challenges & vision - amcham · 9 year avg. brent gasoline 80 gasoline 90 gasoline 92 gas oil...

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Challenges & Vision

Am-Cham, March 2014

Ministry of Petroleum And Mineral Resources

2

Challenges

Recent Developments

Vision & Strategies

Facing Petroleum Sector

4

Unbalanced Energy Mix

Energy Pricing Crisis

Supply / Demand

Aging Infrastructure

Arbitration & Disputes

Mineral Resources

5



Supply / Demand



Mineral Resources

6

Oil and gas 61%

Coal 20%

Nuclear 10%

Other 9% Oil and

gas 96%

Coal 1%

Hydro 3%

World Egypt

Oil & Gas 75%

Coal 14%

Nuclear 6% Hydro

5% Oil & Gas 58%

Coal 25%

Nuclear 7%

Hydro 2%

Other 8%

Oil & Gas 57% Coal

30%

Nuclear 13%

Hydro

Russia Germany South Korea

Oil & Gas 62% Coal

26%

Hydro 11%

Other 1%

Turkey

7

World Egypt

Oil and Gas 27%

Coal 41%

Nuclear 13%

Hydro 16%

Other 3%

Oil and gas

91%

Hydro/Re 9%

Current Energy Mix in Egypt • Unsecure

• Uneconomic

• Unsustainable

8



Supply / Demand



Mineral Resources

9

Year Avg. Brent Gasoline 80 Gasoline 90 Gasoline 92 Gas oil Kerosean Fuel oil LPG Gas

$/BBL pt/litre pt/litre pt/litre pt/litre pt/litre L.E./ton L.E./cyl pt/m31989 18 7 7 351990 24 55/50 60/55 10 10 50 1.5 4.671991 20 70 80 20 20 80 2.5 7.51992 19 90 100 30 30 130/100 9.41993 17 Production 40 40 12.251994 16 started1995 17 in year1996 21 20041997 19 182 14.11998 131999 182000 282001 252002 252003 292004 38 140 60 300/250 20/18.62005 542006 65 130 75 75 500 252007 73 32/242008 97 175 185 110 110 1000 57/242009 742010 772011 1112012 1112013 107 1000-2300 8 26-1252014 108

10

0,7 1,3 1,7 2,7 1,8 1,2 5,3

10,2 10,3 16,1 21,7 31,4

42,0 43,8

71,2

52,7 63,0

90,2

114,4

128,2

0

20

40

60

80

100

120

140

88/8

989

/90

90/9

191

/92

92/9

393

/94

94/9

595

/96

96/9

797

/98

98/9

999

/00

00/0

101

/02

02/0

303

/04

04/0

505

/06

06/0

707

/08

08/0

909

/10

10/1

111

/12

12/1

3

Billion LE

• Subsidy almost 25% of Budget Revenues

• Subsidy will grow 1.5 times GDP growth

• Anti- Social Justice.

• Reduce spending on other important sectors.

• Encourage irrational energy consumption.

Current Subsidy Policies:

11

www.yaxpacppt.com

365

32% Revenues to Costs

Revenues to International Prices 16%

20% Actual Payment to Costs

Billion LE

Value in international Prices

187 Costs

37 Actual payments

59 Revenues from local Prices

Value in International Prices : Oil products based on import prices in addition to direct & indirect costs Natural Gas based on 13 $/MMBTU

11

10% Actual Payment to International Prices

Debtors B.EGP Creditors B.EGP

Governmental Sectors 37.5 Due to IOCs 33.5

Electricity Sector 31.2 Suppliers – Crude oil & Products 12.6

Others (Egyptair – Transportation)

6.3 Holding Companies 17.5

Ministry of Finance (MOF) 112.8 Due to MIDOR 7.8

Paid to MOF 2.4 Other Investment Companies 3

Settlements 110.4 Due to Governmental Petroleum Sector 3.6

Other Consumers 21.2 Loans and Credit facilities 46.1

Total Dues to EGPC 171.5 Total Dues on EGPC 124.1

12

• Average Monthly Expenses of Petroleum Sector around 1.6 - 1.8 billion $ / Month

• Deficit around 800-900 mm$/month

• Cash Crunch negatively affect State Payments to IOCs

Current Subsidy Policies:

Net Balance to EGPC 47 billion L. E.

