CAIRO: Looking to expand Egypt’s natural gas and petroleum production, the Ministry of Petroleum announced yesterday its plan to conduct and international tender that will lead to greater offshore drilling in the Mediterranean Sea.
The Ministry announced that its plan was to bring 14 new exploratory projects at seven different sites online by the end of the year.
These projects are expected to bring LE 3 billion in additional investment to the industry and are likely to add around 1,300 barrels of oil condensates to the market.
The new plan is also expected to produce and additional 1 billion cubic meters of natural gas.
Experts worry, however, that a shift is underway in the petroleum market that may keep prices high and squeeze the profit margins of the oil companies.
Reham ElDesoki, senior economist at Beltone Financial, noted that a change in sites reserved for exploration have increased costs for the oil companies.She mentioned in a memo that exploratory focus has shifted from the Gulf of Suez to the Western Desert and offshore in the Mediterranean. The cost of exploration in these two sites is far greater.
ElDesoki also mentioned that an increase in production cost could prompt the oil companies to seek to alter the price agreements they had reached with the government.
“We expect that, as the production costs continue to rise and international energy prices remain high, she argued, “the impetus for a repeated revision of domestic energy prices will continue to narrow the gap between cost and sale price levels in Egypt, currently the largest for refined oil products. Record oil prices have, in recent months, prompted oil companies and governments alike to open up new oil fields as one means of increasing production.
Topping out at $147 per barrel in the middle of July, oil prices have since slid back from such numbers, offering consumers and industries alike a respite from the breakneck price increases up to that point.Currently, prices stand around $120 per barrel.
Though Egypt’s oil reserves pale in comparison to those of its Gulf neighbors, the Egyptian economy is, nonetheless, deeply wedded to the fluctuation in oil prices.
Energy prices drive a great number of the industries critical to the Egyptian economy. Prices of steel and cement, keystones of any construction project, are dependent on changes in the price of oil.
Even tourism, one of Egypt’s most lucrative industries, is vulnerable to oil price increases because of how they impact airfare and the general global economy.
Skyrocketing petrol prices do not, however, have only a negative impact on the Egyptian economy. High oil prices have brought unprecedented wealth to the Gulf states, which, in turn, have made tremendous investments in the Egyptian economy.
From significant investments in the telecom industry to construction projects on a monumental scale, the Gulf States have helped spur Egyptian industry even as record oil prices slow it.
Knowing the long-term impact of increased oil exploration worldwide may be years away. In the meantime, Egyptian industry will continue to suffer the woes of record prices while enjoying the massive foreign investment they inspire.
