EOG Newspaper June 2009 Issue

EGAS International Bid Round 2008 announced

June 2009

Issue 30

24 pages

Technology advancement, the engine for E&P Despite the slight increase of oil prices, swinging at the $60 per barrel edge, after the dramatic fall down, service companies have modified their pricing strategy to cope with the current market conditions and ensure the spread of their technologies Page 12

Trainings are the core of any industry success..... p2

Non-stop operations’ wheel in Iraq

HSE New Section..... p5

Industry Statistics..... p22

p8

Obama picks Egypt as p16 speech venue

INTERGAS V… Future p21 Energy Challenges LAST MONTH’S OIL PRICES ICE Brent Price

BG’s 20-year journey in Egypt p14

“A marked drop in financing p15 activity!”

Opinions From Cairo to the whole world Since his historical victory in the latest U.S Presidential election, the U.S President Barack Obama has been fulfilling his presidential campaign’s promises, whether to improve the U.S-Middle East relationships, bring the Iraqi war to an end, shut down the prisons of inhumanity (i.e. Abu Gharib and Guantanamo) and above all bring back prosperity to the U.S economy.

Obama pledged during the campaign to address the Muslim world from a Muslim capital within the first few months of taking office. Picking a site proved challenging for a range of reasons -- from diplomacy to security -- and the decision took longer than expected, with Obama commissioning options from a research team.

Concluding the state of hatter and anger aroused in the Arab World for years due to the Bush-administration, President Obama will make his promised speech to the Muslim world from Egypt at the beginning of this month.

Robert Gibbs, the White House press secretary, was asked why Egypt was selected, he said, “The country that in many ways represents the heart of the — of the Arab world, and I think it will be a terrific opportunity for the president to address and discuss our relationship with the Muslim world”.

Choosing Egypt will inevitably bring comparisons with a major speech that then-Secretary of State Condoleezza Rice gave in Cairo 2005, urging democracy and reform in the Middle East.

The Washigton Post highlighted that this is a challenge for Obama to show the difference between his administration and Bush’s, especially that Rice, in her speech, urged the Egyptian government to “put its faith in its own people,” calling on the Egyptian President Hosni Mubarak to end violent attacks on pro-democracy demonstrators, stop “arbitrary justice” and lift emergency decrees allowing the police to break up gatherings of more than five people. She also made similar demands on Saudi Arabia. However, Rice tempered her comments by saying the United States had “every reason for humility” because of its history of slavery and racism.

Regardless the expectations and comparison made prior to Obama’s speech, I believe that this step would be a clear sign to show whether Obama is initiating a genuinely new approach with the Arab World or he is following the old Bush-policies towards the Arabs.

Managing Editor Yomna Bassiouni ybassiouni@egyptoil-gas.com Media & Statistics Monitoring Ayman Rady

Senior Graphic Designer Ahmed El-Degwy Designer Sherif Mokhtar Cartoonist Ramy Ameen

Reporters Ahmed Morsy Tamer Abd El-aziz

Production Advisor Mohamed Tantawy

Photographer Ahmed Hamad

Accountant Abdallh Elgohary Mohamed Said

Contributors Mohamed El-Sayed Ashraf Said Senior Business Development Officer Laila Solaiman Business Development Officer Mustafa Ibrahim

Legal Advisor Mohamed Ibrahim Newspaper Technical Advisors Eng. El-Sayed Orabi -MAGAPETCO Geol.MagdyWedad - PICOEnergy Eng. Said Zaki - Weatherford

Customer Relations Mai El-Rihany

This publication was founded by Omar Donia, Mohamed Sabbour and Mohamed Fouad

Administrative Assistant Basma Naguib

Publisher Mohamed Fouad

All rights to editorial matters in the newspaper are reserved by Egypt Oil and Gas and no article may be reproduced or transmitted in whole or in part byany means without prior written permission from the publisher.

Contact Information: Tel: +202 25164776 +202 25192108 Fax: +202 25191487 E-mail: info@egyptoil-gas.com www.egyptoil-gas.com

Guest Column

Trainings are the core of any industry success In order to recognize the precious value of training in general, we should first understand the vitality of trainings in our daily life.

Training in its meaning refers to a preliminary practice of assigned tasks throughout the different ages and through which each individual gains various skills, whether scientifically, technically, intellectually or socially. To sum up, trainings reflect the attempts to strengthen one’s personality.

In the petroleum industry in specific, programs are set to train the personnel who carries the whole burden of this vital sector in the country. We find out that engineers and geologists receive their training opportunities during university years in order to be ready to join the work force on one hand and provide the qualified and needed labor on the other hand.

The academic curriculum does not ignore the importance of practical implementation of what students study at college and that is why internships are tailored for students to receive the adequate experience and get adapted to the work environment and technological applications on sites.

Graduating and joining the work force is not the closure for training phase, on the contrary, it is the beginning of an advanced training phase provided to the petroleum employees.

As a matter of fact, most petroleum companies allocate determined budget for trainings, as they believe that employees’ performance efficiency is an indispensable factor in the circle of production and achievements. This training budget enables the organization of special sessions/workshops where experts invited to enlighten the employees about the latest technologies and updates of the industry in addition to enrolling workers in special technical courses abroad through which they gain more experience needed for the business and attending international conferences to exchange views and expertise.

But, with the current economic crisis, the budget for international trainings was shrunk compared to previous years, yet this cost reduction policy did not downsize the volume of trainings offered locally.

The Egyptian Ministry of Petroleum has adopted the philosophy of enhancing the personnel capabilities and skills through the appropriate training programs and that is why it established a number of training centers among which OGS and Manar Petroleum Training Center, which is located in the building of Misr Petroleum Co., in addition to the terms added by the ministry in any contract signed with investors to provide appropriate trainings to employees to improve their skills to match the international expertise.

Ahmed Anwar Drilling Manager, EGPC

June 2009 / Issue 30

Egypt News EGAS International Bid Round 2008 announced The Egyptian Natural Gas Holding Company (EGAS) has awarded seven offshore exploration licenses, some of which lie adjacent to Egypt’s largest producing gas fields in the Nile Delta, released in the company’s international bid round launched in September 2008.

The closing date for the bids was February 9, but the deadline had been extended for Block 3 until 31 March. Media reports had said only blocks 1, 2 and 3-garnered interest from investors.