EGPC Receivables & Dues in 31/12/2013

13

610 548 534 1554 1122

1334

3168

6305

5433

6300

4800

05/0

4

06/0

5

07/0

6

08/0

7

09/0

8

10/0

9

11/1

0

12/1

1

13/1

2

Oct.

13

Dec.

13

Accumulation of dues to IOCs reflected negatively on the implementation of some major field development projects

MM USD$

14



Supply / Demand



Mineral Resources

15

Supply Side: • Mature Gas Fields • Delayed Field Development Projects. • Gas Production on Decline since 2009. • Oil & Condensate Production is reasonably Stable

Demand Side: • High Energy Intensity Industries. • Primarily Relying on One source (Oil & Gas). • Irrational Consumption due to Subsidy

17

Build Up Decline Plateau

Discovery

Development

Mid- life

Mature

Gas Field Typical Life Cycle Real Performance of Gas Field

Discovery

First Gas

Build UP

Mid Life Plateau

Mature Decline

- Development of a Gas Discovery Takes 3-5 Years - Oil and Gas Fields has a specific life time

18

31,6 33,3 32,7 33,3 33,4 33,0

44,2 47,3 47,9 47,7 47,5 45,7

75,8 80,5 80,6 81,0 80,9 78,7

08/07 09/08 10/09 11/10 12/11 13/12

Oil & Condensates Natural Gas

MM Tons

• Most Oil Fields date back to the 60s & 70s. • Gas Fields are on the Decline curve (10 years +). • No New Concession Agreements Issued since 2010. • Slow Down of Investments in development projects

• North Alex Concession signed 1992, Gas Discoveries 2000 – 2007. • Proven Reserves 5.5 TCF gas, 55 MM bbl condensate, with a potential for upside. • Investments 11 Billion USD$. • Production Plateau 950 + mmcfd ( 18 % of total Current gas production ). • First Gas was scheduled during 3rd quarter of 2014. • Unjustified environmental concerns prevented access to onshore site. • Project has secured necessary environmental permits and approvals. • Company has committed to spending LE100 million on community development &

providing employment opportunities. • The Project was forced to move to another location and start up delayed to 2018. • Gas Crunch Erupted. • Egypt is incurring around 15 MM $/day.

19

21

26,6 30,1

33,6 37,6 41,1

46,1 51,7

59,6 66,6

72,1 73,2

Million Tons

Petroleum Products Natural Gas

Average Annual Growth Rate 5.3 %

605 Million Tons

Average Annual Growth Rate 5.8 %

348 Million Tons

• High Energy Intensity.

• Low Efficiency

• Low Prices doesn’t encourage rationalization

• GDP Growth entail Increasing Demand (Subsidy)

Market Features :

22



Supply / Demand



Mineral Resources

23

• Aging simple Refineries with limited conversion Units: • Total Design Capacity: 38 mmtons • Utilized Capacity: 26 mmtons (12/13) • Average Complexity: 3.9 • Highest Complexity: (Midor) 10.1

• During the past decade, limited projects for upgrading transmission and distribution infrastructure due to subsidies.

22,8 34

2000/2001 2012/2013

Petroleum Products Consumption

Million Tons

9,5 8,2

6,5 3,9

USA Canada Europe Egypt

Average Refinery Complexity

24



Supply / Demand



Mineral Resources

25

As a result of: • Instability during the past few years, • Gap between gas supply and demand • Cash Flow problems

19 Arbitration Cases against both the state and the petroleum sector have been filed.

26



Supply / Demand



Mineral Resources

27

• Several entities responsible for mining activities.

• Rigid regulations unfavorable for investment.

• The need to develop national capacities.

• Negligible Government Take.

• Export of raw materials with no value added.

Mineral Resources contribution is less than 0.5% to GDP Despite the Great Potential Egypt possesses

Developments

• Issuing 29 Concession Agreements for Oil and Gas Exploration and Development, the First since 2010: • Around 2 billion USD$ Minimum Expenditure Commitment

• 196 MM USD$ Signature Bonus

• Additional 9 Concession Agreements in the pipeline; 200 MM USD$ Commitment, and 50 MM USD$ signature Bonus.

