CAIRO: International investors have pledged $8 billion in petroleum investments this year, said Egypt’s Petroleum Minister Abdallah Ghorab at a conference on Monday.
Ghorab opened the North Africa Technical Conference and Exhibition, taking place in Cairo from Feb. 20-22 and focusing on managing hydrocarbon resources.
The primary issue, regarding the effect of regional political unrest upon the oil and gas industry, was addressed by the petroleum risk manager for consultant firm PFC Energy, Hanan Amin-Salem.
Amin-Salem asserted that the industry’s primary concern is not in fact political instability, but economic populism.
“The current government has reversed the liberalizing reforms that the prior regime had instituted… potentially to replace them with trade restrictions, price controls and maintaining subsidies… [Such policies are] a recipe for economic inefficiency and stagnation.
“They will not produce the 6 and 7 percent rates of growth that Egypt needs to meet the job demand of new entrants to the labor force and to make a dent in high youth unemployment,” she said.
Egypt faces potentially incendiary inflation if the central bank reserves fully deplete in the next several months, as expected, which could trigger further political unrest, she added.
Foreign reserves have been declining at an average of $2 billion monthly since the uprising, reaching around $16 billion at the end of January.
John Berry, Shell’s VP of Technical and Production MENA, had a longer-term outlook, offering a rosier forecast for the industry: given increased global demand for oil and gas, as well as dwindling reserves, the sector will continue to expand.
“Petroleum production will require both more money and more ‘grey cells’ per barrel,” he laughed, referring to the need for enhanced skills and brainpower to find and extract ever more elusive petroleum reserves.
Egypt represents an area that will require new extraction technologies. “Egypt’s more mature oil fields may be ready for EOR [Enhanced Oil Recovery],” he explained, and alluded to the potential for greater employment of skilled Egyptian workers.
Berry told Daily News Egypt in an interview that newly developed chemicals employed in EOR should not necessarily have a negative environmental impact, given the depths at which they would be used.
Although Egypt’s petroleum reserves will reportedly deplete within the next 20 years, South Sudan represents a new frontier for petroleum investors. Salah Wahbi, CEO of Sudapet, an oil and gas company in North Sudan, explained that 75 percent of petroleum reserves lie in South Sudan, but nearly all petroleum infrastructure and development remains in the hands of the North. Still given South Sudan’s “powerful friends” such as the US, he expects South Sudanese production to quickly come online.
Sherif Ismail Mohamed, managing director of Ganope (Ganoub El-Wadi Petroleum Company), one of the five branches of the Petroleum Ministry, emphasized the politically and economically critical issue of energy subsidies.
“We have to change our mindset. We are no longer living in a $20 per barrel world, it is now a $100 per barrel world. We will not be able to find cheap oil and gas anymore,” he said.
He reiterated the necessity of reducing petroleum subsidies, given that it is both economically unsustainable and encourages smuggling.
While taking questions, Hanan Amin-Salem also returned to the explosive issue of subsidies, but acknowledged the political impossibility of decreasing them too quickly.
She also pointed to investors’ anxiety about Egypt’s political future, asking the audience pointedly, “Who’s in charge of economic policy?”
John Berry echoed her concern, explaining that investors require political stability: “[Egypt is] in an interim situation where people are frightened to make decisions because the consequence can be negative.
“Egypt needs to create a climate where people who know what needs to be done will be able to do it. We need a good leader to create such a climate.”