New Strategy for Mineral Resources

Energy in Egypt .• Where to Gas Oil Delivery ... A New Mechanism

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CONTENTS

Board of Directors Chem. Mahmoud Nazeem

Eng. Sherif Ismail

Dr. Sherif Sousa

Eng. Mohamed Saafan

Eng. Tarek El Barkatawy

Hamdi Abdel Aziz

Associate Editors Eng. Shereen Ahmed

Eng. Mohamed Taher

Deputy Editor Magda Zaghloul

Address

Egyptian Petroleum ... Investment Opportunities at Hand

Global Oil Production up in 2012

Global Overview of Base Stock Trends

The Challenge of Zero Discharge from Water Balance to

Regeneration

Top Picks

Natural Gas News in Brief

Petrochemicals in Brief Administration & Advertisement

Petroleum Sector Information Center

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Chairman of the Board Eng. Sherif Haddara

Editor - in - Chief Hamdi Abdel Aziz

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Egyptian Petroleum ...

Investment Opportunities at Hand

E gypt is one of the foremost countries in the world that made a head start

in petroleum industry chain, as it began drilling its first well in Gemsa area in 1886.

In March 1956, a law was passed for establishing the Egyptian General Cor-poration for Petroleum Affairs, and in December 1964, it was replaced by the Egyptian General Petroleum Authority , which became the Egyptian General Pe-troleum Corporation in 1976.

The Ministry of Petroleum was established as the first independent Ministry to proceed and regulate the Petroleum industry in Egypt in March 1973, and since then, petroleum has become one of the fundamental pillars of the economy and a significant source of the Egyptian national income .

The beginning of the new millennium witnessed restructuring the Egyptian Petroleum Sector by separating the activities of natural gas and petrochemicals from the Egyptian General Petroleum Corporation's, and the establishment of five independent strong entities complementing and cooperating each other for optimal monetization of oil and mineral resources, namely: The Egyptian General Petroleum Corporation ( EGPC), the Egyptian Natural Gas Holding Company ( EGAS ), the Egyptian Petrochemicals Holding Company (Echem), South Valley Petroleum Holding Company ( Ganope ), the Egyptian General Mineral Resources Authority (EMRA ) , where its activities were entitled to the Ministry of Petroleum in October 2004.

The Egyptian Petroleum Industry, throughout its history, was full of positive developments contributed to bolstering the Egyptian economy by providing the energy needed for mega projects , export the surplus, bring foreign currencies needed for the economic development plans, as well as providing job opportunities for the Egyptian youth.

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Promising Oil and Gas Potentials

T here is no doubt that, the high oil potentials that most onshore and offshore areas in Egypt enjoy, confirmed

by global studies and reports issued by International special-ized institutions, represent an attractive factor for international companies to work in Egypt. The Petroleum Sector , through signing more petroleum agreements and offering new bid-rounds and adopting special laws encouraging investments, contribute to the flow of International investments to Egypt and further intensifying oil and gas exploration activities, to take advantage of the several characteristics Egypt enjoys, where there are many oil and gas promising areas with global competitiveness for attracting investments backed by state —of— the — art infrastructure of pipelines & processing plants, al-lowing putting discoveries on production and transfer produc-tion to the refineries through an extensive network of crude oil and petroleum products pipelines and the National Gas Grid. The most significant petroleum areas in Egypt are: the Nile Delta, the Mediterranean, the Eastern and Western Deserts, Sinai and the Gulf of Suez , in addition to the South Valley area, one of the promising petroleum untapped areas. More than 70 exploration & production companies are cur-rently operating in Egypt, of which 11 are Egyptian whereas the rest are majors of multinational oil companies. Foreign companies have allocated about $ 8.6 billion in the budget of 2012/2013 to bolster exploration and development activities in Egypt. Total production of crude oil and condensates in 2011/2012 was about 675 thousand barrels per day, and about 5.9 billion cubic feet of gas daily. It is worth mentioning that, the EGPC has offered a Bid Round for oil & gas exploration in 19 September, 2011 in 15 blocks, in the Gulf of Suez , the Eastern and Western Des-erts, Sinai . 25 companies presented offers, where 11 blocks were awarded to International companies. On 4 June 2012, The Egyptian Natural Gas Holding Co. (EGAS) offered an international Bid Round for crude oil and natural gas explora-tion in 15 blocks in the Mediterranean and the Nile Delta, in

light of the studies released by International consulting firms about the good potentials of natural gas in the area. Some ap-propriate amendments have been made to the terms and con-ditions of the new Bid Round, especially in offshore areas where mostly located in deep and ultra deep waters inside the Egyptian economic zone in the Mediterranean , which require the application of the latest technologies of 2D and 3D seis-mic surveys to discover reservoirs with remote depths. This increases the opportunities of achieving new reserves in large quantities which require huge investments. On 30/12/2012, Ganoub El Wadi Petroleum Holding Com-pany offered a new bidround for International companies, comprising 20 blocks to explore for oil & gas in sedimentary basins, in the Eastern & Western Deserts, the Red Sea and the Gulf of Suez .