• Currently offering a new International Bid Round including 23 Blocks in Mediterranean, Nile Delta, Gulf of Suez and Western Desert.

30

• Payment of 1.5 billion USD$ , in coordination with Central Bank and Ministry of Finance, of dues of IOCs by end of 2013.

• Due Payments were reduced to 4.8 billion USD$ by end of Dec. 2013.

• Encouraging Message to IOCs to continue investments.

31

1) On-going projects: (1800 MMCFD) • Desouq; Nile Delta 100 MMCFD (May 2014) • Karam & Assil; W. Desert 125 MMCFD (June 2014) • Denis & Karawan; Mediterranean 260 MMCFD (June 2014) • Jasmin; W. Desert 30 MMCFD (Q4 2014) • Phase 9 A (WDDM); Mediterranean 450 MMCFD (July 2014) • Hydra; 140 MMCFD (April-September 2014) • Other Developments 700 MMCFD

2) Projects Under Negotiations: (800-1600 MMCFD) • Phase 9 B (WDDM); Mediterranean 350-400MMCFD (Q1-2016)

• North Alex.; Mediterranean 400-1200 MMCFD (2016-2018)

• Apollonia (unconventional); W. Desert 40 MMCFD (2016)

32

Intensive discussions with IOC’s to accelerate gas development projects:

3) Projects in Early stages of Negotiations: (1050-1100 MMCFD)

• Rahamat; Mediterranean 350 MMCFD, (2018/2019) (Oligocene, Pliocene)

• EDDM; Mediterranean 350-400 MMCFD, (Q1 2018) (Tenin – Meret – Tersa – Salamon – Baltim)

• North El-Borg; Mediterranean 350 MMCFD, (2016-2018) (Satis – Seth South – Taurt North)

33

Development Projects (3 Categories) add 3650 ramping up to 4500 MMCFD.

Intensive discussions with IOC’s to accelerate gas development projects:

• Operation of Naphtha Treatment Unit at ANRPC in Sep. 2013; 400 K Tons, 430 MM LE.

• Operation of El-Max/Sidi Krir FO pipeline; 35 km, 84 MM LE to supply Sidi Krir Electricity Station.

• Operation of Sidi Krir/Oil refineries Crude pipeline; 22 km, 50 MM LE.

• Rehabilitation of 2 Storage Tanks at SUMED to receive Super GO Tankers.

• Completion of Several Gas Transmission Pipelines: Ain El-Sokhna Electricity Station gas pipeline. El-Sadat/ Dahshour pipeline; 75 km. America/Sidi Krir pipeline to supply Sidi Krir Electricity Station. Gas pipeline to Pirelli Egypt Company in Alexandria.

34

• Increasing Gas Production • Additional 1800 MMCFD, compensating 1200 MMCFD of natural decline and

increasing current production by around 500-600 MMCFD.

• Availing alternative Fuel to Power Generation (Fuel oil & Gas Oil) • Increasing fuel oil capacity from 22 K ton/Day to 35 K ton/Day.

• Import of Natural Gas (200-400 MMCFD; 5.5 – 11 MMCMD) • Closing agreements (FSRU, LNG) by March/April.

• Energy Conservation Campaign • Joint efforts lead by MOEE, MOP and IOCs.

• Completing relevant infrastructure projects of natural gas & FO pipelines to power stations.

(Banha – El Sokhna – El- Max/Abu Qir – El Max/Sisi Krir)

35

• During (July 13 – Mar. 14) gas connected to: • 455 k residential units, total connections 5.8 million units.

• 615 commercial facilities, total connections 13.2 k.

• 57 factories, total connections 2160 factories.

• Agreement with Ministries of Planning and Finance to avail 1.48 billion LE to finance 800 thousands residential connections this year.

• Agreement to avail 600 MM$ soft loans (World bank, AFD) to finance gas connections (3 years plan).

36

• Major Project implemented by the Petroleum Sector aiming at:

• Developing leadership skills of current Top Executives; First Phase 100 of Current Top Executives.

• Developing new leaders form Senior Top Management; First Phase 150 Senior Top Management.

