Egypt partners with Google to promote 'unmatched diversity' tourism campaign    Golf Festival in Cairo to mark Arab Golf Federation's 50th anniversary    Taiwan GDP surges on tech demand    World Bank: Global commodity prices to fall 17% by '26    Germany among EU's priciest labour markets – official data    UNFPA Egypt, Bayer sign agreement to promote reproductive health    Egypt to boost marine protection with new tech partnership    France's harmonised inflation eases slightly in April    Eygpt's El-Sherbiny directs new cities to brace for adverse weather    CBE governor meets Beijing delegation to discuss economic, financial cooperation    Egypt's investment authority GAFI hosts forum with China to link business, innovation leaders    Cabinet approves establishment of national medical tourism council to boost healthcare sector    Egypt's Gypto Pharma, US Dawa Pharmaceuticals sign strategic alliance    Egypt's Foreign Minister calls new Somali counterpart, reaffirms support    "5,000 Years of Civilizational Dialogue" theme for Korea-Egypt 30th anniversary event    Egypt's Al-Sisi, Angola's Lourenço discuss ties, African security in Cairo talks    Egypt's Al-Mashat urges lower borrowing costs, more debt swaps at UN forum    Two new recycling projects launched in Egypt with EGP 1.7bn investment    Egypt's ambassador to Palestine congratulates Al-Sheikh on new senior state role    Egypt pleads before ICJ over Israel's obligations in occupied Palestine    Sudan conflict, bilateral ties dominate talks between Al-Sisi, Al-Burhan in Cairo    Cairo's Madinaty and Katameya Dunes Golf Courses set to host 2025 Pan Arab Golf Championship from May 7-10    Egypt's Ministry of Health launches trachoma elimination campaign in 7 governorates    EHA explores strategic partnership with Türkiye's Modest Group    Between Women Filmmakers' Caravan opens 5th round of Film Consultancy Programme for Arab filmmakers    Fourth Cairo Photo Week set for May, expanding across 14 Downtown locations    Egypt's PM follows up on Julius Nyerere dam project in Tanzania    Ancient military commander's tomb unearthed in Ismailia    Egypt's FM inspects Julius Nyerere Dam project in Tanzania    Egypt's FM praises ties with Tanzania    Egypt to host global celebration for Grand Egyptian Museum opening on July 3    Ancient Egyptian royal tomb unearthed in Sohag    Egypt hosts World Aquatics Open Water Swimming World Cup in Somabay for 3rd consecutive year    Egyptian Minister praises Nile Basin consultations, voices GERD concerns    Paris Olympic gold '24 medals hit record value    A minute of silence for Egyptian sports    Russia says it's in sync with US, China, Pakistan on Taliban    It's a bit frustrating to draw at home: Real Madrid keeper after Villarreal game    Shoukry reviews with Guterres Egypt's efforts to achieve SDGs, promote human rights    Sudan says countries must cooperate on vaccines    Johnson & Johnson: Second shot boosts antibodies and protection against COVID-19    Egypt to tax bloggers, YouTubers    Egypt's FM asserts importance of stability in Libya, holding elections as scheduled    We mustn't lose touch: Muller after Bayern win in Bundesliga    Egypt records 36 new deaths from Covid-19, highest since mid June    Egypt sells $3 bln US-dollar dominated eurobonds    Gamal Hanafy's ceramic exhibition at Gezira Arts Centre is a must go    Italian Institute Director Davide Scalmani presents activities of the Cairo Institute for ITALIANA.IT platform    







Thank you for reporting!
This image will be automatically disabled when it gets reported by several people.