This bid round is part of the country’s ongoing efforts to attract foreign investment and hike its gas output, to meet ever-rising demand and boost exports.

“These are high potential areas,” EGAS Exploration Manager Said Matbouly told MEES. “Most of them have high resolution 3D seismic. We expect the bid round to attract a lot of attention from international oil companies.”

This is one of three bidding rounds to be launched in Egypt this year, after EGPC subsidiary GANOPE offered 12 exploration blocks in the Gulf of Suez and the Western and Eastern Desert in March, and with EGPC itself set to launch another. The Mediterranean, and especially the offshore Nile Delta where the new Satis gas discovery was announced in January, is Egypt’s new exploration frontier.

With industry insiders estimating some 50 tcf of yet-to-find gas or more in the area, this bid round looks likely to generate the biggest buzz.

One key issue for foreign firms is the fact that much of the acreage lies in water depths of 1,000ms (3,280ft) or more, which is considered a deep-water play. Given the soaring cost of offshore drilling equipment – there has been an eightfold increase in the cost of semi-submersible rigs in the last four years – it is imperative that successful bidders can expect a reasonable price for any future gas finds, to cover their investments. This underlines the significance of the gas pricing amendments that Egypt’s Minister of Petroleum Sameh Fahmy signed with BG, Petronas, Edison, Eni and Kufpec on 17 September after many months of negotiations, and which were ratified by the Egyptian parliament in June. Poor gas prices have constituted a major obstacle to the development of Egypt’s offshore gas reserves in the past.

“The amendments are important, as they will enable us to continue our investment in the offshore fields,” said Nicole McMahon, Head of Policy and Corporate Affairs at BG

Block No.

1 (A & B)

2

3 (A & B)

Egypt. “They are a response to the significant increase in the capital and operating costs the industry is facing.”

Total is back to the E&P!

Total has been awarded, within the framework of the EGAS 2008 international bid round, the operatorship and a 90 percent stake in Block 4, East El Burullus offshore in conjunction with partner ENEL (10 percent). This award is subject to approval by the competent authorities.

This block, located in the Mediterranean Sea, in the Nile Basin, covers an area of 2,516 square kilometers, and is situated approximately 70 kilometers from the coast in water depths varying from 1000 to 1600 meters. The Nile basin is a prolific area where numerous gas discoveries have already been made.

The permit is for an initial exploration period of four years, and will include 3D seismic surveys and the drilling of exploration wells.

This award brings Total back to Exploration and Production in Egypt, where it was previously present between 1975 and 2001. The company intends to bring its experience of deepwater developments to the country. Total is also present in downstream, through its marketing subsidiary Total Egypte.

In North Africa, Total is present in Exploration and Production in Libya with exploration and production assets located offshore and onshore, and in Algeria with onshore gas production permits.

Enel said the project would help it get direct access to strategic supply sources, while a new co-operation EGAS BID ROUND 2008 PRICE LIST agreement with EgypAvailable Data tian Electricity Holding Company will pave the 2D Seismic 3D Seismic Drilled Wells Block Name way for new projects in energy efficiency and rePurchase Total Line Purchase Purchase .No Survey Name US$ Km US$ US$ newable energy.

N. Gamasa Offshore

N. Tineh Offshore

N. Damietta Offshore

230 Km

3550

18340

1368 Km

634 Km

8800

270 Km2 NW Damietta (1999)

81170

1260 Km2 N Bardawil (2000)

378170

Km2 Seti 460

138170

356 Km2 Gebel El Bahar (1996)

106970

1395 Km2 EDDM (1999)

418670

212 Km2 Gebel El Bahar (1996)

63770

2

5000

4

10000

3

7500

4 (A,B,C&D)

E. El Burullus Offshore

1580 Km

21100

1783 Km2 WDDM (2003)

535070

2

5000

5

E. El Mamura Offshore

1990 Km

26430

1484 Km2 WDDM (2003)

445370

2

5000

6

E. El Dabaa Offshore

7

Sidi Barrani Offshore

2D * 295 Km

4400

2D *

1

5000

Trio triumph in Block 3

Anglo-Dutch super major Shell, its UK peer BP and Malaysian state-run producer Petronas have landed a prize gas block off Egypt’s Mediterranean; the North Damietta offshore Block 3.

The three companies hold equal shares in the consortium.

In a statement, Shell said the concession covered an area of 1600

square kilometers and carries a commitment of drilling four exploration wells over six years.

BG wins block-1

BG Egypt, a subsidiary of UK gas giant BG Group, said it had been awarded an offshore gas block.

“We are delighted to have been awarded a gas block in the latest EGAS bid round,” the President of BG Egypt, Tim Blackford, told the Intergas Conference, last month.

On the conference sidelines, he identified the award as Block 1, North Gamasa Offshore.

Trio triumph in Block 3 Anglo-Dutch super major Shell, its UK peer BP and Malaysian state-run producer Petronas have landed a prize gas block off Egypt’s Mediterranean; the North Damietta offshore Block 3.

The three companies hold equal shares in the consortium.

In a statement, Shell said the concession covered an area of 1600 square kilometers and carries a commitment of drilling four exploration wells over six years.

BP picks up two exploration blocks

BP announced that the Egyptian Natural Gas Holding Company (EGAS) has awarded the company two blocks, Block 2 and Block 3 in the 2008 International bid round on the Egyptian Offshore Nile Delta.

Block 2, the North Tineh Offshore is in a deepwater offshore area of the Nile Delta, located about 60 kilometers north of Port Said City. It covers an area of approximately 2400 square kilometers in water reaching a depth of 1000 meters. BP is committed to drilling three exploration wells over two phases totaling six years. BP will operate North Tineh block with 100 percent working interest.

Block 3, the North Damietta Offshore, which is adjacent to Block 2, covers an area of around 1600 square kilometers and carries a commitment of drilling four exploration wells over six years. BP will operate this block with Shell and Petronas, as previously mentioned.

“Over more than 45 years of working in the country, Egypt continues to grow in importance for BP. Our expertise and latest technologies will be deployed for mutual benefit in these new blocks. BP is very pleased to have been awarded these two blocks, which transform BP’s gas exploration opportunities in the Nile Delta and increase BP’s options for further significant growth. The new partnership that has been created also brings together companies with great technical capabilities to meet the challenges of exploring for high pressure gas resources in the deep water Nile Delta,” commented Hesham Mekawi, President of BP Egypt.

