Egypt announced, on Tuesday, new oil discoveries in the Gulf of Suez, which come at a time when the country is going through a severe economic crisis.
The Egyptian Ministry of Petroleum and Mineral Resources said that the “Kiron” company achieved the discovery through the exploration well “North Jessum North-GNN-11”, which is currently producing more than 2,500 barrels per day.
She added, “The well is the fourth well to be completed through the Early Production Facility… (and) 3 more wells could be drilled” in the current exploration phase.
The ministry stated that the total production from the North Jessum field amounted to about 23,000 barrels per day.
Is “commercial oil production” possible?
However, experts believe that these discoveries are “initial” and that oil production in the commercial field “depends on investments by major foreign energy companies.”
Energy analyst Amer Al-Shobaki said that the discoveries announced on Tuesday are “some of them new and some of them were previously announced.”
He added, in his interview with Al-Hurra, that “the re-announcement of these discoveries is more informational than actual, as it has not yet contracted with investors for these oil concessions.”
He believes that “even if there are investments, Egypt needs a long time to start production and marketing.”
Last year, the giant Italian oil and gas company, Eni, announced that it had discovered new oil and gas wells in Egypt, with a production capacity of 8,500 barrels of oil equivalent per day.
At that time, the Italian group said in a statement that these wells, which it discovered in the Maliha concession in the Egyptian Western Desert, had already started production. “Further exploration is underway in the concession with promising prospects,” the statement added.
Egypt, with a population of 105 million, a third of whom live below the poverty line, is witnessing harsh economic conditions, exacerbated by the crisis that led to the local currency losing more than 50 percent of its value against the US dollar in one year.
“Lifeline”
Al-Shobaki believes that the announced new discoveries “are supposed to cover Egypt’s need for oil, which may be a lifeline at least in self-sufficiency” in oil derivatives, in a country that imports half of its black gold needs.
In turn, the Egyptian economist, Abd al-Nabi Abd al-Muttalib, goes in a similar direction, saying that the discoveries are “still in the study phase.”
He told Al-Hurra that these discoveries “will make a big difference” in the Egyptian economy “if commercial production begins.” He added, “If it does not achieve an increase in exports, it will reduce a large part of imports.”
Egypt, which is one of the 5 countries in the world that is most likely to default on its foreign debts, is seeking to reduce its domestic consumption of energy, in order to increase the amount of its oil and gas exports, and thus increase its resources in dollars.
Since the Russian invasion of Ukraine, Egypt has been experiencing a shortage of foreign exchange reserves, in a country that imports most of its needs from abroad.
Al-Shobaki said that the announcement of the new discoveries “supports the credit agencies not downgrading Egypt’s rating, after it took such a step due to the difficult economic conditions the country is going through.”
This declaration also supports “for Egypt to obtain loans (from international bodies) with acceptable interest,” according to Shobaki.
In December 2022, the Egyptian government agreed with the International Monetary Fund on a $3 billion loan program, amid pledges to adopt a flexible exchange rate regime, reduce the state’s role in the economy, and strengthen the private sector.
However, the first review of the program has been postponed, as the exchange rate has remained stable at around 30.85 pounds to the dollar since last March.
On the other hand, Egypt’s foreign debts have more than tripled in the last decade, to now reach more than $165 billion, while it hopes that these oil discoveries will be a glimmer of hope for the African country.
Abu Bakr El-Deeb, an economist and researcher in the field of energy and mining, draws a more optimistic view, saying, “The petroleum and mineral wealth sector are among the most important economic sectors benefiting from the success of the Egyptian economic reform program.”
In statements to Al-Hurra website, Al-Deeb said: “The discovered well contains 165 feet of net vertical strata of high quality in the Nubian Formation, dating back to before the Miocene era.”
Foreign investment “less than expected”
Despite these discoveries, foreign investment in the field of oil in Egypt remains less than expected, as Abdel Muttalib said that “the giant companies in this field are studying the feasibility of investment in terms of costs before making their decisions,” noting that the new discoveries “encourage investments ( foreign) in oil or gas to come to Egypt.”
He continues, “This type of discovery is large and huge. If production begins, the state’s resources will increase, oil imports will be reduced, and the country will witness urban development.”
For his part, El-Deeb said, “The sector has witnessed a major boom in terms of the volume of development and modernization, especially the refining industry during the past years. The fruits of economic reform, under the guidance of the political leadership, were reflected in the implementation of new projects and the injection of large, unprecedented investments.”
He added, “The development comes within the framework of the state’s strategy to advance the energy sector, and within the framework of its vision to transform it into a regional center for energy trade and circulation and attract foreign investments, taking advantage of its strategic location and natural resources that it enjoys, and the availability of new and renewable energy sources, as well as the assets and infrastructure that it enjoys.” developed over the past years.
However, Shobaki said that foreign investment depends on “the ability of the Egyptian government to make a fair investment that meets the need for economic viability of companies and the rights of the owning country.”
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2023-08-23 11:00:23
