Interview: Claudio Descalzi
How has the sharp decline in global oil prices impacted investment in Egypt?
CLAUDIO DESCALZI: Egypt is a key strategic partner for us. Despite persistently low oil prices, we have increased our investment in the country. It will be one of Eni’s top destinations for investment in the coming years, with $2.7bn having already been invested in 2016. Our increased investment follows the successful discoveries of the Zohr gas field, which will begin production by the end of 2017, and Nooros, which is already producing 170,000 barrels of oil equivalent per day, since its discovery in July 2015. Zohr is a game changer for Egypt; it is the largest gas discovery ever made in the Mediterranean Sea, with a potential 850bn cu metres of gas in place, enough to meet Egypt’s natural gas demand for decades to come.
To what extent do delays in payments to international oil companies (IOCs) constitute a concern?
DESCALZI: The process of paying IOCs has improved substantially in recent years, which shows how seriously the government is taking the issue. We are confident that the government’s commitment to honour payments to IOCs with a securitisation package linked to strategic developments will help ensure that a sustainable and successful payment system is established. This in turn will help to further consolidate the historical relationship IOCs have with Egypt.
How can the Egyptian government and IOCs work together to align costs with prices?
DESCALZI: They can work together through mutual understanding and constant cooperation in all sectors to incentivise businesses and attract new investment. Governments should encourage foreign investment in order to ensure energy security and diversification. By developing domestic gas as well as sources of renewable energy, they can support growing local demand at lower costs, fuelling domestic growth. Companies have to work together with host countries and offer their expertise in order to support local development and promote shared growth. This has been the case in Egypt thanks to favourable relationships and the reliability of the decision-making process, which have contributed to the success of major discoveries in the Mediterranean. Zohr’s development is a good example of close and profitable bilateral cooperation between IOCs and the government.
What do you identify as the key challenge facing the energy industry in Egypt?
DESCALZI: One of the key challenges facing the energy industry in Egypt is ensuring that the environment is as stable as possible. The greatest challenge for Egypt will be to provide energy to a rapidly growing population and an expanding economy at a competitive and sustainable price. This is an issue with which the Egyptian government has been constantly engaged.
What investments are required to maximise Egypt’s potential as a gas player in the region?
DESCALZI: Egypt has a crucial role in the Eastern Mediterranean, because it has the most developed infrastructure with transportation capacity of about 37bn cu metres per year, of which 70% is liquefied natural gas. The giant gas fields discovered and developed so far in the Eastern Mediterranean – in Egypt, Israel, Cyprus and Lebanon – have large volumes potentially available for export. Therefore, the best course of action would be to maximise the utilisation of existing liquefaction capacity in Egypt for exports and existing pipelines for gas flows between Israel and Egypt, such as the Arab Gas Pipeline. On the other hand, the construction of an export route to Europe via a pipeline will require both significant investment and political acceptance in the states concerned. Further investments in exploration are required to secure additional volumes before this option can be considered viable.
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