June 2009 / Issue 30

PGNiG revolutionizes the Western Desert

Poland’s gas monopoly PGNiG signed an agreement with the Egyptian General Petroleum Corporation (EGPC) which covers an exploration work over 414 square kilometer tract in the Bahariya region, in the Western Desert.

According to the terms of agreement, PGNIG is expected to drill six wells over three phases.

The polish company will spend $48 million over eight years on its exploration work in the Western Desert, according to Reuters.

Plexus extends its equipment contract with BP Egypt

Plexus Holdings has entered into a contract extension with BP Egypt, to supply its proprietary POS-GRIP® 15,000 psi High Pressure/High Temperature (HP/HT) wellhead systems, together with service and support for gas exploration in the Nile Delta concession.

The value of the contract is estimated at £1.6 million, with revenues anticipated to commence before the company’s year-end June 30, 2009, and continuing into 2010.

Plexus first signed a rental wellhead contract with BP Egypt in 2006, for an exploration-drilling program, which expired at the end of 2008.

Plexus CEO Ben van Bilderbeek said, “We are delighted to have secured this contract extension with BP Egypt, as we continue to consolidate our position as a superior wellhead equipment supplier within the Northern African region. Our aim is to increase the awareness of our unique POS-GRIP technology within the international oil and gas community and eventually secure its position as the industry standard for wellhead design.

Naturally, each new or extended contract takes us one more step forward in reaching this goal, and in order to accelerate this process, we continue to seek licensing or JV partnerships with key industry players.”

Eni boosts Egyptian ties The Egyptian Minister of Petroleum Eng. Sameh Fahmy and Eni Chief Executive Officer Paolo Scaroni sealed a new cooperation pact, which would further strengthen the Italian company’s ties to Egypt.

The pact covers new initiatives, which create a new framework for cooperation between the two parties, Eni said in a release.

Among deals included in the pact, the license for the 100 percent Eni-held Belayim field, in the Gulf of Suez, has been extended for a further 10 years through the end of 2030.

The license extension will enable Eni to implement a five-year, $1.5 billion investment program covering exploration, development and production in the Sinai area.

The planned investment will cover operating costs and work aimed at optimizing production, with the objective of sustaining production volumes in the region and enhancing the reserve recovery ratio.

Eni and the ministry will also jointly evaluate various alternatives for the definition of a commercial framework aimed at allowing development of Egypts deep gas reserves.

The pact will also see Eni and the ministry jointly evaluate hydrocarbons development initiatives in third-party countries, both in the upstream and in the downstream sectors.

A new hit at Geyad-1X

Vegas Oil & Gas has made a discovery at the Geyad-1X exploration well in the onshore North West Gemsa concession in Egypt.

Co-venture Circle Oil confirmed the discovery in the Kareem formation sandstones with the well testing 40° API oil and gas at a sustained average combined rate from two pay zones of 2809 barrels of oil per day (bopd) and 3.04 million cubic feet per day.

The total calculated net thickness of the two pay zones is approximately 29 feet. The upper pay zone identified in the Kareem Shagar Formation is a net 10 feet thick and the lower pay zone in the Kareem Rahmi Formation is a net 19 feet thick. The lower Kareem Rahmi Formation zone has been tested at a sustained rate of 1174 bopd and 1.324 MMscfd. The upper Kareem Shagar Formation zone was not tested separately.

The well is currently being completed as a potential producer with a view to early production.

Vegas operates the North West Gemsa concession with a 50 percent interest on behalf of partners Circle Oil (40 percent) and Premier Oil (10 percent).

David Hough, CEO of Circle, commented on the new achievement, “This successful exploration well is yet more excellent news for Circle and we look forward to its near term appraisal and development. We can continue to be justifiably very happy with the results of the 2008-09 drilling program as a result of which Circle is now gaining due recognition as a growing exploration and production company.”

The rig, Mubarak-1, will move to the Al Amir discovery to start drilling the Al Amir SE-3 appraisal well.

The NW Gemsa concession covers an area of over 400 square kilometers and lies about 300 kilometers southeast of Cairo, in a partially unexplored area of the Gulf of Suez Basin.

The concession agreement includes the right of conversion to a production license of 20 years, plus extensions, in the event of commercial discoveries.

Saipem stays in the Egyptian Waters

It is the science of taking the right cautions and providing a satisfactory work environment in order Adel Younis, QHSE Expert to prevent any possible harm/injury to personnel at work Good health and safety at work are important in all levels; for human terms, they help reduce workers’ pain and suffering, while on the work level, It is also a way of ensuring that enterprises are successful and sustainable, and that economies stands in the long term.

For most enterprises, simple cost benefit analysis will not be necessary or appropriate in this area. Businesses have moral HSE (Health, Safety & Environment) obligations, as well as legal and financial ones. It is impossible to quantify costs such as suffering in monetary terms.

Nevertheless, there are quantifiable costs and benefits involved in HSE, which businesses should be aware of. For enterprises, a good HSE system helps to: • Enhance “brand image” and “brand value” as a socially responsible business (which may affect investors’ decisions)

• Reduce absences and increase the productivity of workers • Increase motivation and commitment of employees to business • Cut down business costs, such as insurance premiums, and business disruption • Enable enterprises to meet and exceed customer expectations.

And if businesses get HSE wrong, the costs of accidents and ill-health can be substantial. For the individual, there are the costs of care, loss of earnings etc. For businesses, disruption, claims for damages, loss of goodwill and loss of confidence in management can sometimes lead to total collapse. For small companies particularly, occupational accidents can have a major financial impact. Research shows that investing in safety and health leads to a better company performance. And, a good working environment is good business.

What are the costs of accidents?

Many employers may not realize the extent of injury and ill health arising from work activities. There are approximately 1.6 million injury accidents each year, causing the suffering of 2.2 million workers. Moreover, 30 million working days are lost each year, leading to a £700 million loss. Estimates of the overall cost to employers vary from £4,000 to £9,000 million a year, some 5-10% of gross trading profit. On a national basis (including Social Security and NHS costs), it is estimated that the total cost to society is some £10-£15 billion per year.