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R efining industry plays a vital role in securing the coun-try's requirements of petroleum products & achieving

high economic return on refineries' production capacities and their contribution to increase the value added of the petroleum crudes in Egypt. Egypt has 8 refineries, distributed geographically among the regions of the Republic, in Cairo, Alexandria, Suez, Tanta, Assiut and Sinai. Total designed refining capacity reached about 38 million tons. However, great opportunities are now available for expan-sion in the refining industry domain, whereas a plan is being implemented, currently, to achieve full economic exploitation of potential designed capacity of Egyptian refineries, with in-vestments of more than $18 billion, aiming to improve and develop the refineries operation economies, in addition to re-alizing integration among the various refineries according to their geographical distribution in the Egyptian governorates

to increase the value added of crude oil and petroleum prod-ucts, and erecting new refineries till 2019/2020 to fulfill the growing domestic consumption & exploit refining surplus capacity to refine others' crude oil to achieve benefit for both parties, where Egypt is regarded as a big market & a major gate in virtue of its distinguished position which entitles it to invade the African virgin market, especially as a member of the African Group of COMESA, that provides Egypt with distinctive benefits of customs and tax. One of the projects that are currently being implemented is the Egyptian Refining Company at Mostorod area, with Egyp-tian, Arab investments, of about $3.7 billion and a capacity of 4.2 million tons / year to produce high quality products (LPG, gasoline, gas oil). Currently, preparations are also underway to implement a refinery for the production of middle distil-lates and olefins (Sokhna Refining and Petrochemicals Com-pany) with the private sector's participation.

F gypt is at the forefront of African countries and the Middle / I East region to expand in the use of natural gas in many fields surpassing many of the major oil and natural gas produc-ing countries .The activity of delivering gas to houses started in 1981, with the total number of units that have been connected with gas since its start-up until Jan., 2013, about 5.3 million units in 25 governorates. However, this domain is one of the most promising & attracting to investments as currently, an in-tegrated program is being implemented to increase and speed up the rate of natural gas delivery to houses in the different Egyp-tian governorates to replace liquefied petroleum products. Egypt has a National Gas Grid, with a length of 18 thousand kilometers to secure distribution and pressures in the various regions of Egypt. Natural gas was also used as a fuel in fac-tories and electricity plants as the electricity sector is a major consumer of natural gas, representing about 57% of the total gas consumption.

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Western Desert Gas Extraction Complex, Alexandira GASCO)

President Morsi during the Inauguratioh of the Styrenics Plant in Alexandria .

One of the Petrochemicals Master Plan Projects.

Using compressed natural gas (CNG) as fuel for cars, also characterizes Egypt among others in the world, where it started to use natural gas as fuel for cars in 1992 and on a commercial scale as of January 1996. The number of cars fueled with natural gas since the beginning of activity until Jan., 2013 reached about 183 thousand cars, and the number of stations supplying cars with natural gas reached 161 stations in the same period, rather than 70 converting cen-ters, whereas 37 new fueling stations & 14 converting centers are under construction. In the late nineties, natural gas was used, for the first time in Egypt and the Middle East and North Africa, in air conditioners

operation as an experiment , after proven successful , the pe-troleum sector started expand-ing the use of gas in the field of air conditioning and refrigera-tion through the establishment of specialized entity working in this field in 2004 , which would contribute to maximizing the value added of Egypt's petroleum wealth, transferring advanced technologies , raising the efficiency of human cadres along with raising the ratio of local component manufacturing as most of the operation equipment are fabricated locally.

