The Egyptian government has been taking several steps to manage the fuel shortage and ameliorate the investment environment for international foreign partners. In previous announcements, Minister of Petroleum Tarek El-Molla said the ministry is aiming to secure the local demand with reasonable prices. He introduced several measures through which the government can follow through on its goals. Daily News Egypt exclusively illustrates the Petroleum Ministry's plan for energy security and financial sustainability andreviews the ministry's prediction for the demand of oil and gas for the next five years. During the previous fiscal year (FY) 2014/2015, the oil and gas demand increased by 0.5m tonnes to a total of 73m tonnes. The share of demanded oil was 38m tonnes, of which 36% was fuel oil, 36% was gas oil, 16% gasoline, and 11% LPG. Demanded gas was approximately 35m tonnes, of which 62% went to power generation, 23% went to the industrial sector, 10% was for petrochemicals and NGL. Only 4% was allocated to residential and commercials units. The ministry expects the demand for oil and gas to surge by 22% over the next five years from FY 2015/2016 to FY 2020/2021. The demand is expected to jump during the current fiscal year to 77.9m tonnes compared to 73.4m tonnes that was demanded in FY 2014/2015. The surge will rise to 88.8m tonnes, 91.9m tonnes, and 94.4m tonnes in FY 2016/2017, FY 2017/2018, and FY 2018/2019, respectively. By FY 2019/2020, the demand for oil and gas will increase to 98.2m tonnes and finally reach 100.1m tonnes in FY 2020/2021. The challenge of oil and gas demand is only amplified by the fact the most of Egyptian oil and gas wells are either at maturity or beginning to decline in yield. Exploration efforts to discover a new well will take between three to five years and an additional one to two years to develop, El Molla added. The peak of production occurs for six to eight years after the well is established. However, afterwards, the well will yield diminished returns in the last six to eight years of its life. To address the increase in demand and the paucity of maturing wells, the ministry launched new exploration and discovery initiatives. The ministry said its plans will add 6bcf/d during the next five years through North Alez, Salamat, Atol, WDDM 9b, and Zohr projects. The Zohr gas field was recently discovered and is the largest discovery in the Mediterranean Sea and is expected to increase production to 5.3bn cubic feet per day by 2017, when production begins. Drilling ship Saipem 10,000 arrived at the site of Zohr and started drilling on 21 December. Production will start by the end of 2017, while projects commensurate in size tend to take up to eight years to begin production. The well is expected to reach its full production capacity by the end of 2019. Investments in Zohr well have reached $12bn and are expected to increase to $16bn during the field's lifetime. During the past five years, Egypt's spending on energy subsidies totalled EGP 520bn. The government's plans to phase out energy subsidies over a period of five years, beginning in FY 2014/2015. The previous FY closed with subsidies amounting to EGP 74bn. The budget set for subsidies this FY is expected to be affected by the decline in oil prices and will decrease from the previously set EGP 62bn to EGP 56bn.
The government's efforts are not enough to resolve the oil and gas production-demand crisis. For the current FY, the Petroleum Ministry was expecting the oil and gas shortage to be 14m tonnes. The gap is expected to widen as the demand increases to reach 22m tonnes in FY 2016/2017. In FY 2017/2018 the shortage in oil and gas is expected to reach 28m tonnes and increase to 37m tonnes in FY 2018/2019 and to 47m tonnes in 2019/2020. The gap is expected to reach its peak in FY 2020/2021 at 54m tonnes. However, according to the Petroleum Ministry's strategy, there will be significant changes in the production-demand equation. In FY 2015/2016 the shortage in oil and gas will be 9m tonnes and will increase to 15m tonnes in FY 2016/2017. It will then decrease to 13m tonnes in2017/2018. The reduction plan will lead to an 11m tonne shortage in FY 2018/2019. The gap will significantly drop in FY 2019/2020 to reach 5m tonnes and then drop to 3m tonnes in 2020/2021.