A study undertaken by the Health and Safety Executive (HSE) in the early 1990’s shed light on the practical and financial consequences of accidents at work; the costs for one company totaled 37 percent of annual profits whilst another suffered losses accounting to 5 percent of running costs. It is worth noting that the businesses suffered no fatalities, prosecutions or significant civil claims in the study period, which would have further in-

creased these costs. The cost of accidents can be subdivided into insured and uninsured costs.

Successful businesses are essential to both the national and local economy. Small to medium sized firms in particular develop new ideas and provide essential services on which many larger companies depend. Unfortunately, small firms often tend to have worse accident records than large firms, as a study carried out in the late 1980’s revealed (see diagram).

Where standards are below average, this is often due to a lack of knowledge and expertise rather than a flagrant contempt for health and safety, though regrettably, this is sometimes found.

Over the coming issues of our new QHSE Section, we will deal in more details with one of the HSE management systems functions used in compliance with the Egyptian labors law # 12–2003 and explaining the simplest way of implementing the function within the company.

RWE Dea strikes gas at Sidi Salem In the Disouq concession in the Egyptian Onshore Nile Delta, the well Sidi Salem South East-1x found the Messinian formation gas bearing for the fifth time.

The Disouq concession was awarded to RWE Dea as operator in July 2004. The block covers an onshore area of 5,375 square kilometers within the densely populated farmland of the Nile Delta region of Egypt. The Sidi Salem South East1x well is the eighth well to be drilled by RWE Dea in the Disouq Concession. It is located 11.5 kilometers southwest of the North West Sidi Ghazy-1x discovery, drilled by RWE Dea in 2009. Following the five successful Messinian wells, the sixth exploration well (Disouq-2x) will be drilled to test another potential Messinian structure in addition to the basal Pliocene sand of the Kafr El Sheikh formation.

The exploration well was spudded on April 1, 2009 and drilled to a total depth of 2,656 meters within the Late Miocene. The well encountered a gas bearing reservoir interval with a total of 40 meters column. Formation evaluation and Modular Dynamics Tester Tool (MDT) confirmed the presence of gas within interval of 2,5875 to 2,626 meters. The prospect is based on a seismic anomaly within the Upper Messinian succession, which shows direct hydrocarbon indicators (DHI) conformable with a three-way dip closure at the top of the Messinian succession.

RWE Dea has been operating in the upstream segment in Egypt since as far back as 1974 and, as an operator, can look back on almost three decades of oil production in the Gulf of Suez. In recent years the company made a number of major gas discoveries in Egypt and boosted its activities considerably with the acquisition of additional concessions.

RWE Dea has a total of 15 onshore and offshore concessions in Egypt, across a concession area of about 15,500 square kilometers.

Melrose Resources announced a successful exploration discovery and first production from two new field developments in Egypt. The South Khilala No.1 exploration well has been successfully drilled with the EDC-9 rig to test a prospect located approximately 10 kilometers to the south of the West Khilala field in the El Mansoura concession.

The well encountered 62 feet of net pay in the Qawasim formation and has been flow tested at 17.6 MMcfpd of gas with small amounts of condensate. The mid-case estimate of the discovery reserves is 36 Bcf (on a working interest basis) and the well has already been completed as a producer for fast-track development via the West Khilala field facilities.

The EDC-9 rig is currently being moved to the West Dikirnis field where it will be used to drill a third horizontal development well following the recent success of the West Dikirnis No.7 and No.10 horizontal wells. On a combined basis, these two wells were drilled through over 3,100 horizontal feet of reservoir interval and are currently producing 5,200 bpd of oil.

The South Zarqa and North East Abu Zahra field developments in the El Mansoura concession have been completed within budget and ahead of schedule. The fields have been tied back to the South Batra production facilities using a common 35 kilometer flow line and came on production on

20 April 2009.

The fields contain total proved plus probable reserves of 58 Bcf of gas and 1.6 MMbbls of condensate and are currently producing at 22 MMcfpd of gas and 710 bpd of condensate. The production rate from the fields will increase to approximately 40 MMcfpd over the next four months when additional facilities capacity will become available at the South Batra plant.

The North Dikirnis No.1 appraisal well was also brought on stream on 13 April 2009 through the West Dikirnis facilities and is producing approximately 5 MMcfpd of gas and 150 bpd of condensate.

Production from the new developments, coupled with a strong contribution from the existing fields, has increased Melrose’s Egyptian production at the end of May to 224 MMcfpd of gas equivalent (on a working interest basis).

This comprised some 160 MMcfpd of gas and 10,700 bpd of oil and condensate.

… Hans-Hermann Ecke appointed new General Manager Starting this month, Hans-Hermann Ecke will be responsible as General Manager for the RWE Dea Egypt Branches.

Ecke succeeds Hans-Hermann Andreae, who was appointed to RWE Dea’s Head Office in Hamburg, Germany.

RWE Dea has been operating in the upstream segment in Egypt since as far back as 1974 and, as operator, can look back on almost three decades of oil production in the Gulf of Suez. In recent years the company made a number of major gas discoveries in Egypt and boosted its activities considerably with the acquisition of additional concessions.

OMV: $20 million investments in Egypt

Austrian oil and gas group OMV said it was spending $20 million on an exploration survey in Egypt in the coming weeks.

“We have already committed ourselves to the 3D seismic survey, and that is close to $20 million. We are investing that until 1 July,” OMV Managing Director Hussein Hussein said. “We might see results by the end of this year.”

OMV was awarded an offshore exploration block in the Mediterranean Sea near Matruh in the 2006 Egyptian Natural Gas Holding Company (EGAS) licensing round.

According to a Reuters report, OMV had not been interested in the most recent bid round launched by EGAS in September 2008 and was more interested in the onshore blocks expected in an upcoming Egyptian General Petroleum Corporation (EGPC) licensing round coming up soon.

“We were not really interested in the Nile Delta and more interested in the Western Desert,” Hussein said.

“We are waiting for the EGPC round because it will be onshore,” he highlighted.

EGPC to launch its bid Melrose starts first production from round The Egyptian General Petroleum Corporation (EGPC) plans to launch bid rounds for 15 to 20 exploration blocks two fields in the first week of this month.

