CAIRO: BG Egypt has had a busy year. The company moved forward with investment plans, launched new projects and continued drilling efforts.
When the economic crisis hit, its strategy was simple: proceed as planned.
According to BG Egypt President Tim Blackford, the crisis has not and will not affect Egypt operations. As a long-term investor, he said, the current downturn in the economic cycle does not affect investment plans.
The company plans to invest $1 billion in Egypt this year and $2.5 billion the next year.
At last week’s InterGas conference in Cairo, the company said it had been awarded an offshore gas block – called Block 1, North Gamasa – in the latest bid round held by the state-owned Egyptian Natural Gas Holding Company (EGAS).
BG Egypt, a subsidiary of Britain’s BG Group, signed its first agreement with the Egyptian government on May 25, 1989. As the company prepares to celebrate its 20-year anniversary, it is positioned in the market as one of the largest investors in Egypt’s natural gas business.
Since its inception, the company has invested over $6 billion in upstream and downstream operations in Egypt.
On the sidelines of InterGas V, Daily News Egypt sat down with Blackford to discuss the company’s plans for the future and its outlook for the sector.
Daily News Egypt: BG has been operating in Egypt for 20 years, how was 2008 different?
Tim Blackford: It was a year of achievements in many ways.a consolidation of a lot of hard work. These 20 years began with a small start, just exporting. Now [it is] a large scale industrial activity: we are producing over 40 percent of total gas production [in Egypt] and we are a key exporter of energy.
In many ways, last year we were building on all of these achievements. It [2008] was busy for us in terms of projects, drilling and contracting.
BG brought in 15 percent of Egypt’s total foreign direct investment in 2008, how will this change in 2009?
It will stay around the same percent. Our intention is to invest $1 billion this year and $2.5 billion next year. We don’t know what our other investment will be, but I can’t see [BG’s investment] being less than 15 percent.
So the financial crisis has not affected BG?
Absolutely not. One of the important things to know about BG is that we are a long-term investor. This kind of cycle, where we see economic activity reducing, doesn’t really affect our long-term investment plans, [especially] in a place like Egypt.
No projects were put on hold?
No, no projects on hold at all…and we are looking at sanctioning new projects this year and next year.
Which projects currently top BG’s agenda?
There are two projects. The West Delta Deep Marine (WDDM) Phase V is a project that allows us to continue delivering [gas supply to the domestic market] at current levels. This project involves installing [booster] compressions [on the Scarab Saffron facilities].
That [project] allows us to boost the pressure. and prolong the level or the period which we can deliver the service.
Another very exciting project is Sequoia, located between the WDDM area and Rosetta, so it’s a joint development between the two concessions. That project will drill six wells [tied back to existing infrastructure] and will be upstream in the third quarter of this year.
We have another phase of the WDDM project, Phase VII, which is a very big compression project. We are now in the process of finishing Phase V and VI, and this summer, in July probably, we will be sanctioning Phase VII.
Next year will see Phase VIII, which is a big onshore project.
Phase VII is a $1 billion, 18-month project and Phase VIII is about a $2.5 billion, four-year project. [Both] will be funded by BG and our partner Petronas.
Algeria and Libya have been mentioned frequently by oil and gas companies as promising markets. How do you see this in comparison to Egypt?
We have been here in Egypt a lot longer than we have been in Algeria. In Algeria, we are there for exploration and development, so it’s not as mature a [market] as Egypt, but we think it’s a good development opportunity.
In Libya, we are still in the exploration phase – I will characterize these two countries as less mature.
Egypt is a full business now – exploration, production, downstream – it’s very mature and capable to keep growing. Tunisia is perhaps more like Egypt, in the sense that we have been there for quite a long time, we have a good production record, there is a lot of investments going on. The next project is well on the way there.
But in all of these countries, we are active investors and looking to grow our business in the whole region. We have been in Algeria and Libya between two to three years, and in Tunisia for 15 years, and Egypt for 20 years
How do you see the effects of the financial crisis on the oil and gas industry?
I think we’ve already seen some effects. We’ve seen the cost coming down, demand [declining]. For the moment, perhaps we’ve seen the first glimpse of more optimism in the market. In recent days, for example, oil prices moved to $60, so gas prices moved up in United States.
I think people [will] start feeling a little less pessimistic about the future economically. I think some companies will struggle with liquidity to finance their investments. BG is not one of those, we have a strong balance sheet.
I think smaller companies might struggle a little bit, but in general, my sense is that we hit the bottom of the cycle, so things might be improving, I hope.
For Egypt, we will see positive economic growth unlike a lot of countries.
