Shift to gas

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The Nile Delta is home to most of Egypt's untapped oil and gas reserves, as exploration and production of the 60,000 km area did not commence until the 1960s.

David Townsend reports that Egypt's declining oil reserves are being balanced by a sprightly gas sector.

Egypt is a significant oil producer and an increasingly important gas producer. Hydrocarbons are a vital part of the Egyptian economy with the sector a major contributor to total GDP. There are several international oil companies active in the country.

The sector is overseen by the Ministry for Petroleum and Mineral Resources and the Egyptian Mineral Resource Authority (EMRA). The national oil company is the Egyptian General Petroleum Corporation (EGPC).

There are also three further state-run holding companies managing activity in different areas: the Egyptian Natural Gas Holding Company (EGAS), the Egyptian Petrochemicals Holding Company (ECHEM) and the Ganoub El-Wadi Petroleum Holding Company (GANOPE).

International oil companies (IOCs) play a significant role in Egypt's upstream sector on a production-sharing basis with EGPC and EGAS.

Exploration tenders attract the likes of ENI and BP, National Oil Companies (NOCs) such as Petronas and Kuwait Foreign Petroleum Company (KUFPEC), and small IOCs such as Dana Gas and Burren Energy.

Egypt's proven oil reserves are estimated at 3.7 billion barrels. Production is centered in four main areas with around half from the Gulf of Suez, and the rest from the Western and Eastern deserts and the Sinai peninsula.

Production is typically from mature, smaller fields. Production has been declining since the mid-1990s mainly in the Gulf of Suez, partially offset by increased output from the Western desert which now accounts for around 25% of total production.

Last year the Saggara field came on stream, one of the largest discoveries in the last 20 years, producing around 50,000 barrels per day. Also in 2008 the Egyptian government launched a new licensing round offering 30 blocks that will be managed by EGPC, EGAS and GANOPE but developed with IOCs.

EGPC has said oil production in 2009 is expected to total 720,000 barrels per day, up from 665,000 barrels per day produced in 2008 but still off the 1996 peak of 920,000 barrels per day. Apart from Saggara there have been few significant discoveries since, and economic growth means more oil is being consumed and the country is expected to become a net importer by 2010.

The government is keen to encourage investment in the downstream sector particularly in new refining capacity. Egypt already has the largest refining sector in Africa with nine plants with a combined processing capacity of 726,000 barrels per day.

The largest refinery is the El-Nasr at Suez (145,000 barrels per day) owned by EGPC. The government wants to increase production of lighter products, petrochemicals, and higher octane gasoline by expanding and upgrading existing facilities and promoting two new projects: a 500,000 bpd plant near the Suez Canal and a 130 000 bpd refinery at Ain Sukhna, on the Red Sea coast.

The Suez project has been developed as a joint venture, including local Saudi Arabian and Kuwaiti investors, and is due to be commissioned this summer. There are also plans to jointly develop a 250,000 bpd refinery with Libya for US$6 billion.

The Ministry is currently promoting deep-water offshore oil and gas drilling and the EMRA began in 2006 a study into oil shale deposits. This has estimated shale reserves at 570 million boe in the Red Sea and at Abu Tartour in Upper Egypt. But the reserves are costly to recover and the recent collapse in oil prices may have rendered some of the potential projects uneconomical.

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