“We have been working hard to prepare everything for the licensing round. We are targeting to launch it in the first week of June,” said Mostafa el-Bahr, Vice Executive Chairman for Agreements and Exploration at EGPC. Speaking on the sidelines of the Intergas conference in Cairo, Bahr said the blocks would be in Egypt’s Western Desert and in the Gulf of Suez.

Egypt’s proven natural gas reserves rose to around 76 trillion cubic feet in the last fiscal year, while reserves of crude oil and condensates rose to 4.189 billion barrels, according to the government.

Dana allocates “its largest investment” for Egypt

UK-based producer Dana Petroleum revealed its plans to invest $130 million in Egypt this year, described as “the largest investment”, said Stuart Paton, the company’s Technical and Commercial Director.

“That is about 35 percent of our total group investment internationally. We have about 25 percent of our production here in Egypt,” Paton added.

“We should clearly, in the current investment climate, be looking carefully at where we are going to spend our money. But Egypt is fundamental for us.”

ECG focuses on the HAZOP theory and its applications “Despite the global crisis, we plan to export 35 million tons of oil, gas and petrochemical” Egyptian Petroleum Minister, Eng. Sameh Fahmy

“A reduction in the subsidiary bill of the petroleum goods’ provisions in the new year budget, compared to the current year, as a result of the global decline in oil prices” Minister of Economy and Foreign Trade, Yousef Boutros-Ghali

“We are targeting to reach 20 rigs by the beginning of 2011”

The Egyptian-Chinese Petroleum Co. for Manufacturing Drilling Rigs

Engineering Consultants Group (ECG) held a one-day seminar as well as a three-day workshop last month, led by Eng. Mohamed Wagieh Zaky who holds a PhD in Chemical Engineering from Birmingham University, UK. The one-day seminar was about the aspects of Hazards and the operability study of HAZOP while the workshop focused on the HAZOP theory and its applications.

During the Seminar, Dr. Zaky, Expert in Process Hazards Analysis using all techniques: HAZOP, FMEA and FTA , gave a detailed discussion on the PHA’s and why PSM in addition to a brief history of major accidents that changed the world PSM and its 14 elements risk assessment, HSE Health and Safety Executive UK, Siting studies worst case scenarios, PHA’s at different stages of projects, Hazard Evaluation, PHA techniques and elements, event tree analysis, plant layout design consideration, consequence modelling.

June 2009 / Issue 30

International News Non-stop operations’ wheel in Iraq Over the last month, Iraq has witnessed an active agenda of new agreements and plans signed and approved by Iraqi officials.

The Iraqi government approved the Kurdish plans to export crude oil from fields in the northern Kurdish region through Iraq’s national pipeline.

“The Iraqi Ministry of Oil approved that the Kurdish regional government to export crude oil through the Iraqi pipeline to the Turkish Mediterranean port of Ceyhan,” an official in the ministry ‘s media office told Xinhua on condition of anonymity.

From its side, the Kurdish Regional Government (KRG) announced that exports of crude oil from fields in the Kurdish region will start officially at the beginning of this month.

A KRG statement said that around 60 thousand barrels per day (bpd) would be exported from the Tawke Field.

The exported crude oil from the Kurdish fields will be marketed by Iraq’s State Oil Marketing Organization and the revenue will be deposited to the federal Iraq account for the benefit of all Iraqi people, the statement added.

In addition to the oil exportation commencing this month,

Iraq expects to award the contract to develop the giant Nassiriya oilfield in the southern part of the country to one of three competing international companies this month.

Hussain Shahristani, iraq’s Oil Minister said that his ministry is planning to invite international companies to compete for developing the southern portion of the East Baghdad oilfield near the Iraqi capital.

Italy’s Eni, Japan’s Nippon Oil and Spain’s Repsol YPF have submitted bids to develop the Nassiriyah oilfield, in the Dhi Qar region, said a Dow Jones report.

“We have accepted the technical bids they submitted and we have opened the commercial bids,” Shahristani highlighted.

Iraq had invited the three companies in January 2008 to compete for the field, which has estimated crude oil reserves of around 4 billion barrels.

Shahristani previously has said the field could produce 100 thousand bpd within 18 months from the start of development.

The three would be invited by the ministry for negotiations in order to discuss the model contract, said Shahristani.

The East Baghdad oilfield currently produces only about 17 thousand bpd, and the ministry is

planning to further develop the field, which has estimated reserves of 7.5 billion barrels.

Shahristani did not name the companies that would be invited to compete to develop the southern portion of that field.

Iraq has announced two rounds of bidding, offering 19 oil and gas fields for development to international oil companies with the aim of boosting crude oil output to six million bpd in five years, from about 2.4 million bpd currently.

The ministry has set 29 and 30 June for companies to submit their offers for the six oilfields and two gas fields in the first round of bidding.

Around 32 international companies, including oil majors, are competing for the fields.

“We are still committed to that date,” Shahristani said.

MOL and OMV join Dana Gas and Crescent in Kurdistan Region of Iraq

Weatherford gets $224.4 million Iraqi Oil Deal

Dana Gas and Crescent Petroleum announced strategic partnership agreements with OMV, Austria’s largest listed industrial company and a leading Central European integrated oil and gas group, and MOL Hungarian Oil and Gas Company, which is set to transform the prospects for Iraq’s gas industry to become a major and secure gas supplier to local, regional and European markets.

The groundbreaking partnership is based upon OMV becoming a 10 percent shareholder in Pearl Petroleum, the company which holds Crescent Petroleum and Dana Gas’ upstream interests in the Kurdistan Region of Iraq, in return for a payment of $350 million, which in turn will be re-invested in the development of the project; and with MOL based upon around reciprocal shareholdings of their respective companies: MOL will become a 10 percent shareholder in Pearl Petroleum and Crescent Petroleum and Dana Gas will each become three percent shareholders in MOL. This arrangement unites the Middle East’s leading E&P companies with Europe’s most dynamic integrated companies and the original architects of the Nabucco gas pipeline project.

Badr Jafar, Executive Director of Crescent Petroleum stated “Our joint project in the Kurdistan Region now has the full potential of linking the Region’s significant gas reserves to Europe by pipe for the first time, after satisfying all local requirements of course”.

