Interview: Tarek El Molla
What measurable progress has the energy modernisation programme made thus far?
TAREK EL MOLLA: The oil and gas sector’s modernisation has seven pillars, aimed at improving efficiency and developing the resilience of the oil and gas sector to cope with domestic, regional and global volatility. This programme will have significant implications in both the short and medium term, by increasing petroleum resources, reducing costs and improving the workforce. Additionally, optimising value-added downstream industries will enable oil and gas resources to increase their contribution to the country’s sustainable development, in line with Egypt’s Vision 2030 strategy.
The oil and gas bidding system was established, along with an updated model for petroleum agreements, making the sector more attractive for investors. Furthermore, the creation of an online portal for exploration and production will help to promote investment opportunities in oil and gas. As a result, the petroleum sector launched the first international offshore bidding round for 2019 to explore for oil and gas in the Red Sea. Also, the terms of agreements regarding newly discovered areas, such as the West Mediterranean and Red Sea, have also been revised to make them more competitive and attractive to investors, who must cope with the challenges inherent in working in such regions.
What are the main challenges on the path to becoming a regional centre of energy production?
EL MOLLA: We are currently implementing new infrastructure projects for the storage and trade of petroleum products, as well as developing receiving platforms. In addition, we are working to improve the value of existing infrastructure, and issuing legislation in support of investment in the oil and gas sector. For example, the Gas Market Regulatory Law No. 196 of 2017 created an independent regulatory authority for the gas industry. However, the way that Egypt will become a hub for energy is by strengthening its partnerships with the eastern Mediterranean countries in order to maximise the economic benefit of its natural gas resources. To this end, an agreement was signed with Cyprus to establish a direct offshore pipeline between the two countries to transfer gas from the Aphrodite field in Cyprus to Egypt, where it can be transported to liquefied natural gas plants along the Mediterranean and then re-exported to Europe.
Another significant development was the signing of a memorandum of understanding with the EU, which created a strategic partnership for energy. This is one aspect of an ongoing dialogue between Egypt and the EU regarding the growth of the sector. Furthermore, the East Mediterranean Gas Forum was launched in Cairo in mid-January 2019 with seven countries to exploit the natural gas potential in the eastern Mediterranean Sea.
How can the sector become a more attractive destination for foreign investment?
EL MOLLA: Egypt has taken a number of measures to speed up the implementation of projects. As a result, 95 petroleum agreements have been reached since 2014. This is a testament to the speed, flexibility and transparency of the bidding rounds process. An example of this efficiency is the El Zohr gas field, which took 28 months to be completed, a much shorter time than projects generally take. The petroleum sector has also launched its development and modernisation plan, including a programme to update the mechanism of attracting foreign investment. The petroleum agreements model includes provisions to encourage international partners to invest in Egypt, taking into account the high cost of exploration and production – particularly in deepwater areas of the Mediterranean – as well as the risk factor involved. In order to accommodate for these challenges, we have updated the terms of the agreements to ensure a fair return on investment, encouraging foreign companies to establish themselves in Egypt and increase the development of new projects.
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