According to the Oil and Gas Journal’s January 2008 estimate, Egypt’s proven oil reserves stand at 3.7 billion barrels. In 2007, Egypt’s oil production averaged 664,000 barrels per day (bbl/d), less than 1 percent of world production. Despite discoveries and enhanced oil recovery techniques at mature fields, production is declining annually. The Saqqara field, discovered in 2003 and estimated by BP to contain reserves of 80 million barrels, represented the last major find since 1989.

Source: EIA International Energy Annual

Demand for petroleum products, after being relatively flat since 1999, is again rising rapidly. This increase is due partly to high domestic subsidies. According to official figures, the value of government subsidies to petroleum products has continued to rise, from 14.3 billion Egyptian pounds (EGP) in FY2004 to 62.7bn EGP in FY2008 - with the 2008 subsidy being 71.3% higher than that projected for the previous year at 36.6 bn EGP. Though the government hopes to reduce demand by gradually lifting subsidized prices and targeting subsidies more effectively, this is a politically sensitive issue that will take time to fully implement. The increased use of compressed natural gas (CNG) as a fuel for motor vehicles is one trend that may aid government efforts.

Structured to accelerate decision making and facilitate cooperation with international oil companies, the energy sector is broken up into three holding companies in addition to the Egyptian General Petroleum Corporation (EGPC) and the Egyptian Mineral Resource Authority (EMRA). These include: the Egyptian Natural Gas Holding Company (EGAS), The Egyptian Petrochemicals Holding Company (ECHEM), and Ganoub El Wadi Petroleum Holding Company (GANOPE).

International Oil Companies (IOCs) play a significant role in Egypt’s upstream sector on a production-sharing basis with EGPC and EGAS. Exploration tenders attract supermajors such as ENI and BP, National Oil Companies (NOCs) such as Petronas and KUFPEC, and small IOCs such as Dana Gas and Burren Energy.

Egyptian oil production comes from four main areas: the Gulf of Suez (about 50 percent), the Western Desert, the Eastern Desert, and the Sinai Peninsula. Most Egyptian production is derived from mature, relatively small fields that are connected to larger regional production systems. The fields in the Gulf of Suez are declining most rapidly while independent producers such as Apache and Seagull Energy are helping to slow the decline through the development of small fields, especially in the Western Desert and Upper Egypt.

Oil from the Gulf of Suez basin is produced mainly by Gupco (Gulf of Suez Petroleum Company) under a Production Sharing Agreement (PSA) between BP and the Egyptian General Petroleum Corporation (EGPC). Production in the Gupco fields, with most wells in operation since the 1960s and 1970s, has fallen in recent years. Yet Gupco has slowed this decline through significant investments in enhanced oil recovery (EOR) as well as increased exploration. Egypt's second largest oil producer is Petrobel, which is a joint venture between EGPC and Agip of Italy. Petrobel operates the Belayim fields near the Gulf of Suez and also is undertaking an EOR program to stem declining production. Other major companies operating in the area include Badr el-Din Petroleum Company (EGPC and Shell); Suez Oil Company (EGPC and Deminex); and El Zaafarana Oil Company (EGPC and British Gas -- BG). 

Since 2000, Western Desert production has risen substantially, accounting for roughly 27 percent of total oil production, more than double 2000 levels. Oil in this area is on average cheaper to produce and lighter than other domestic crudes. Apache and Seagull have developed the Beni Suef IX field in the East Beni Suef concession in Upper Egypt and the Wadi El-Sahl field in the South Hurghada block. A joint venture between EGPC and Agip is developing the Qattara Depression in the Western Desert, in the Meleiha and West Razzaq blocks. Khalda Petroleum, a joint venture between Apache and EGPC, operates in the Western Desert in the Khalda and East Bahariyya areas.

The Saqqara field, which represents the largest new crude oil discovery in Egypt since 1989, went online in May 2008. Located offshore adjacent to the existing El-Morgan field, Saqqara reached a flow rate of 30,000 bbl/d at the end of May 2008, and is expected to reach a peak production of around 40,000 to 50,000 bbl/d.

In early 2008 the government launched a licensing round offering between 20 and 30 blocks proposed by EGPC, Egas, and Ganoub el-Wadi Petroleum.

In addition to its role as an oil exporter, Egypt has strategic importance because of its operation of the Suez Canal and Sumed (Suez-Mediterranean) Pipeline, two routes for export of Persian Gulf oil.

Crude oil shipped through the Suez Canal in 2007 amounted to 980,000 bbl/d southbound and 280,000 bbl/d northbound, according to the Middle East Economic Survey. This compared with a flow of 160,000 bbl/d southbound and 1,100,000 bbl/d northbound in 2006. The change in the flow’s direction reflects the decline in European demand and the continued demand growth in Asia.

The Suez Canal Authority (SCA) is continuing enhancement and enlargement projects on the canal. By the end of 2008, the canal’s depth will be increased from 62 ft to 66 ft, but plans to extend the depth to 72 ft for supertankers by 2010 have been put on hold. The SCA is instead considering widening the canal to 322,000 ft to boost the pass-through rate. In the meantime, the SCA increased its fees in April 2008 by 10.5% for natural gas tankers, 10% for naval vessels, 7.3% for oil tankers, 5.7% for container ships, 5.2% for passenger ships and 5% for all other vessels. According to the SCA, revenues from the Suez Canal stood at US$5.11 billion during fiscal year (FY) 2007/08, which ended on 30 June, compared with US$4.16 billion recorded a year earlier. The total number of ships passing through the Suez Canal reached 21,080 in 2007/08, in contrast to 19,479 ships during the previous year.

The Sumed pipeline runs 200-miles from Ain Sukhna on the Gulf of Suez to Sidi Kerir on the Mediterranean. The Sumed's original capacity was 1.6 million bbl/d, but with the completion of additional pumping stations, capacity has increased to 2.34 million bbl/d according to industry press. The pipeline is owned by the Arab Petroleum Pipeline Company (APP), a joint venture between Egypt (50 percent), Saudi Arabia (15 percent), Kuwait (15 percent), the U.A.E. (15 percent), and Qatar (5 percent). The APP also has been increasing storage capacity at the Ain Sukhna and Sidi Kerir terminals. As a competitor with the canal, the pipeline offers discounts for VLCCs offloading at Ain Sukhna and reloading at Sidi Kerir. During the 2007 FY, Summed shipped approximately 1.89 million bbl/d of Arab and Iranian crude, down nearly 400,000 b/d from 2006 levels according to the Middle East Economic Survey.

Egypt’s major export grades are Suez Blend and Belayim Blend, most of which are sold straight into term contracts. Minor exports grades include Ras Gharib and West Desert.

Egypt has the largest refining sector on the African continent with nine refineries that have a combined crude oil processing capacity of 726,000 bbl/d. The largest refinery is the 146,300-bbl/d El-Nasr refinery at Suez, which is owned by the Egyptian government through the EGPC and operated by its subsidiary, the El Nasr Petroleum Company. The government has plans to increase production of lighter products, petrochemicals, and higher octane gasoline by expanding and upgrading existing facilities and promoting two new projects. One is a 500,000 bbl/d refinery to be built near the Suez Canal. The second is a 130,000 bbl/d refinery to be built at Ain Sukhna, on the Red Sea coast. The 500,000 bbl/d export-oriented oil refinery is to be a joint venture among Egyptian, Saudi Arabian and Kuwaiti investors; start up is scheduled for summer 2009.