Helmut Langanger, OMV Executive Vice President for E&P said, “ OMV now has the rare opportunity to participate in the appraisal, development and production of very large gas reserves close to the European market which has significant potential to serve as feedstock for the Nabucco pipeline.”

These partnership agreements between the companies represents a significant vote of confidence in the investment policies and climate of the Kurdistan Regional Government of Iraq and illustrates the companies’ strong belief in the growth potential of the Kurdistan Region of Iraq’s natural gas assets to develop into one of the most significant gas export projects in the region within the next few years. In due course, this will establish Iraq as one of the region’s major gas exporters, once local requirements have been met.

Over the past two years, Crescent Petroleum and Dana Gas have jointly invested $605 million in the successful fast-track development of the Khor Mor gas field and a local natural gas network, including construction of a 176-km natural gas transmission pipeline in record time, efficiently enabling local gasfired power generation plants to provide secure electricity supplies to over four million Iraqis.

Rashid Al-Jarwan, Executive Director of Dana Gas commented, “We are very pleased to have demonstrated that constructive reciprocal shareholdings such as these can cement co-operation in world-class private sector-led integrated energy projects, with a positive global impact.”

Shell, CNPC agree on stakes for Iraq Bid Royal Dutch Shell PLC has agreed on a shareholding structure with China National Petroleum Corp. (CNPC) ahead of a joint bid for a contract to develop an oil field in Iraq.

Shell signed a memorandum of understanding with CNPC last April and is now discussing details of the official joint bid agreement to develop the Kirkuk oil field, said the person, declining to be named.

China Petrochemical Corp., known as Sinopec Group, will also join the consortium. “Shell, CNPC and Sinopec will together own a 75 percent stake if the bid is successful. CNPC will have 15 percent, Sinopec is likely to have a similar interest.”

The remaining 25 percent interest will be held by a state-

U.S Oilfield Service Company Weatherford International Ltd. won a deal worth $224.4 million to drill 20 wells in the Buzurgan oil field in southern Iraq, said Ali Al-Dabbagh, Iraq cabinet spokesman.

He said in a statement following a cabinet meeting headed by Prime Minister Nouri al-Maliki that the cabinet had approved the deal. “The company would drill these wells within two years.”

Buzurgan oil field is in Missan province, which has proven oil reserves of more than two billion barrels. It is currently producing 100,000 barrels per day (bpd).

The new wells would boost output to a total of 130,000 bpd.

Drilling new wells in the field is part of a “crush plan” initiated by the Iraqi oil ministry earlier this year, which aims to boost the country’s crude oil production by 500 thousand bpd within two years.

Iraq, which sits on the world’s third largest oil reserves, produces only around 2.3 million bpd.

Buzurgan is among the producing fields announced by the Iraqi Oil Ministry to international oil companies to develop in the first bidding round.

The Missan Oil Co., which operates the field, announced a tender earlier this year to drill new wells in the field.

Weatherford has been involved in drilling operations in southern Iraq oil fields over the last three years. owned Iraqi operator, according to Iraq’s model contract for the eight oil and gas fields offered to international oil companies in the first bidding round. The winners will be decided in Baghdad June 29-30.

Last month, Jeroen van der Veer, Shell’s Chief Executive, confirmed the Anglo-Dutch oil major was in talks with Chinese firms to be a part of the consortium bidding for an Iraqi oil field.

Iraq is desperately seeking to boost production and renew an industry that has been shackled by years of war, sanctions, underinvestment and violence.

CNPC has already built a relationship with the Iraqi government. In March, it secured the first major oil development deal with Iraq since the fall of former Iraqi President Saddam Hussein in 2003. The $3-billion project is to develop al-Ahdad oil field in Wasit Governorate, south of Baghdad.

June 2009 / Issue 30

Saipem awarded a €200 million onshore contract in Algeria Saipem has been awarded a new onshore contract in Algeria worth approximately 200 million euros.

The Algerian Oil Company Sonatrach awarded Saipem the contract for the engineering, procurement and construction (EPC) of a marine export terminal for the future urea/ammonia plant to be built near the Algerian city of Arzew, about 400 kilometers west of Algiers. The overall work on the project will be completed within 23 months.

Oman: LNG steady at 80% MedcoEnergi denies intent to sell Oman’s output of liquefied natural gas will be steady at around 80 percent of total capacity in 2009 for the second year running, said a senior official.

According to Upstream Online, Oman is short of gas and has struggled to produce enough to meet both domestic demand and capacity to export LNG. Oman produces LNG from three trains with a total capacity of nearly 10 million tons per year.

“We expect to produce 80 percent of our usual full production this year, the same as in 2008,” Brian Buckley, Chief Executive of Oman LNG told Reuters. “There is a general decline in LNG demand globally due to more plants coming onstream, and this may continue for two years until 2012.”

Oman LNG’s plant has capacity to produce about seven million tons of the country’s total capacity and is 51 owned by the government.

Shell owns 30 percent, while France’s Total and Japan’s Mitsui also have stakes.

Saudi starts Khurais field production Saudi Arabia will start production at its 1.2 million barrels per day Khurais oilfield in a few weeks, state-run Saudi Aramco said.

Khurais is the largest of three oilfield projects that would take Saudi total production capacity to 12.5 million bpd by the end of June.

Although it will not immediately add to the sum of Saudi output it is the biggest ever single increment to global production, according to a Reuters report. “... Khurais, a Mega Project, which will add 1.2 million barrels per day of Arabian Light crude oil to the Company’s output in a few weeks time,» said Aramco in a statement.

The other two fields included in Aramco’s program are the 250,000 bpd Shaybah expansion, which would take capacity at that oilfield to 750,000 bpd and the 100,000 bpd Nuayyim oilfield.

interests in Libya

The Board of Directors of PT Medco Energi Internasional Tbk announced that currently the company has no intention or plan to sell its participating interests in Area 47, the Company’s oil and gas asset located in Libya.

This announcement is made to clarify the current news/rumors spread around the online media yesterday, attributed to a Director of our domestic operation PT Medco E&P Indonesia.

As the board of directors has made clear on several occasions with journalists in the last couple of months, MedcoEnergi intends to continue its commitment to complete exploration and undertake development of its interests in Area 47.

