Egypt is a significant oil producer and a rapidly growing gas producer. The Suez Canal and Sumed Pipeline are strategic routes for Persian Gulf oil shipments, making Egypt a focal point in world energy markets.
Note: Information contained in this report is the best available as of November 2000 and can change.
Due to major recent discoveries, natural gas is likely to be the primary growth engine of Egypt's energy sector for the foreseeable fututre. Foreign oil companies began more active exploration for natural gas in Egypt beginning in the early 1990s, and in short order they found a series of significant gas deposits -- in the Nile Delta and the Western Desert.
Today, Egypt's natural gas sector is expanding rapidly, with production expected to nearly double between 1999 and 2002. Production stood at 2.3 billion cubic feet per day (Bcf/d) at the end of 1999, and it is expected to reach 3.0 Bcf/d y the end of 2002.
Major foreign companies involved in gas exploration and production in Egypt include British Gas (BG), BP Amoco, ENI-Agip, and Shell. Spain's Repsol and Apache also produce gas from their concessions in the Western Desert.
Egypt's government released a revised estimate of proven natural gas reserves in January 2000, which put the figure at 42.5 trillion cubic feet (Tcf). New finds had doubled proven gas reserves in only three years.
It was also stated that, based on initial seismic survey work in offshore areas, probable reserves were 120 Tcf. Most of this increase has come about as a result of new gas discoveries in the Mediterranean offshore/Nile Delta region, and some finds in the Western Desert.
In the Nile Delta, which has emerged as a world-class gas basin, recent offshore field developments include Port Fuad, South Temsah, and Wakah. In the Western Desert, the Obeiyed Field is an important natural gas area currently under development.
The International Egyptian Oil Company (IEOC), a subsidiary of Italy's ENI-Agip group, is Egypt's leading natural gas (and overall hydrocarbons) producer, operating in the Gulf of Suez, the Nile Delta, and the Western Desert regions.
In cooperation with BP Amoco, IEOC has been concentrating its natural gas exploration and development efforts in the Nile Delta region.
The companies are undertaking a $1 billion development program expected to yield about 365 Bcf annually beginning in 2000. On November 4, 1997, BP Amoco (along with its partners EGPC and IEOC) announced plans to develop the giant Ha'py gas field in the Ras el-Barr concession of the Nile Delta region at an estimated cost of $248 million. The field came onstream in February 2000, and is espected to reach output of 280 million cubic feet per day (Mmcf/d) by December 2000.
In September 1997, IEOC tested the Temsah gas field (located in the offshore Nile Delta) at 11.6 Mmcf/d. In October 1998, BP-Amoco (25 percent owner) and ENI-Agip signed a gas sales agreement with EGPC (50 percent owner) and IEOC (25 percent owner) for Temsah.
Temsah's gas reserves are estimated at 3.9 Tcf, and the gas sales agreement is for 35 Mmcf/d initially in 2000, increasing to 480 Mmcf/d by 2003.
Two areas in the Western Desert -- Obeiyed and Khalda -- have shown great potential for increasing Egypt's gas production in the near future. The Obeiyed gas recently started producing 300 Mmcf/d, after the completion of a pipeline linking it to Alexandria. Production of 300 Mmcf/d started at Khalda. In late 1998, Repsol announced a gas discovery in the Khalda Offset Concession, adjacent to Khalda.
Output from Obeiyed and Khalda will be transported to Alexandria by a 180-mile pipeline. BP-Amoco and the IEOC also are preparing to bring several fields off the Nile Delta coast into production. Other companies with recent gas finds in Egypt include: Petrobel (the Sigan-1 field), Agip/EGPC (Wakkar), and the U.K.-based BG Group (Rosetta-5 and Rosetta-6). These three finds are all in the Nile Delta region. Gas deliveries from the Rosetta concession began in 2000.
Much of the growth in gas production in the next decade, however, will be from areas offshore from the Nile Delta. In May 1999, the Italian firm Edison and the BG Group made a large find ("P12/13") in their West Delta Deep Marine concession, which tested at 45 Mmcf/d, followed by another ("Simian-1") which tested at 44 Mmcf/d in October 1999.
The two companies announced in July 2000 that their second and third wells at the field also had tested successfully at a similar flow rate, which was contrained by the capacity of the equipment. Another successful test well drilled on another structure within the same concession also was announced in September 2000.
The fields are expected to be developed and brought onstream by 2003. BP Amoco and Shell also have concessions offshore from the Nile Delta, and initial seismic survey work and exploratory drilling has indicated significant probable reserves.
Shell has announced that probable reserves in its Northeast Mediterranean (NEMED) concession are 15 Tcf. ExxonMobil also holds a 25% stake in this concession.
Natural gas demand has grown rapidly in Egypt as thermal power plants, which account for about 65 percent of Egypt's total gas consumption, have switched from oil to gas. Domestic gas consumers are to be served by several private gas distributors, franchises which were awarded in late 1998.
