Exclusive Interview – High Hopes for the Nile Delta
In an exclusive interview with 'Shell in the Middle East', His Excellency Sameh Fahmy, Egypt's Minister for Petroleum, talks about his objectives for the Egyptian oil and gas industry.
He also outlines the important part which Shell can play in helping to achieve these objectives, particularly with the development of the NEMED (North East Mediterranean Deepwater) Concession in the Nile Delta and by working with the Egyptian Government to examine the possibilities of constructing a Shell Middle Distillate Synthesis (SMDS) plant for the conversion of Egypt's natural gas to environmentally friendly synthetic fuels.
"I took up office as Oil Minister for Egypt in October 1999 with a clear objective to develop a strategy for Egypt's oil and gas industry for the next 25 years," says His Excellency Sameh Fahmy, Egypt's Minister for Petroleum.
"My team and I have worked very hard on establishing this strategy and have set ourselves goals which we intend to achieve.
These involve all aspects of Egypt's oil and gas and petrochemical industries. Our main focus will be to ensure that Egypt becomes a major world player in the gas and petrochemicals businesses and indeed becomes a gas exporting country”.
"Our initial concentration will be on the development of our gas reserves and resources for our domestic market, and this is an area in which Shell is working with us.
Shell is also working alongside us to develop our gas industry to such an extent that we will be able to export gas to generate foreign currency to support Egypt's development plans.
"Egypt's current gas production is currently running at around two billion cubic feet per day and our ambition is to see this doubled within five years.
"We are also producing some 800,000 barrels of oil and condensates per day.
At the moment, this is sufficient to meet the demands of the country, and as demand increases we intend to meet it by switching over to an increased use of gas in both the industrial and private consumer sectors.
"Today Egypt's oil reserves stand at some three billion barrels of oil, and whilst we are meeting current levels of demand we would still like to increase these reserves and eventually become a crude oil exporter.
"So, it is very good news to my ears to hear from Shell recently that the estimates of the potential oil reserves in the North East Mediterranean Concession are very substantial.
"We will also be examining ways to increase production from existing fields through the use of improved technology and by issuing new exploration licenses to search for new oil reserves to increase both reserves and production."
His Excellency goes on to say, "However, my belief is that gas will be the energy of the future, and in my opinion this will be so not only for Egypt but for the whole world.
"To assist us with the development of Egypt's gas industry we have encouraged the establishment of private gas distribution companies, but so far I am not very happy with the progress that is being made in this area.
We hope a better job will be done in the next few years to improve the level of gas distributed to both the industrial and private consumer sectors.
"My expectations to secure the future of Egypt's oil and gas sector requirements for the next 50 years are based firmly in the offshore Nile Delta, which is emerging as a new world-class hydrocarbon basin.
It is a challenging area, because of the water depths, but I have high hopes that it will be a very successful basin and provide us with the quantities of gas we need to start exporting gas.
"We are examining three options for the export of gas. The first option would be to supply natural gas by pipeline, and we are in discussions with several neighboring countries to reach agreement to provide them with supplies.
In this highly competitive market I cannot comment further, but, basically, we are talking to those close enough to be connected to Egypt by pipeline.
"The second option would be to build LNG [Liquefied Natural Gas] plants and export our gas in this way. In fact, we are currently examining three locations, namely Rashid, Port Said and Damietta, for the construction of LNG plants.
"Despite the increase in production levels of LNG worldwide, and with several new LNG plants on the drawing board and under construction, I believe that world demand is on the increase. I think that more and more countries will switch from oil to gas for their power requirements, and that a lot of that gas will be LNG.
Also it is not always feasible, or economical, to use a pipeline to transfer gas over great distances. So I believe that it is the right time for Egypt to enter the LNG market, and I do not think that we are too late to make an impact on, and take a share of, the growing global market.
"The third option for Egypt is to convert its gas to liquid fuels, using the Shell Middle Distillate Synthesis [SMDS] process. We are very impressed with the concept and the technology involved in this process.
At the moment of course, with high oil prices, it is an extremely attractive proposition. With our oil reserves declining and our gas reserves on the increase it would be a very good thing to have access to this type of advanced technology.
"At this point in time we are talking to Shell about the possibility of developing an SMDS plant in Egypt. We have, in fact, identified two possible locations for building such a plant, at Port Said or Damietta, should we reach agreement on the details of the project and decide to proceed with the project.
Both Shell and EGPC [Egyptian General Petroleum Corporation] have had technical teams working closely together on the SMDS project and we are ready to sign a development protocol to proceed with more detailed studies.
"We have been approached by other companies in the gas-to-liquids market, but we are very impressed with Shell's unique SMDS technology, which really is world-class.
Furthermore, Shell is the only company in the world with a commercially up-and-running gas-to-liquids plant, currently operating in Bintulu in Malaysia. I think, and hope, that this project will succeed, and it has my personal support."
His Excellency moves on to talk in more general terms about partnership agreements.
"In the past, Egypt has entered into Production Sharing Contracts [PSC] with its partners, which have, in fact, been in existence for nearly 30 years now. The PSC is a dynamic model and one which has been successful, but then all agreements are valid at the time at which they are made," he says.
"However, times change and so must the models we use, so we are examining various options for new partnering models. What is important is that these new models will be based on a 'win win' situation for all parties involved.
"In all our activities we believe we must respect our partners and the agreements we have made with them. We also work closely with our partners to develop our plans.
"On the whole, I must say that we are happy with all the partners we work with here in Egypt in the oil and gas industry. However, it is only natural that this cannot always be the case and there will be differences of opinion.
"In Egypt, especially in EGPC, we are all working to improve our performance to ensure that we stay ahead of the game.
Certainly, one of the important spin-offs of working with Shell and other international oil companies is the benefit we get from the transfer of technology and I hope that we will see more of that in the future.
"We are also studying the development of Egypt's downstream sector to examine ways in which to open it up to the private sector. I cannot give out more details about this at the present time, but I hope to be able to do so within the next 12 months."
His Excellency concludes by talking more specifically about Egypt's relationship with Shell. He says, "I think that Shell is doing an excellent job in Egypt. More and more notice is being taken of our particular needs and goals .
The people at Shell are listening to us and trying to understand us more, and all this will support us in having an even better relationship with Shell in the oil and gas sector in Egypt.
"My message to Shell's Committee of Managing Directors would be that we are willing to co-operate with them on any 'win win' situation whenever it is possible. We would like to see Shell concentrating more of its activities in Egypt and to conduct a greater transfer of its technology to the Egyptian people.
"If Shell succeeds with what I consider to be the two important issues of the day, in other words, the development of the NEMED Deepwater Area and the gas-to-liquids SMDS project, Shell will have made a remarkable achievement in - and for - Egypt."
Source:Shell Middle East.
© 2000 Mena Report (www.menareport.com)