These days, we read in newspapers, petroleum magazines and social media a lot of news about the Egyptian petroleum sector, and many have reported news about the decline in crude oil production as well as a significant decline in gas production, especially the production of the Zohr field, which opened the doors of hope for all Egyptians when production began, and even raised the ceiling of dreams and aspirations for all Egyptians. Gas exports have stopped, and many shipments of liquefied gas have been imported to cover Egypt’s gas needs and so that the power outage does not continue for hours. Here we want to ask, is this the first time Egypt has faced this crisis or has it happened before?
The answer to this question is that Egypt faced the same crisis in the period from 2011 to 2014 when the debts of international companies working in the exploration and production of gas and oil in Egypt reached 6.3 billion dollars. Then the situation changed, and the debts began to be paid off and exploration/production rates increased after 2014 until self-sufficiency in gas was achieved in 2018, then gas exports resumed again. Self-sufficiency in gas and gas exports continued until last year, but the same previous crisis was repeated. Investments stopped and the drilling of new wells stopped, especially in the Zohr field, which produces more than 40% of Egypt’s gas production. Natural decline began to occur in this field, and no development wells were drilled to compensate for the natural decline, which led to decreases in its production to be 65% from the beginning. We say here that everyone who works in the petroleum sector knows very well that any reservoir has a gradual decline rate ranging between 10%: 20%, and therefore this natural decline must be compensated for by drilling new development wells every period throughout the production life of the field or reservoir.
From here, we can assert that the current crisis is the result of the suspension of payment of the share of production by international companies, which led to an increase in debts once again to more than 6 billion dollars, which resulted in the suspension of drilling development wells, not only in the Zohr field, but also in many other fields. From here, we can see the main reason for the significant decline in Egypt’s production of gas and even crude oil, which led to an increase in gas imports, the largest proportion of which is used in generating electricity, so that the deficit in supplying gas to power plants does not lead to power outages for hours. Also, the import of crude oil increased to continue operating oil refineries and reduce the bill for importing various petroleum products.
Here comes the question: What’s next?
To answer this question after the previous explanation of the reason for the crisis, a quick decision must be made to pay at least 50% of the debts of international companies and agree on a schedule for the other 50% in specific installments on specific dates and adhere to this plan until we regain the confidence of these companies again, provided that an agreement is reached with these companies to invest the largest part of this money in drilling new development wells to compensate for the significant decline in gas and crude oil production, which will in turn lead to self-sufficiency and stop the bleeding of the country budget in importing liquefied gas, the cost of importing which is several times its cost if it is produced from Egyptian production fields, and also reduce the bill for importing crude oil