Currently, the company has set aside resources to develop its oil and gas discoveries in Area 47. This clarification is made to counter misleading information that may impact the decisions of our shareholders or stakeholders in making investments in or pro-

Sports Figo announces retirement Portuguese legend Luis Figo has announced his retirement from football after Inter Milan were crowned Serie A Champions The title success has prompted Inter Milan’s Figo to confirm that he will stop playing top-level football at the end of the season, saying that it is the right time to end his glittering career.

He also added that this is the first time to celebrate before playing and that it is the best way to end.

Former Portugal skipper Figo was about to retire a year ago when he had disagreements with then Inter boss Roberto Mancini. However, the 36-year-old backtracked on his decision after the installment of his fellow countryman Jose Mourinho as head coach, and stayed in action for another season.

Reports have linked the former Barcelona and Real Madrid schemer with a move to Major League Soccer, but Figo suggests it is unlikely he will head to the United States.

“I will not play again at the highest level and I will most likely not accept any offer,” he said.

“Only if something special emerges, and it is from outside of Europe, but it is not likely,” he explained.

Figo, who won 127 Portugal caps, started his professional career at Sporting Lisbon in 1989, and then moved to Barcelona in 1995 and stayed with the Catlans for five years. Afterwards, He had another successful spell in the Primera Liga with Real Madrid, before signing for Inter in 2005. The most prestigious personal accolades he claimed were the 2000 European Footballer of the Year award, and

the World Player of the Year in 2001.

Figo also won a FIFA World Youth Championship in 1991, the same year he made his senior debut against Luxembourg on 16 October 1991, in a friendly match that ended 1-1 when he was only 18 years old. He has performed at the highest level ever since, making appearances at UEFA Euro 1996, Euro 2000, and the 2002 and 2006 FIFA World Cups. He announced his retirement from international football following the UEFA Euro 2004 final defeat by Greece, scoring 31 goals. However, in June 2005, he reversed his decision and returned for the 2006 World Cup qualifying wins against Slovakia and Estonia.

Despite having no trophies to show for the “Golden Generation”, Figo managed to bring the team to their first World Cup semi-final since the Eusebio era in 1966.

Nadal’s defeat in Madrid Roger Federer inflicted a rare defeat on great rival Rafael Nadal, winning 6-4 in the final of the Madrid Masters

The world number two took advantage of a performance from the Spaniard that lacked its usual flair just a day after his four-hour marathon semi-final against Novak Djokovic.

It is not only Federer’s first title of the season, but it is also the second time to defeat Nadal on clay-court in 10 meetings - ending a run of 33 consecutive wins on clay for the left-hander in the process.

Federer claimed a break of serve in each set to hand Nadal only his fifth defeat on clay in 155 matches since 2005, and denied the world number one a hat-trick of Masters Series titles after he won in Monte Carlo and Rome.

The Swiss broke the deadlock in the ninth game of the

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first set and clinched it in the next game when serving out to love on his first set point.

He then led 4-2 in the second and although Nadal had two break points to level at 5-5, he sent first a forehand and then a backhand just wide of the tramlines.

The Spaniard, who will bid for a fifth successive French Open title later this month, saved the first match point against him, but Federer sent down an ace to clinch a win that is sure to give him much satisfaction.

“I thought I took all the right decisions today and in the end it looked pretty comfortable so it was a perfect win for me,” Federer said.

“I am very, very happy that I stayed positive and I got the win I needed badly because I have had some rather bad losses this year,» he added. “It’s very satisfying.”

On the other hand, Dinara Safina won her second claycourt title in as many weeks with a 6-4 6-2 victory over Caroline Wozniacki in the final of the WTA Madrid Open.

The world number one, who defeated Svetlana Kuznetsova to triumph in Rome a week ago, demolished her Danish rival to record a comfortable straight sets victory.

Wozniacki missed an opportunity to break Safina’s serve in the second game of the match and was made to pay in some style.

Jose’s departure The most successful foreign coach in the history of Egyptian football, Manuel Jose announced his resignation as Al-Ahly Coach After guiding the Cairo team to a glut of trophies, including four African Champions League titles, the former Benfica and Sporting boss will leave the club where he was idolized at the end of the season to become the new head coach of Angola.

As soon as the news of Jose’s resignation broke online, Ahli fans started surrounding the club, calling on Jose to remain with the team.

“Leaving Al-Ahly was the most difficult decision I had to take in my life. The only reason I did not make a similar decision in the past was because of the Ahly fans,” said the 63-year-old Portuguese.

“My phone has not stopped ringing since I decided to leave. I am getting lots of text messages from Ahly fans asking me to stay, people stop me in the street and ask me to stay, but it is very difficult for me to do so now…

The main reason for leaving Al-Ahly was my personal life. I am 63 now, and working for Al-Ahly puts enormous pressure on the coach, which I cannot tolerate at my age. I saw my old father, who is 93, only once last year, and I saw my son only twice.”

He added, “Perhaps I am growing old! But I think, with all this pressure, it is time for me to leave Al-Ahly.”

Jose has been named the new coach of Angola, and while not returning to his homeland, the coach explained how the position will make his personal life a lot easier.

“Life in Angola will be much easier for me. They all speak Portuguese, the lifestyle itself is similar to Portugal, and I will not have to spend a long time in Angola without going back to Portugal, especially as many players in the Angolan national team play for Portuguese clubs and I can follow them easily when I am in Portugal.

“It is not the first time I have thought of leaving AlAhly, but the Ahly fans were always the main reason I did not leave. They are the main reason for my success here,” he added.

Till the minute of writing this story, the club did not announce the name of the new head coach. Moreover, according to sources, Al-Ahly was busy studying resumes of foreign coaches, with Luthar Matheus coach of Germany on top of the list of candidates as well as an unnamed Croatian coach.

Even though the club has suffered recent setbacks, Jose is considered the most successful coach in the history of the club. He guided the club to 18 titles in his two stints in charge of the Cairo side.

Jose joined Al-Ahly for the first time in 2001 and won the Champions League and the African Super Cup before returning to his home country to coach Belenenses.

He returned to Al-Ahly in 2003.

Overall, he led Al-Ahly to four national league titles, four African Champions League crowns, two Egypt FA Cups, four Egyptian Super Cups and four African Super Cups, plus a bronze medal in the 2006 FIFA World Cup in Japan.