37

Disputes Settled (7)

38

Claimant Brief

Bawabet Al Kuwait Holding Company Gas Pricing conflict (Alexandria fertilizers Plant)

(Sonkar Ships Fuel Supply Co.) Petroleum Products Storing Contract Conflict

Claimant Brief

South Abu Zenimah National Company Ltd. E&P Agreement Conflict

PICO AMAL / GRAYSTONE

Arab Maritime Petroleum Transport Co. - AMPTC Petroleum Products Feed and Transportation Conflict

Aker Solutions Project Execution Conflict

Egyptian Fertilizers Company Gas Pricing conflict

SMW Gold LTD Exploration and Development Conflict

Kuwait Oil & Gas Conflict on Gas treatment facility

Disputes in final Settlement Stages (2)

• Finalizing an Agreement with Shalateen Mining Company (State-Owned) to explore for Gold in Upper Egypt.

• Cabinet Approval (in progress) of the new Mining Law, to maximize added value.

• Issuing 36 exploitation licenses for mining and 46 under review.

39

of Petroleum Sector

Secure & Satisfy local demand of energy with

Reasonable Prices in order to fuel Sustainable

Economic Development & attain Egyptians’

Aspirations of Better Lives.

41

Security of Supply • Diversifying Energy Mix. • Promote Egypt as a Regional Energy Hub. • Natural Gas Imports. • Develop Oil and Gas Infrastructure.

Boost Exploration and Production.

Energy Subsidy Reform.

Maximizing Added Value from Natural Resources • Petrochemicals and Related Industries. • Mineral Resources.

42





43

• Renewable Energy: develop an integrated plan • Great potential in Egypt • Technology & investment, need favorable investment climate • Subsidy reform & cost reflective tariffs

• Nuclear Energy • Medium to Long Term alternative for future plans

• Oil & Gas • Great potential in Egypt • Need to restore the favorable investment climate

• Unconventional Oil and Gas Resources • Good potential in Egypt (shale gas, shale oil …) • Need new agreements model to encourage investments

• Petroleum Coke and coal: • Need for strict environmental regulations • Reasonable alternative for mid-term plans • Suitable for power & industry sectors

44

Diversification of energy resources to ensure energy security, ALL ALTERNATIVES SHOULD BE CONSIDERED

gas 45%

oil 15%

renewable 20%

coal 10%

Nuc 10%

Target 2025

International Trade Line SUMED Pipeline

Arab Gas Pipeline LNG Facilities

Egypt Strategic Location. Proximity to major oil and gas exporters and

consumers. Proximity to major gas discoveries in the

region. Refining capacities with potential to upgrade

and expand. Reliable, upgradable and diversified

infrastructure. Long term experience in hydrocarbon industry. Huge growing local market.

45

Promote Egypt as Regional Energy Hub

• Current Gas development Projects expected to add 3500 MMCFD within 5 year.

• Imports of 200-400 MMCFD will contribute to bridge the supply gap.

• Signing necessary contracts (FSRU, LNG purchase).

• Will always act as a means to secure energy needs.

