Petroleum Magazine in an interview with the Minister of Petroleum March.2014
An interview with Eng. Sherif Ismail, Minister of Petroleum and Mineral Resources,
laying out an integrated profile of the current petroleum status, in terms of the
challenges facing the Petroleum Sector , and the plans to handle them . He also
reviews the work performed by the Petroleum Sector’s men on the ground during the
last period to restore the required confidence to invest in projects and strengthen its
role in the development of the Egyptian economy.
• What are the main challenges faced by the Petroleum Sector since the current
government took over in July 2013 ? Are they going on along 2014?
•• The most important challenges facing the Petroleum Sector is the growing domestic
consumption of petroleum products , and the continued increase in gas demand for electricity
& industry sectors , non- diversity in the energy mix use, and the high value of petroleum
products and natural gas subsidy , which amounted to about L.E.128.3 billion in the fiscal
year 2012/2013 , which is expected to increase if the current trend continues , which does not
serve the interests of the state and the citizen at the same time , in addition to the increase in
dues of the State’s bodies to the Petroleum Sector, as well as the debts increase to foreign
companies. Also, there are challenges related to exploration and production activities, which
include the delayed implementation of some major projects for gas development and
production and halting signing new oil agreements since 2010, as well as the need to develop
the terms of petroleum agreements to encourage investments, especially in the field of
unconventional resources. In addition to the need to revamp refineries in order to achieve
optimal exploitation as well as the development of fuel and petroleum products transportation
infrastructure, marketing and distribution.
These challenges are still going on and need
sophisticated mechanisms of action and a new perspective for attaining stability.
• What are the measures taken to stabilize the petroleum products trading market
and supplying the Electricity Sector with fuel?
•• The Petroleum Sector puts the provision of petroleum products for the domestic market on
top of its priorities and does its utmost to stabilize the domestic market in the domain of the
provision of major products, natural gas. We are in coordination with the Ministries of
Supply, Finance, Electricity and Agriculture through working groups to set up plans to
provide petroleum products & natural gas during the coming period and determine the actual
needs and contracting for new shipments imported at peak times of petroleum products
demand as well as increasing strategic reserves to avoid bottlenecks. The most important
matter, we are working on currently and will help us in the future, is to set a plan to develop
infrastructure for products storage and transportation to consumption areas, which include
facilities for receiving imported shipments, strategic storage tanks and pipelines to cope with
high rates of consumption, and gives the Petroleum Sector flexibility and speed in meeting
demand in some areas, particularly at Upper Egypt.
• What about allowing the private sector to import natural gas, what are the
alternatives available to provide the Electricity Sector with fuel requirements?
•• The Ministry is ready to provide the private sector with all the facilities to import gas. It
does not have any objection towards any request made by the private sector to import gas
either for its own account or to be sold to other private sector companies. The Petroleum
Sector is ready to allow these companies to utilize imported gas receiving facilities at the
Sector’s terminals, as well as gas transfer via the National Gas Grid in return for utilization
fee to be agreed upon for the interest of both parties. The result of the tender offered by
EGAS concerning the Floating LNG Unit at Ain Sukhna terminal will soon be announced.
Currently, the Petroleum Sector is in coordination with the Ministries of Electricity and
Finance putting a number of alternatives to satisfy the power plants requirements, of fuel oil
or natural gas.
• The success of the partial payment of foreign partners dues is a positive
indication, what is the impact on the exploration and development operations, and
what about the period of time that have been identified with the partners to schedule
the rest of the debt and the payment completion ?
•• Recent payment of $1.5 million as part of the foreign partners dues is a significant step to
restore foreign investor confidence in the Egyptian economy in general, and the Petroleum
Sector in particular, as well as advancing investment in oil & gas discoveries exploration &
development, which would have a positive impact on increasing their production. This is
considered a positive indicator of the government credibility of the Petroleum Sector in
fulfilling its obligations. The recent payment process was achieved in collaboration with the
Central Bank and the Ministry of Finance, where $1 billion were paid in foreign currency and
the other $500 million were paid in local currency, contributing to the reduction of the
remaining debts to about $4.8 billion. I confirm that we are committed to pay the rest of the
dues in accordance with the accredited schedule. And with the improvement of the country’s
economic situation, production rates increase, domestic consumption rationalization and
improvement of the Petroleum Sector’s balance of payment, it will accelerate the payment of
the rest of the foreign partners debts, stressing that the increase in production plays a major
role in this direction.
• Does exploration Bid Rounds offered by the EGPC and EGAS consider a new gas
pricing for the domestic market to spur foreign partners? What are the factors
controlling the pricing process? And is it a variable from one region to another?
•• It is not related to the new Bid Rounds only, we started to review and set a new gas pricing
formula for the foreign partner’s purchased share, so that operating companies in Egypt
would accelerate the development process of the new discoveries along with the discovered
reserves. This is applied to the current petroleum agreements; therefore it will take effect in
the new agreements, which will be signed in the framework of the new Bid Rounds.
Concerning the factors controlling the pricing process, they are represented in the: economies,
the volume of discoveries and the nature of regions, as well as the quality of the discovered
gas, whether unconventional , in any geological structures formation, or shale gas.
• What about the suspended gas export projects during 2014 ?
•• Operating gas export projects during 2014 depended on achieving new gas discoveries, as
well as developing and putting recently discovered fields on the production map. It’s worth
mentioning that, covering domestic market requirements comes on top priorities within the
line of the Ministry of Petroleum goals.
• Does offering the Petroleum Sector’s companies shares on the stock market
currently exist on the Sector’s agenda ?
•• A: The matter is currently being discussed . A portion of some petroleum companies’ shares
is proposed to be offered for public subscription to be a new addition to the three petroleum
companies that already exist in the stock market , which are Egypt Gas , Sidpec and Amoc,
but the subject requires a perfect study to ensure the success of the offering. There some
significant procedures and financial reforms that must be implemented e.g. restructuring,
improving the financial status, examining the available liquidity , assets , liabilities , ratio to
be offered , as well as conducting an evaluation. This we are currently aiming via studying. In
addition, new petrochemical companies are currently in the center of attention, and the study
which is undergoing in light of the regulations issued recently concerning offering the new
companies for public subscription .
• Can we say that you bet on the Mineral Resources Sector during 2014, due to your
eagerness on issuing its related law? What are the expected revenues from this
Sector with the new law after increasing the royalty in accordance with the law?
•• Egypt’s mineral potentials could help the Mineral Resources Sector to occupy a greater
position in the Egyptian economy in terms of revenues volume and value added. Egypt hasn’t
made the best exploitation of this sector yet, and through the new law we target to activate the
mineral resources role as a source of the national income, that its contribution to GDP
reaching about 5%, instead of the current small percentage that does not exceed half percent.
In addition we target establishing manufacturing industries based on the mineral resources to
be converted into final products to increase the value added to the mineral resources
exploitation. Preliminary estimates indicate the possibility of achieving an annual return of
about L.E 3 billion, after issuing the new law, a number which can be increased later.