What lies beneath
Published in Al-Ahram Weekly on 18 - 01 - 2007

The private sector is reaching for a bigger share of the oil industry, reports Sherine Nasr
Everyday, more private sector companies are entering the oil sector as service providers to displace the largely public sector companies. The government, after years of dominating this industry, is now allowing more private capital in the form of sub-contractors who provide countless and substantial services. There are some 300 private businesses already operating in the field, while at least 60 more were established recently as joint ventures. The private sector holds a share ranging from 35 to 100 per cent in these new companies.
"It is normal to see the private sector growing and gradually replacing aging state-owned companies," Minister of Petroleum Sameh Fahmi told a meeting of the Egyptian Junior Business Association (EJBA) last month. "Nevertheless, we have to stop thinking in terms of public or private sector; these are all Egyptian companies. They all work hard towards the same goal of helping build a strong and vital oil sector in Egypt," Fahmi added that the ministry's ultimate goal is to develop the sector and create real job opportunities.
Notably, the majority of the owners of these private entities started in the public sector, and, since beginning their own businesses, have hit it big. Egypt's long experience in the oil industry has enabled it to venture into at least 12 Arab and non-Arab countries, including Saudi Arabia, Kuwait, Qatar, Jordan, Morocco and Venezuela. Egyptian companies are directly involved in extraction and transportation operations, in addition to a variety of other oil-related activities.
Despite this success, no directory has been compiled of these private companies, detailing their activities and defining their ratings. "Unless we publish a company directory with detailed information about these companies, it would be difficult to tally them and ascertain their quality," argued Khaled El-Wagih, head of EJB's energy committee. The committee was launched in 2005 to help member companies in the petroleum field, and later expanded "to include all members working in the fields of electricity, as well as new, and renewable energy," El-Wagih explained.
One of the committee's main objectives is to improve the level and price of energy, develop the petroleum sector and increase the role of the private sector in this field. "While the sector continues to face major problems," according to El-Wagih, service exports provided by private Egyptian companies to other countries over the past two years are estimated at some $2.5 billion.
Topping these obstacles is the state's monopoly of the production and distribution of electricity, which consumes the state's budget in the form of subsidies. The new private companies operating in the petroleum sector are also mostly small and medium-sized entities in need of development and upgrading. "To meet the first challenge, we suggest legislative amendments to allow private companies to operate in energy production," proposed El-Wagih. "In the meantime, an association for all private companies in the petroleum field should be created, and the business environment should be further developed to assist these companies to reach international standards."
He further recommended that the Ministry of Petroleum adopt a mechanism to provide these companies with technical support and training as a means to upgrade their performance. In response, Fahmi said he was willing to establish a holding company for petroleum services, in which shares will be equally divided between private companies and the Egyptian General Petroleum Corporation (EGPC).
"Under the umbrella of this holding company, two other companies should emerge," suggested Fahmi. "One to provide petroleum services inside the country, and the other for services abroad." This initiative would ultimately lead to the establishment of a conflict resolution mechanism to correct faulty practices in the market, he added. "This mechanism is certain to eliminate genuine problems, since contracts in this field are always long-term and it is a nuisance to hire companies which are not serious about their business," added Fahmi.
Over the past few years, the ministry has been criticised for exporting large amounts of natural gas, instead of directing it to the rapidly- growing, heavy energy-consuming petrochemical industries. Critics believe that Egypt has lost the value-added of exports of petrochemical products to an ever-growing world market. In the fiscal year 2005-2006, the oil sector contributed some LE52 billion to the budget, LE42 billion of which were directed to subsidising oil products. "Subsidies for 2006 jumped to LE48 million, as local energy consumption registered unprecedented increases compared to the previous years," noted Fahmi. Paradoxically, and as a result of heavily subsidised fuel, the more fuel is sold domestically, the bigger the losses.
Egypt's proven gas reserves have almost doubled from some 36 trillion cubic feet (tcf) in the early 1990s to 67 tcf in 2004. This roughly stands for almost one per cent of total global reserves. "As long as we are able to satisfy the country's demands of oil and gas, while exporting to maintain a surplus of hard currency, we are optimistic," declared Fahmi. This is thanks to re-pricing gas in international treaties, otherwise, Egypt would have paid some $3.8 billion in 2005-2006 according to old prices.
Although no major oil discoveries have been made recently, Fahmi believes that figures are mostly reassuring. In comparison to other Arab countries, oil and gas discoveries in Egypt during the past five years are relatively high. In 2002, Egypt was home to 22 out of 57 oil discoveries in the Arab world, and 10 out of 18 gas discoveries. In 2005, Egypt's share of oil discoveries was 38 out of 56, and 11 out of 13 in gas discoveries.
On the international level, the minister indicated that Egypt is keen on being present at all world energy forums to closely monitor changes in the debate, especially that securing energy demands has become a hot topic. He was referring to the EU-OPEC (Organisation of Petroleum Exporting Countries) Energy Dialogue held in Brussels last June, and the first Global Energy Roundtable hosted by Egypt in November. "Developed countries need to buy oil to satisfy their growing developmental needs," Fahmi said. "They will buy it at any price." A dialogue between producers and consumers has never been more serious, he noted, and needs to continue to be constructive for the benefit of both sides.


Clic here to read the story from its source.