One of the franchises, awarded to a team headed by BG and including the Egyptian construction firm Orascom and Edison of Italy, is developing a gas distribution infrastructure in Upper Egypt as far south as Asyut, where no piped gas had been available. After the initial phase, valued at $220 million, a possible later phase may extend the gas grid south to Aswan.
The rapid rise in natural gas reserves has led to a search for export options. In late 1999, the Egyptian government stated that natural gas reserves were more than sufficient for domestic needs, and that foreign firms producing gas in Egypt should seek export customers.
In early 2000, the government announced a moratorium on new purchase agreements by EGPC for domestic consumption, as previously signed agreements will meet projected demand over the next several years.
It also announced in September 2000 a new pricing policy which includes ceiling and floor prices, designed to protect both consumers and producers from the risks of prices indexed to oil. Export options under discussion have included Liquefied Natural Gas (LNG) plants and a pipeline to Israel with a possible extension onward to Turkey.
The four LNG projects currently under discussion are backed by Union Fenosa (the Spanish utility firm), BG and Edison, and BP Amoco. Union Fenosa signed a firm contract with EGPC in July 2000 for the purchase of gas for an LNG gasification terminal which is to be completed by 2004 on the Nile Delta coast.
The planned capacity for the facility is 141 Bcf-per-year.
Most of the gas will be used at Union Fenosa power plants in Spain, with additional volumes being sold to other customers in Spain and elsewhere in Europe. BP Amoco has signed a letter of intent with EGPC for a two-train LNG terminal to be completed by 2004.
The project would also include a facility to produce liquefied petroleum gas (LPG), of which Egypt currently imports a large share of its consumption. Shell also is proposing such a dual-use facility. It would involve both an LNG export terminal and a facility for 75,000 bbl/d gas-to-liquids production of petroleum products for the growing local market.
BG and Edison are backing a plan to build a 141 Bcf-per-year LNG terminal near Idku on the Nile Delta coast. It seems likely that some of these export projects could eventually be consolidated.
The idea of exporting gas to Israel has been under discussion for several years. The most ambitious version of the scheme would involve the construction of an offshore pipeline from El-Arish in Sinai up the coast of Israel, with a possible extension onward to Turkey.
The East Mediterranean Gas Company (a consortium of EGPC, Merhav of Israel, and Egyptian businessman Hussein Salem) has been set up to pursue the project.
ENI has nearly completed a pipeline up Egypt's Mediterranean coast to El-Arish, which could serve as a starting point for the export pipeline. Recent gas finds offshore from Israel have raised questions about Israel's need for imports, however.
The Egyptian and Israel governments have held discussions of the proposal in 2000, but have not signed an agreement. Recent political tensions in the region may further delay the negotiations.
Egypt has installed generating capacity of 17 gigawatts (GW), with plans to add 9.3 additional GW (mainly gas-fired) by 2010. Around 84 percent of Egypt's electric generating capacity is thermal (gas turbines), with the remaining 16 percent hydroelectric, mostly from the Aswan High Dam.
All oil-fired plants have been converted to run on natural gas in a recently completed program. With electricity demand growing 7 percent -8 percent annually, Egypt is building several power plants and is considering limited privatization of the electric power sector.
Egypt's power sector is currently comprised of seven regional state-owned power production and distribution companies, which were held by the Egyptian Electricity Authority (EEA). In July 2000, the EEA was converted into a holding company, though still owned by the state.
Current reform plans call for the separation of generation, transmission, and distribution. Distribution companies will eventually be privatized, while the Egyptian Electric Holding Company (EEHC) will continue to hold transmission lines and power generation. New power generation will come almost exclusively from privately funded projects, which will sell to EEHC.
Egypt is planning to add generating capacity by utilizing Build, Own, Operate, and Transfer (BOOT) financing schemes to construct power plants. BOOT projects are used to fund large-scale public infrastructure without affecting the country's debt profile.
Private developers are allowed to recover their costs of construction through ownership and operation of the plant for a fixed period before handing it over to the state. The first BOOT project was a gas-fired steam power plant with two 325-MW generating units, located at Sidi Kerir on the Gulf of Suez, which was completed in September 2000. The plant cost $450 million.
Electricity from the plant is to be sold at 2.54 cents per kilowatthour. This competitive price stems largely from the availability of cheap natural gas -- to be supplied by Egypt's Gasco -- as a feedstock. U.S.-based InterGen (a joint venture of Bechtel Enterprises and Shell Generating Ltd.), along with local partners Kato Investment and First Arabian Development and Investment, have the 20-year BOOT contract for Sidi Kerir.
The second BOOT power project award went to Electricite de France (EDF), for two gas-fired plants to be located near the north and south ends of the Suez Canal. Each plant will have an installed capacity of 650 MW, and the project cost will total around $900 million.
The price for power from the EDF plants will be 2.4 cents per Kilowatt hour (Kwh), the lowest price yet offered for a BOOT plant. Planned future projects are 750-MW plants planned for Nubariya in the western Nile Delta, a 750-MW addition to the Cairo North power complex, and smaller hydroelectric projects at Nag Hammadi and Asyut.
