• Home
• Egypt
• News Article

Egypt: Oil Comeback

Egypt's daily oil output has reached its highest point in 14 years, as the country strives to revive the sector.

A report by the Egyptian General Petroleum Corporation (EGPC) , which holds the government stake in about 30 oil subsidiaries in Egypt, has announced an increase in production of 55,000 barrels per day (bpd), bringing the nation's oil output to 700,000 bpd, according to local media. This is a much needed boost for the industry, as oil production in Egypt has been declining steadily since 1990, when it peaked at 941,000 bpd.

The 2007-2008 fiscal year saw a rise in production as a result of new discoveries in the Gulf of Suez, the Nile Delta, the Western Desert and the Mediterranean Sea, reflecting the success of the government's efforts to encourage increased investment in the oil sector. Additionally, last year the Shura Council's Industrial Production and Energy Committee approved nine agreements for oil and natural gas prospecting in the areas of the Gulf of Suez and the Western and Eastern Deserts. These new areas of exploration will receive investments of over $222bn, according to local media.

Last month, Egypt signed three more oil exploration agreements with four companies from the UK, Italy, Malaysia and Kuwait. The deals will allow the foreign corporations to look for oil in Rosetta, on the Mediterranean coast, off the Mediterranean shores in the west Delta and in northern Al Bardawil, according to reports.

Several foreign oil operators have already struck oil this year. UK-based companies Circle Oil and Premier Oil recently announced an oil and gas find in the Al Amir SE-1 well at the North West Gemsa Concession, located southeast of Cairo in the Gulf of Suez Basin. Initial, sustained production was over 3,000 bpd, as reported by the Associated Press.

The increase in exploration has already had an impact on Egypt's official reserves. The figure increased from 3.7bn in 2006 to a current estimated 4.2bn barrels due to the various new findings, according to the Ministry of Petroleum.

Additionally, opportunities for further development of the sector are increasingly being found outside the country. On October 5, Egypt's Minister of Petroleum, Sameh Fahmi, accompanied Foreign Minister Ahmed Abul Gheit on a surprise visit to Baghdad to meet with members of the Iraqi administration. The Iraqi government has called on Egypt to help rebuild its oil infrastructure.

Iraq remains the second largest Arab oil power and the world's third, with proven reserves of 115bn barrels. During Fahmi's visit, the two governments signed various cooperation agreements, including stipulations that Egyptian companies would build 20 filling stations in the country and hold training courses for Iraqi oil personnel. The Egyptian government expects other cooperation opportunities to arise in the areas of digging, extension of pipelines and construction of oil installations.

"Although Egypt is not a main producer comparable to other countries in the Middle East, several companies and engineers have acquired valuable experience in the Gulf," Gamal Soltan, a research fellow at the Al Ahram Centre for Political and Strategic Studies, told OBG. "This is where Egyptians have a competitive advantage in oil sector, in the services side of the business."

Foreign cooperation will further enhance capabilities that will be much needed at home, if Egypt is to increase oil output in the years to come.

The revamping of the country's oil sector is important for future sustainability, as some analysts fear that Egypt might become a net oil importer in the years to come. According to a report by the Organisation of Arab Petroleum Exporting Countries (OAPEC), Egypt's energy consumption rose from 1.21m barrels of oil equivalent (boe) to 1.24m boe during the past year. Egypt is already the most populous Arab country as well as the region's biggest energy consumer, excluding Saudi Arabia. The country's growing population is only set to add further pressure.

Overall, the evolution of the Egyptian oil industry will depend highly on the level of investment in exploration and the new oil finds it can produce. Enhanced oil recovery techniques, which allow higher production on already explored wells, are also impacting the level of reserves positively and allowing the country to better use its resources in a time of worldwide energy constraints.

© Oxford Business Group 2008