Billions pledged for Egypt’s energy sector
Energy deals featured high on the Economic Development Conference agenda, with an obvious preference for upstream activity and power generation, according to a report by the Middle East Strategic Perspectives.
Reducing the debt it owns foreign companies and cutting down subsidies by about a third (with a view to phasing them out completely within five years) have contributed to restoring confidence in Egypt’s energy sector. The following is a list of agreements and MoUs signed during the three-day conference in Sharm el Sheikh:
- BP finalised a $12 bln deal to develop 5 tcf and 55 mln barrels of condensates in the West Nile Delta. Production is expected in 2017 and is supposed to meet a quarter of Egypt’s energy needs.
- BG will invest $4 bln in the next two years to develop natural gas fields in the Mediterranean.
- ENI signed agreements worth $5 bln to be implemented over 4-5 years, including concessions in the Mediterranean, the Western Desert, the Nile Delta and Sinai.
- UAE-based Dana Gas announced plans to invest $350 mln over the next 30 months, including the drilling of dozens of new development wells.
- UAE’s Masdar and Saudi Arabia’s Acwa Power signed MoUs to develop up to 4 gigawatts (GW) of renewable and gas power generation projects, valued at $15 bln.
- Siemens signed $10.5 bln in deals and MoUs to help expand the electricity network, which include building a 4.4GW combinedcycle power plant and installing 2GW of wind power.
Egypt’s gas production is likely to reach 63 bcm by 2019 (from 52.5 bcm in 2013). Energy self-sufficiency is hoped by 2018, although the deadline is seen as ambitious, the MESP report said. With new discoveries in the Mediterranean and elsewhere, in addition to possible supplies of Israeli and Cypriot gas, Egypt could have access to approximately 74 bcm of gas by 2019, allowing the country to resume exports.
Egypt is counting on the development of BP’s West Nile Delta project, which it perceives as the basis for an early return to energy security.
Interestingly, the Russians, who have not had a major presence in the Egyptian oil and gas sector in the past, traditionally dominated by western companies, have inherited a stake in BP’s West Nile Delta project. A 35% stake previously owned by DEA, the oil and gas unit of Germany’s RWE, will be passed to LetterOne, owned by Russian billionaire Mikhail Fridman and headed by former BP chief executive John Browne. LetterOne bought DEA in March for $5.7 bln and acquired its assets, including those in Egypt.
Russian involvement in the Egyptian energy sector is expected to expand. Beside plans to jointly build Egypt’s first nuclear power plant, made following President Vladimir Putin’s visit to Cairo in February, Gazprom was one of the first companies contacted by the Egyptians to provide LNG. Some 35 shipments will be provided in the next five years.
The government is also courting Gazprom’s exploration arm. A delegation of executives visited Egypt on February 18-19 and met with officials from the Ministry of Petroleum to explore possible investment in the sector.