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E gypt owns all necessary factors for establishing a dis-tinct petrochemical industry in its products and strong

economies. These factors are represented in the special geographical location among the markets of Europe, Asia and Africa, which are considered main markets for Egyp-tian petrochemicals products. As well as the existence of an adequate infrastructure and outstanding technical expertise in various domains, i.e. refining, fertilizers, petrochemicals, and a growing domestic market. Egypt has set a national plan for petrochemicals including the establishment of 14 complexes of petrochemicals (24 projects, 50 production units) with estimated investments of about $20 billion, to produce 20 million tons per year of in-termediate and end petrochemical products. It is expected to achieve an annual income of about $15 billion export output and replace imports, in addition to providing 100 thousand direct and indirect job opportunities. The Egyptian Petrochemicals Holding Company adopts the necessary mechanisms to implement this plan, it's about to finish executing first phase projects, with investment cost of about $5 billion to produce about 4 million tons per year of petrochemical products to meet the needs of the domes-tic market and export the surplus. Completed projects in-clude the acrylic fibers project, linear alkyl benzene project, propylene and polypropylene project, methanol production project, and first phase of the polystyrene project. Second phase projects of the petrochemicals master plan are underway, including the Ethylene & Derivatives Production Complex and Styrene production projects in addition to tak-

ing active steps towards implementing the petrochemicals industrial clusters projects, which depend on the products of the first phase projects as components to manufacture end , high quality products to meet the needs of the domestic mar-ket and export. Moreover, important steps have been taken to facilitate investment procedures and speed up projects implementation measures. There are many projects are underway including: glycol eth-ylene project (Port Said), gas to olefins production project (GTO), bio ethanol from molasses production project and petrochemicals complexes project for cluster industries, Pertochemicals Production Complex, depending on Naph-tha produced at some refineries and Propylene and Deriva-tives Production Project .

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Equipment and Petroleum Requirements Manufacturing Workshops

One of the Projects Implemented by the EgyptiM Petroleum Companies Abroad (Dubs - Saudi Arabia)

C IJ n and the Role o Petroleu Compani in the Field of Projects Implementation,

Inside and Outside E

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P etroleum sector is keen on supporting local manu-facturing in various domains of petroleum, gas and

petrochemicals industry in order to achieve self-depen-dence, through increasing manufacturing capacity in production workshops of Petroleum Sector companies, to maximize and encourage domestic production and re-duce imports. Many production workshops of petroleum sector companies cover all petroleum industry domains, equipped with the latest techniques of modern technol-ogy, in addition to the distinct experience of Egyptian manpower. Most important companies are Petrojet and Enppi. Besides its role in implementing projects inside Egypt and its long experience, petroleum companies expanded its activities outside Egypt in neighboring countries in the Middle East, Africa and Latin America. Despite the fierce competition of giant International companies, due to its possession of all success factors, they were able to win many International tenders to implement mega projects abroad, proving their ability to implement mega projects in accordance with the performance rates and world standards in 14 countries, including Saudi Arabia, Kuwait, Libya, Syria, Algeria, Qatar, Yemen, Jordan, Lebanon, Sudan, Tunisia, United Arab Emirates, Oman and Venezuela.

Gold Purification and Extraction Plant at Sukkari Mine

Mineral Resources

E gypt's land is rich with various minerals that qualify it to achieve the most economic exploitation of these natural resources to be added

to the national economy, the first integrated strategy for Mineral Resources was set, to identify opportunities for Mining investment . A new draft law of the Mineral Resources is on its way to be completed so as to attract investments that provide the local industries requirements of mineral ores and carry out industrial projects on these raw materials, to increase Egypt's revenues and create new industrial area in this field , as the currunt law, which was issued long time ago , does not achieve the optimal use of these resources and does not go in line with the requirements of both present and future phase. Among the most important wealth of mineral resources of which the Egyp-tian land is rich with, other than gold, are; feldspar, white sand, glass sands, dolomite, limestone, shale, basalt, sulfur, quartz, barite, phosphate vermicu-lite, ornamental stones, coal which stand as an important wealth for the Egyptian economy and can be offered for investment over the next phase, in addition to ornamental stones and salt, which are one of the renewable resources in the Eastern Desert. At the end of 2012, the Egyptian Mineral Resources Authority ( EMRA) offered bid rounds to explore for phosphate, iron and kaolin by production and manufacture sharing system .

PP Petroleum & Arab, African, International Cooperation

E gypt has a prominent role in es-tablishing Arab and International

organizations concerned of oil and gas industry affairs . It is a member in several petroleum or-ganizations; OAPEC, APPA, COMESA and Gas Exporting Countries Forum. It also participates in OPEC confer-ences as an observer, which has an ef-fective role in activating dialogue and cooperation among all parties of energy industry. Moreover, Egypt is interested in participating and hosting International conferences, which is an opportunity to exchange views and experiences, review the developments and changes that oil and gas industry witnesses on a global level, as well as studying all the factors affecting markets stability, which reflects positively on the Egyptian petroleum in-dustry. Egypt is also keen on offering its experience to various Arab and African countries in different petroleum industry domains.