The Nubariya plant may be financed with loans from Persian Gulf investors, rather than as a BOOT project.Egypt also is planning to build a part-solar power plant at Kureimat as a BOOT project, which will have 30 MW of solar capacity out of a total planned capacity of 150 MW.
The World Bank will provide a financing package from its Global Environmental Facility which will offset the cost difference between the solar capacity and thermal capacity.
A Netherlands-funded project is building 60-MW of wind power units in the Suez Canal area. Egypt also has a 22-MW nuclear research reactor at Inshas in the Nile Delta, built by INVAP S.A. of Argentina, which began operation in 1997.
Work is continuing on the linkage of Egypt's electricity network with other countries in the region, including a $239-million link with Jordan which was completed in October 1998. The first phase of a Five-Country interconnection of Egypt's system with those of Jordan, Syria, Turkey, and Iraq is scheduled to be completed by 2002.
Egypt also activated a link to Libya's electric grid in December 1999. Other interconnections with Egypt's electricity network are being studied, including an Arab East (Egypt, Bahrain, Jordan, Lebanon, Oman, Qatar, Saudi Arabia, Syria, United Arab Emirates, Yemen) interconnection, as well as one with Israel, Jordan, and the Palestinian Authority.
Saudi Arabia and its partners in the Gulf Cooperation Council are building their own unified power grid, which they hope to integrate later into a wider Arab network. The Arab Maghreb and the Five-Country interconnections will help form an even larger system interconnection, the Mediterranean Power Pool (MPP), which will link the Middle East, North Africa, and Europe. The anticipated completion date of the MPP is 2015.
In a country that is predominantly desert, the Nile River provides the lifeblood for Egypt's population. With 96 percent of Egyptians living astride the river, environmental issues are a central component of Egyptian life.
Population growth, modernization, and increased economic development have brought environmental problems to the forefront, especially air pollution.
In Cairo, emissions from vehicles and lead smelters, together with sand blowing in from the adjacent Western Desert, have created high levels of particulate matter in the air--a deadly combination for public health in the densely-populated capital.
Energy Ministers: Sameh Fahmy (Minister of Petroleum), Ali el-Saidi (Minister of Electricity and Energy)
Proven Oil Reserves (1/1/00E): 2.9 billion barrels
Oil Production (August 2000): 794,000 barrels per day (bbl/d), of which 720,000 bbl/d is crude oil
Oil Consumption (2000E): 573,000 bbl/d
Net Oil Exports (1999E): 352,000 bbl/d
Crude Refining Capacity (1/1/00E): 577,760 bbl/d
Natural Gas Reserves (Jan. 2000E, as stated by Egyptian government): 42.5 trillion cubic feet (Tcf)
Natural Gas Production (1998E): 0.5 Tcf
Natural Gas Consumption (1998E): 0.5 Tcf
Recoverable Coal Reserves (12/31/96E): 24 million short tons (Mmst)
Coal Production (1998E): 0.4 Mmst
Coal Consumption (1998E): 1.7 Mmst
Electric Generation Capacity (1/1/98E): 17 gigawatts (84% thermal, 16% hydroelectric)
Electricity Generation (1998E): 57.8 billion kilowatthours
OIL and GAS INDUSTRIES
State Oil Company: Egyptian General Petroleum Corporation (EGPC) plus 11 smaller state oil companies
State Pipeline Companies: Sumed-Arab Petroleum Pipeline Company (APP), Domestic pipelines-Petroleum Pipelines Company (PPC), Export gas pipelines-Egypt Trans-Gas Company (EGTC)
Major Foreign Oil Company Involvement: Apache, British Gas, BP-Amoco, Deminex, TotalFina-Elf, ENI-Agip, Exxon-Mobil, Marathon, Norsk Hydro, Novus, Repsol, Royal Dutch Shell, Samsung, Texaco
Major Ports: Alexandria, Port Said, Sidi Kerir, Ras Shukheir, Suez, Ain Sukhna
Major Oil Fields: Belayim Marine, October, Morgan, Belayim, Badri, Ras Budran
Major Gas Fields: Abu Madi, Abu Qir/North Abu Qir, Shukheir, Badreddin
Major Pipelines (capacity): Sumed pipeline (2.5 million bbl/d)
Major Oil Refineries (crude oil capacity): Cairo Petroleum Refining Company -- Mostorod (145,000 bbl/d), Tanta (35,000 bbl/d); El-Nasr Petroleum Company - Suez (99,300 bbl/d), Wadi Feran (7,060 bbl/d); Alexandria Petroleum Company - El Mex (100,000 bbl/d); Ameriya Petroleum Refining Co. (78,000 bbl/d); Suez Oil Processing Company - Suez (66,400 bbl/d); Assiut Petroleum Refining Co. (47,000 bbl/d)
Source:United States Energy Information Administration.
© 2000 Mena Report (www.menareport.com)