46

UGD

SYRIA

AqabaAqaba

P.S

36 “

-425

k.m

RehabP.S

Samra2P.S

East Gas Pipeline

36 “ - 264 k.m

Taba

ElSheikhZowayedArish

P.S

East gas

Sinai Cement

& Ind. Area

Military Cement

& Ind. Area

N. Sinai Cement

36 “ 196 k.m

16 “ - 16 k.m

24 “ - 45 k.m

36 “ - 139 k.m

36 “ - 180 k.m

24 “ - 30 k.m

24 “ - 135 k.m

36 “ - 185 k.m

SharmEl Shekh

Dahab

Nuweiba

20 “ - 208 k.m

Petrobel

Suco Fields

Sinai Manganez

PPC

Abu RudiesP.S

RamadanEsma 2Esma 8

Badri

Sho’abAli

SeaBird

Agiba

Suco

Oil Gulf

Morgan

24 “ 127 k.m

Safaga

Hurghada

16 “ 192 k.m16 “ 256 k.m

Za’frana

Ras Bakr

Ras Shukeir

City Gas

Unit 104 Gupco

Unit 103 Gupco

Ras Ghareb

16 “ 75 k.m

October

24 “145 k.mSuez

CityGas

24 “ 10 k.m

18 “ 162 k.m

AyounMoussa

Sokhna

16 “ 165 k.m

Abu SoultanP.S

32 “ 106 k.m

Abu Soltan

30 “ - 4 k.m36 “ - 55 k.m

Fayroz

TownGas

Town Gas

Romana

El-Tina

42 “ 40 k.mN. Sinai

Port Fouad

DeniesAkhen

Shapas

Theka

BardwellPort Said

P.S

FlowerHelm

N. Port Said

24 “ 215 k.m

32 “ 60 k.m

TemsahTaurt

Leba

non

Damascus

HomsBanias P.S

Connection withSyrian Gas Network

daraa

Turkey

Cyprus

Aleppo

Connection withSyrian Gas Network

Gehan

KingNALPETCO HESS

SediKreir P.SIntergen

P.S

Natgas

Town Gas

24 “ 7.5 k.m

North Idku

BurullusScrab & Saffron

32 “ 165 k.m

Alexandria Abu Qir

ElQar’aWastany

Baltem

L N G FenosaRepco Gas

Damietta

24 “ 50 k.m

Mopco

24 “ 2 k.m

RosettaNorth Alex.

Tarek

Obaiyed

Salam

S.UmBaraka

Matruh

Qasr

Sham

s

Agiba

Vegas

South Dabaa

AbuSanan

AbuGharadig

Bed-3

Bed-2

Bed-1

Qarun

NeagShell

MelahaDeep

Sitra

18“- 212 k.m 24 “

–13

2.5

km

16 “- 68 k.m

20 “- 68 k.m

8 “- 25 k.m

14 “- 68 k.m

BorgElarab

24 “ - 260 km

AmeriyaCement

12 “ 14 km

34 “ - 233 k.m

32 “- 50k.m

26 “- 41.5k.m

12 “- 1.5k.m

24 “ 26 k.m W.D.G.Complex

24 “ 26 k.m

Natgas

32 “ 200 k.m

AbuHomos

Town Gas

Nobaria P.SNatgas

28 “ 16 k.m

18/16” 13km

42” 65km

El Sadat

12” 14.5km

Natgas

Egypt Gas

Mahmudya P.S

24 “ 40 k.mEgypt Gas

EgyptGas

6 OctoberCairo

Banha

Qusina

24”/20”65 k.m

Dahshour

36 “ 88 k.m

Tanta

Fayum Gas

36” 73 km

42” 74 km

Natgas 6 October

EL Shabab

Abu Za’bal

Natgas

Town Gas

Mostorud I. A

24 “ 25 k.m

42 “ 40 k.m22 “ 40 k.m

32 “ 167 k.m32 “ 24 k.m

16 “ 114 k.m

10 th ofRamadan

Egypt Gas

South Manzalla

Batra

South Mansora

National Gas

28 “ 86 k.m

Transgas

AbuMadi

Shabsheer

SouthBelkas

12 “ 40 k.m

20 “ 18 k.m30 “ 26 k.m

28 “ 40 k.m

22 “ 87 k.m

30 “ 28 k.m

El Minya

Abu Qurqas

TebbinTown Gas

New Minya

Koraimat

Beni Swief

32 “ 150 k.m

Assiut

Qena

Sohag

Nagaahammadi

32 “ 150 k.m

32 “ 122 k.m

New Assiut

Gerga

Dar El-Salam

Dishna

Aswan

Luxor

Queft

KIMA

EdfoKom

Ombo

Qus

30 “- 392 k.m

Jan. 2014

Existing. P/LExisting. P/LUnder Cons. P/LUnder Cons. P/LUnder Study. P/LUnder Study. P/L

Gas FieldsGas Fields

FacilitiesFacilities

Distribution CenterDistribution Center

Power StationPower Station

Industrial Area Industrial Area

Future Gas Fields Future Gas Fields

Consumer Consumer Distribution Co. Off TakeDistribution Co. Off TakeExportExport

Existing Comp. StationExisting Comp. Station

Future Comp. StationFuture Comp. StationUnder Const. Comp. St.Under Const. Comp. St.

