Amidst growing tension in the region Amr Kamal Hammouda scans the potential of Egypt's energy sector Egypt has a lengthy experience in the petroleum sector going back to more than 100 years. The Middle East's first oil refinery was built in the Egyptian port city of Alexandria in 1911. Petroleum industry operations since then have covered practically every facet of the industry. Today, they continue to span exploration, production and refining activities, to marketing overseas and local distribution. The production of gas and petrochemicals was also relatively recently incorporated in Egypt's veteran petroleum sector. Over the past decade and a half, the Ministry of Petroleum has successfully adopted policies which effectively encourage more Arab and foreign investments in the petroleum sector. The latter has been restructured, through new and specialised entities for petroleum, natural gas and petrochemicals. Transparency and free access to information were also guaranteed. There are at present over 50 international companies working in Egypt in gas exploration, at an annual investment of $2 billion. "Despite the problems that always arise ... in the course of ... activities (that are) valued in the millions it is possible in Egypt to surmount these problems" says Chairman of British Gas Robert Wilson, alluding to the favourable investment climate provided by authorities to oil companies working in Egypt. Within the context of its efforts to solicit companies to work in Egypt, the Egyptian General Petroleum Corporation (EGPC) has developed agreement conditions which provide a greater flexibility for cost recovery. The People's Assembly is careful to rapidly approve such agreements which facilitate their prompt implementation. Unconventional areas have also been recently opened up to exploration by international companies in the Western Desert and Upper Egypt. Investors have displayed greater interest in the latter, following the major oil discoveries made in the northern and western Sudan. Two agreements were concluded as a result, with two Canadian companies. One, Centorion Energy International, signed an agreement with the government covering an area of 22,894 km in Kom Ombo. The second agreement was signed with Quadra Resources Corporation and covers some 30,028 km in Naqra. The petroleum sector has also established a private company (Tharwa Oil) to work in exploration, inside Egypt as well as outside. The company enjoys a financial and administrative flexibility which allows it to establish partnerships with international companies. Tharwa Oil recently won four new concession areas in Salloum on the Egypt-Libya border, and in the Western Desert oases of Siwa and Farafra. Egypt's natural gas sector, despite being relatively new, is also enjoying expansion and a high level of activity. Environmentally-friendly natural gas also contributes to meeting the country's ever-growing developmental needs. Foreign companies are thus encouraged to carry out intensive exploration in natural gas fields. This has resulted in a number of discoveries off the Mediterranean coast and in the Western Desert. Confirmed reserves of natural gas have consequently risen to 62 trillion cubic metres. International companies working in Egypt assess that an additional 100 trillion cubic meters can be added to the country's expected future natural gas reserves. Egypt's natural gas is currently exported to the Arab region through pipelines extending to Jordan, Syria and, ultimately, Turkey. Another pipeline was also built to reach Israel. Two major projects producing liquefied natural gas (LNG) have been constructed on the northern coast of the Mediterranean. The Damietta project was undertaken in cooperation with Spain's Union Phenosa, and Italy's Eni. A second project was set up with British Gas, the Malaysian Petronas and Gas de France. There is potential for yet more expansion, since both projects can increase their production capacities by building more units. Stewart Fisch, British Gas's executive manager in Egypt adds that, "Liquefying gas projects in Egypt are among the fastest- paced and cheapest in the world, because of the proximity of their production centres to export outlets on the Mediterranean, on to markets in Europe and the USA." Fisch adds that another asset is "the availability of experts and qualified technical labour in Egypt.". "The potential for growth is also sizeable in the petrochemicals domain. The government is now planning to expand in petrochemicals by undertaking at least 18 large projects in the period extending from 2002-2022. The production of styrene polyvinyl, polyester, propylene, ethylene and other materials necessary for intermediate industries has also been made possible. The abundance of natural gas as a basic raw input for the petrochemical industry, along with the partnership of international companies, availability of infrastructure and qualified personnel, have all supported a successful petrochemical industry in Egypt. To this one may add the proximity of projects to the national electricity grid. Egypt's refining industry also has a well-established record, with nine refineries now operating. There are important investment opportunities in this domain as well, and which have become more apparent in view of the problems that have beleaguered the international refining industry in the past few years. The nine existing refineries have an excess capacity which can be offered to investors on the basis of "refining-for- second-party". By virtue of this arrangement, oil companies can rent and operate the refineries and take their revenue in exchange for a reasonable profit and fees delivered to EGPC. There is also the added possibility of constructing a new refinery, in collaboration with Arab or international capital. Egypt's successful oil, gas and petrochemical industry has resulted in the development of other areas in which the prospects for investment are high. The Sumed Pipeline is one instance of a successful Egyptian-Arab partnership that has a potential for yet more expansion. Egypt currently owns a 50 per cent stake in the project, with the remaining 50 per cent equally divided between the Kingdom of Saudi Arabia, Kuwait, the United Arab Emirates and Qatar. The Sumed pipeline connects the Red Sea port of Ain Al-Sukhna with the Sidi Kreir Port on the Mediterranean. The pipeline mainly services very large crude carriers (VLCCs) and ultra large crude carriers (ULCCs) with cargoes exceeding 350 thousand metric tonnes. Since they are not able to cross the Suez Canal at full capacity, such vessels discharge their cargo in the Sukhna port and load it again at Sidi Kreir port. There is again potential for doubling the Sumed Pipeline by constructing an additional line in the opposite direction. This would extend from Sidi Kreir to Ain Al-Sukhna. There are opportunities for storage-for-second-parties in the Sumed storehouses, and the extending of SWAP services to clients using the pipeline. Another area of future growth is in the marketing of bunkers that supply fuel to ships crossing the Suez Canal, East Mediterranean and Red Sea. Two ideal sites for the establishment of such bunkers are Damietta and Ain Al-Sukhna. Both provide good marine facilities and excellent logistical services. Given the above-mentioned opportunities, it is possible to establish an "Egyptian Energy Exchange Market" which services the Arab region in oil and gas trading. Such a market should aspire to attract capital financing investment opportunities in the Middle East's oil sector. This is all the more pertinent in view of the rise in Arab surplus oil revenues which resulted from the huge hike in oil prices exceeding $70 per barrel of crude oil. These surpluses are now assessed at $860 billion dollars, making it possible to direct a portion amounting to 25 per cent, to fund an oil and gas market. This would be based in Egypt to serve Middle East operations. It is also worth mentioning that Egypt's marketing and investment initiatives have not ignored environmental concerns. There is a great awareness of the need to protect the environment, and to provide increased industrial safety and health standards in all locations. This has been reflected in the relatively low rate of repeated accidents (injury/million working hours) which reached 0.68. Such a low incidence of accidents is seen as a positive indicator of the degree of concern which is afforded to all of those working in Egypt's thriving petroleum industry.
