment and a rapidly growing young people (50% of the people is currently under 35 years old). Increasingly, there is local request for foreign companies to offer training to their Egyptian employees or widen it to different Egyptian nationals through their CSR obligations. Opportunities for companies specialized in the provision of education and training for the sector are on the rise.

Health Safety & Environment: For: most IOCs and their JV companies, health and safety is a priority and much time and effort is spent on implementation of international standards. Most local companies engaged in the sector have basic health and safety management systems and preventative measures. Both segments have an increasing request for HSE consultation and staff training.

DOWNSTREAM ACTIVITIES Egypt has a well established oil refining and distribution system, including significant transportation links such as the Suez Canal. The gas transmission and distribution market has been established since 1990s and is now characterized by an integrated system.

• Refining Egypt has by far the major refining sector in Africa with an estimated refining capacity of 730,000 b/d through its nine refineries. It represents 22.61% of the total African region capacity. Its market share is forecasted to reach 17.98% by 2014 according to a BMI study. The refining sector is predominantly national dominated with only active private sector refinery and additional in the pipeline.

Major projects include:

  • (i) a JV between Egyptian, 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 major oil refinery with output capacity of 15 million tonnes per year planned to reach 30 million tons/year in a next expansion. The project will supply the domestic market inclunding export to China.
  • (iii) The International Financial Corporation, the World Bank’s investment arm, agreed to invest $120 million in the Egyptian Refining Company as a part of the major project-financing transaction in Egypt. This equity investment will be used to build a $3.7 billion hydro-cracking and coking refinery that will allow Egypt to transform locally available fuel oil into lighter fuel products, such as ultra-low sulfur diesel, for the domestic market.
  • (iv) A 130,000b/d plant to be built at Ain Sukhna on the Red Sea coast. Opportunities for UK companies lie in almost amount aspects of the industry especially in the development and supply for new projects, upgrading the old refineries to cope with Egyptian crude, updating refineries basic design, supply of new technologies, various equipment and supplies and learning and development services for refinery staff.

• Oil Pipelines Egypt has strategic importance because it operates the Suez Canal and Sumed (Suez-Mediterranean) Pipeline major routes for export of Persian Gulf oil.
The Summed pipeline is an alternative to the Suez Canal for transporting oil from the Persian Gulf region to the Mediterranean. The 322km pipeline runs from Ain Sukhna on the Gulf of Suez to Sidi Kerir on the Mediterranean. Sumed's original capacity was 1.6mn b/d, but with completion of additional pumping stations, capacity has increased to 2.5mn b/d. The pipeline is owned by the Arab Petroleum Pipeline Company (APP), a JV between Egypt (50%), Saudi Arabia (15%), Kuwait (15%), the UAE (15%) and Qatar (5%). The APP has been increasing storage capacity at the Ain Sukhna and Sidi Kerir terminals.

Service Stations

Egypt's downstream fuels sector is dominated by the national owned Misr Petroleum, with a network of 810 retail outlets. Foreign players such as ExxonMobil, Shell, Caltex, Total, Emarat Misr and OiLybia are as well active in the market.
Gas Transmission and Distribution Projects

The natural gas industry has moved during the last decade towards deregulating and privatizing the gas distribution sector. This resulted in an increase in the percentage of gas utilization, which led to a number of new gas transmission and distribution projects being approved. The midstream projects are dominated by the national transmission company Egyptian Natural Gas Company GASCO which governs the national natural gas grid. While 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 part the world's gas elite with operating LNG plants:
Egyptian LNG (ELNG) ideally situated in Idku capturing gas from the western part of the Delta. It comprises trains producing a total of 7.2mtpa of LNG. It is operated by BG and Malaysia's Petronas.
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 large train of 5.0 mtpa.

Opportunities for companies lie with the LNG supply chain and providing products/services as these plants expand.

Gas Pipelines - The Arab Gas Pipeline (AGP)

Egypt has been expanding its gas pipeline network along the east Mediterranean coast to open up new markets for its rapidly growing gas production. There are ambitious plans to extend the Arab Gas Pipeline (AGP) to Turkey and onwards to Europe with speculative extensions to Iraq, Cyprus and Eastern Europe.
The AGP linked Egypt to Jordan since 2003 with capacity of 10.3bcm of gas per annum and was then extended to Syria. The Jordan-Syria section runs from El Rehab in northern Jordan to Damascus then to the Al Rayan gas compressor near Homs. This section became operational in 2008 followed by the Lebanese branch started in 2009.

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