El Fayum

El Minya I.ASinai Gas

Waledia P.S

Assiut P.S

Fajr

Gas

Pip

elin

e

L N G Idku Al Gaber

Al Rayyan

SamraP.S

EastOmaan

P.S

JOR

DA

N

SAU

DI

AR

ABI

A

36 “ - 75 k.m

Kilis

24 “- 20 k.m

West Aswan

8“- 12 k.m

Tripoli

Dier AmaarP.S

Eldabosia

10 “ – 1.5km

Armant

New Qena

12 “ - 23 k.m

32” 105 km

42 “ 40 k.m

MitNama

24” 36 km

36 “ 93 km Atfih P.S

Beni Swief P.S

N.Giza P.S

Banha

P.S24” 15km

Dairout P.S

42 “ 25 k.m

36 “ 40 k.m

24” 38 km

A.rawash P.S

18 “- 63k.m

24 “

-37k

.m

18 “

-42k

.m

22 “- 22k.m

32” 65km

NahdaCement

36 “ - 60 k.m

Sinai Gas

Nile Valley Gas

Nile Valley Gas

Nile Valley Gas

Regas

Egypt Gas

Egypt Gas

Qena P.S

AlamShawesh

Kom OmboSolar P.S

FSRU

Import Gas (LNG)

El Sokhna Port – Import Pipeline 32”

Trap

47

Refineries (next 5 years) • Upgrading existing Refineries... improve efficiency & HSE (556MM USD Investment).

• Adding conversion units (CCR, Hydrocracker, Coker….).

• Construct new Refineries to increase production of Petroleum Products (Private / Public) (17.4 Billion USD Investment)

Import, Storage and Transmission Upgrade • Import facilities (Suez and Alexandria) to double capacity.

• LPG & Fuel Oil Storage

• LPG Pipelines, Diesel and Fuel Oil Pipelines & Crude oil pipelines





48

23 new concession blocks offered in EGPC/EGAS Bid Round

5 YEARS TARGET 23 signed concession agreements + 3 in pipeline

MID 2014

26

49

Signing new concession agreements is the cornerstone for boosting exploration activities, increasing reserves and eventually increasing production

Boost exploration activities & Increase production

+23

NOW

5 Years Plan

• Restore favorable investment climate & attract more FDI o Payment of IOCs overdues within 3 years (End of 2016). o Review Natural gas prices in petroleum agreements. o Development of upstream agreements model to cope with unconventional

resources.

• Increase production to reach:

o 750 thousands bbl/day Oil

o 6500 mmcfd gas.

• Develop National Upstream Capacities.

50

Boost exploration activities & Increase production

51

• EIA Estimates: • Shale Gas, 536 TCF in place, 100 TCF

technically recoverable reserves.

• Development requires modification of Concession terms to encourage Investment.

• Apollonia, Shale Gas potential, on-going negotiations with IOCs to agree on development plans.

Unconventional Resources





52

• Integrated Subsidy Reform Strategy. • Better Energy Mix. • Gradual Reform over 5-6 years to recover almost 70% of costs. • Resolve Current Price Distortion. • Effective Communication Campaign to Raise Awareness. • Policies to support low income people. • Developing related sectors:

(Public Transportation – Railroad – Maritime Transportation – Traffic). • Energy Efficiency (10-15 % in 5 years, saving up to 6-8 billion dollars yearly). • Restructuring Petroleum Sector, Establish Regulator, and Move to Free Market.

53





54

X N.G Ethane

Ethylene 1.7 X

5.5 X Polyethylene 8 X

18- 30X

Finished Products

• Increasing Production from 3.0 to 3.7 million tons in 5 years.

• Maximize the use of petrochemicals locally.

• Establishing downstream petrochemical clusters.

• Produce alternative energy sources (Bio-ethanol) using natural feedstock (agricultural wastes).

55

Develop Petrochemicals industry and maximize added value

• Increase Mineral Resources contribution in the GDP to more than 5 % in 10 years through:

• New Mineral Resources law to attract more investments and boost mining activities.

• Restructure of Mineral Resources sector and develop human resources.

• Develop master plan to include integrated industrial complexes to maximize added value, especially for (Phosphate - White sand – Gold – Black sand).

• Develop the Golden Triangle project in Upper Egypt to establish world Class Economic zone including Mineral Exploitation, Industrial Facilities, Commercial Hub, and Touristic zones.

56

Development of Mineral Resources Sector to maximize State Revenues

challenges & vision - amcham · 9 year avg. brent gasoline 80 gasoline 90 gasoline 92 gas oil...

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