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CC Global production and reserves of crude oil and lease

condensate both increased in 2012, according to Oil & Gas Journal's annual Worldwide Production report. Reserves of natural gas increased slightly between Jan. 1,

2012, and Jan. 1, 2013.

OGJ estimates average worldwide oil production in 2012

at 75.72 million b/d, up 2.9% from the 2011 rate.

Globa Oil Production up in 2012..

as reserves estimates rise again

T op producers, their 2012 pro-duction averages, and year-

to-year changes are Russia, 10.45 million b/d, up 1.2%; Saudi Arabia, 9.96 million b/d, up 6.6%; the US, 6.33 million b/d, up 11.9%; China, 4.08 million b/d, up fractionally; and Canada, 3.095 million b/d, up 6.6%. Evident in those numbers is the

surging importance of production from unconventional resources-shales and other low-permeability formations in the US and Canada and oil sands and heavy oil in the latter . Total average production by mem-bers of the Organization of Petro-leum Exporting Countries in 2012 is up 5% at 32.1 million b/d. Besides that of Saudi Arabia, large increases have come from Abu Dhabi (6.1%), Iraq (8.4%), Kuwait

(10.1%), and Libya, where produc-tion rebounded to an annual aver-age 1375 million b/d after having been slashed by internal war in 2011. Those and other OPEC gains help offset a 14.7% decline in Iranian production related to international sanctions toughened in 2012. Iran has lost its position as the world's fifth largest producer to Canada. Nigerian production also has de-clined in 2012 despite the start-up in April of deepwater Usan field, which is expected to produce 180,000 b/d. Flooding later in the year cut Ni-gerian production by an estimated 500,000 b/d. Qatar's oil production this year is down 8.4%, Algeria's 5.9%. An- golan production is up 7.1%, and

Venezuelan output is up 1%.

Non-OPEC oil output The production surges by the US and Canada have helped push non-OPEC production up by 1.4% in 2012. Other notable non-OPEC production gains have come from Brazil (0.7%) and Colombia (2.4%). Major decreases in non-OPEC production come from Azerbaijan (4.7%), Kazakhstan (2.7%), Syria (46.6%), Yemen (11.2%), and the North Sea. Maintenance outages took their tolls in fields off Norway in 2012, where production declined by 7.5%, and the UK, down 73%. UK activity stalled this year in the wake of a tax increase in 2011, but the government has been working with the industry to accommodate This report was published in Oil & Gas Journal (OGJ) Magazine on Dec3,2012.

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taxation to work in mature fields, deep water, and other challenging environments. Production in Mexico is down 0.6% this year.

Reserves up OGJ's new estimate for global oil reserves of 1.6 trillion bbl is up 115

billion bbl from the number pub-lished at this time last year . Where possible, OGJ uses data from its surveys and published of-ficial estimates. Most reserves es-timates come from governments, which control most reserves. Gov-ernment reserves estimates fre-quently are influenced by geopoliti-cal pressures. Two big reserves increases this year are from countries where geopoliti-cal controversy is routine: Iran and Venezuela. Having moved large vol-umes of extra-heavy crude oil into the reserves classification in recent years, Venezuela claims 298 billion bbl. Iran has raised its reserves es-timate to 154.6 billion bbl. For Russia, which doesn't disclose country reserves, estimates vary greatly. OGJ has been conservative in its estimates for Russia but this year increases its estimate by one-third for the world's top producing country to 80 billion bbl. Although many giant Russian fields are ma-

tt 2.9% Increase in Average

Worldwide Oil Production

ture, the country is considered un-derexplored, underdeveloped, and amenable to improved production efficiency with the growing applica-tion of modern technology. More-over, a push into the Russian Arctic offshore is set to begin. For the US, OGJ relies on what had been annual reserves esti-mates by the Energy Information Administration. Because of budget cuts, however, EIA hasn't updated its reserves estimates since 2010. The estimate here therefore is un-changed. For China, where exploration is ac-tive on a number of fronts, the oil reserves estimate is up about 5 bil-lion bbl at 25.6 billion bbl. The new estimate for worldwide gas reserves is 6.79 quadrillion cu ft. ■

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