According to sources in the club, Jose was offered 150,000 Euros a month by the Angolans. In Al-Ahly he was making 83,000 Euros a month.

June 2009 / Issue 30

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InFocus Technology advancement, the engine for E&P Despite the slight increase of oil prices, swinging at the $60 per barrel edge, after the dramatic fall down, service companies have modified their pricing strategy to cope with the current market conditions and ensure the spread of their technologies

By Tamer Abdel Aziz Reducing the prices of services and technologies has encouraged the industry players to seize the opportunity and boost their exploration and production activities, while at the same time cutting down their costs.

The petroleum industry services and technologies have always been labeled as expensive, yet needed, factors to ensure the efficiency and success of E&P operations. Therefore, lowering prices has attracted new investors to expand their operations in the country and strengthens the E&P wheel. No one can undermine the vitality and necessity of technology nowadays, which paves the exploration route to reach new “unattainable areas or drilling depths”.

“The technological advancement, which we have witnessed lately, has contributed to a great extent to develop the process of the 3D seismic research, that used to be 2D one, enabling more accurate data of reserves volume of each well,” a petroleum expert said. Over the last 10 years, more various drilling techniques have been developed, thanks to this technological advancement. For instance, new techniques such as the horizontal drilling have contributed to increase the drilling depth up to 25 thousand feet.

He added that there is a harsh competition between the Chinese and the American rig manufactures, stating that the Chinese are invading the market with unprecedented technologies in their rigs, though they are of a less quality compared to the American rigs. However, the Chinese rigs are gaining more popularity and are utilized worldwide. In Egypt, the Ministry of Petroleum has strengthened its ties with China through the establishment of the Egyptian Petroleum HH for Rig Manufacturing Co. (EPHH) in 2007, which produced its first 2000-HP rig Mubarak-1 in 2008 in addition to five more rigs.

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Asked about the reason for preferring the Chinese rigs over the American ones, the petroleum expert highlighted that the daily rent rate of a Chinese rig, able to drill to up to 15 thousand feet, counts for $24 thousand, while the daily renting rate of an American rig costs $50-65 thousand, with a double drilling depth, 30 thousand feet. “However, most of the international companies operating in Egypt seek the rent of rigs characterized by their high quality and up-to-date technologies regardless their high costs in order to ensure better production efficiency… though the current economic recession puts heavy economic burden, these companies would decrease their production activities and would never accept the low-quality rigs.”

Technology has become an indispensable factor for enhancing the exploration and production operations and a mean to boost production and calculate the volume of reserves at each well. Having such a big role, the laws of Health, Safety and Environment (HSE) set regulations for site preparations necessitate the usage of special technologies whether installed in equipments or production facilities, which are needed to ensure the safety of personnel and avoid any possible violation of the environmental decree before conducting any operations.

As a matter of fact, the obstacle hindering the technological advancement in Egypt lies in the lack of investments, which varies from one type of drilling to another. For instance, the offshore drilling is more costly compared to the onshore and that is why the Ministry is currently opting to lure more foreign investments to intensify the E&P operations in the offshore fields, which generate more promising production records. Fortunately, due to the terms of agreements signed between the ministry and investors determining specific time plan

for E&P, most foreign investors bring latest technologies into fields to speed up his E&P wheel and get the most out of each drilling operation without exceeding the deadlines.

Eng. Medhat Gendy, General Manager for East Mediterranean Area, KMC Petroleum Services, declared that technology is an added value to the petroleum sector in all aspects. “Some discoveries were hit in areas explored 40 years ago, thanks to technology advancement which contributed to the re-exploration of old areas in the country.”

Gendy added that recognizable production quantities were generated and more reserves were proved through the use of technologies, which at the same time help protecting the environment from pollution. For example, new technologies have been developed to minimize the negative effects of drilling fluids on the environment, noting that these fluids are one of the primary services in the drilling sector and known to cause damages to the surrounding environment. “KMC has been already utilizing this new technology in accordance with Petrobel and El Paso companies… and GUPCO to join by next month.”

According to Gendy, this drilling fluid technology paves the way for exploration in new areas, such as the agricultural areas of Delta and touristic sites in the Red Sea and Sinai, where drilling activities were banned to protect the environment. The development of seismic research and directional drilling techniques contributed to the re-exploration of areas and wells, where results were negative in the past.

Though the new opportunities this technology offers, the cost and finance remain the barriers facing its growth, confirmed Gendy. “Unfortunately, the economic recession affecting all industrial sectors worldwide led companies to use the second generation technology instead of the first one as means to cost reduction, especially that oil prices have dramatically fallen down,” he added.

Service companies had to modify their pricing strategy to cope with the economic deficit, which has encouraged some companies to seize this opportunity of low service prices and intensify their activities. “Our company brought approximately $8-million drilling equipments to the local market over the past six months, which generated high revenues in return despite the economic crunch.”

Ahmed Tarek Mahmoud, Drilling Manager, Rashid Petroleum Company (Rashpetco) said that the evaluation of technological developments in Egypt is measured on individual basis; service companies development’s evaluation is done through their operation performance on daily basis and by end of each individual project, by measuring the impact of their new technologies which were applied, and its impact on the final cost and time of their project.

“Unquestionably, the company considered the modification of its pricing strategy and started controlling costs, because all the operators in the region reduced dramatically their activities,” highlighted Mahmoud.

He further added that the company still provides its latest services to the Egyptian petroleum sector despite the negative impacts of the economic crisis. “Our latest services are the Portable NORM decontamination units & Jet Pump which aim at enhancing heavy oil production in addition to other special offshore early production facilities.”

June 2009 / Issue 30

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Interview BG’s 20-year journey in Egypt Seizing the occasion of celebrating 20-year partnership in Egypt, BG Egypt President Tim Blackford takes us to the company’s long and outstanding journey, throughout which this leading British-based company has been crowned as one of the biggest investors in the country and an indispensable partner of success

By Yomna Bassiouni

Operating in the Egyptian market for 20 years, how do you evaluate the development of the natural gas sector in the country?

Egypt has moved rapidly and skilfully over that period from a domestically focused producer to an increasingly important player in the international market for liquefied natural gas.

The Minister of Petroleum has been working hard to develop the domestic market and expand the gas network, which has reached Upper Egypt this year. Also, the Ministry makes the best use of its energy resources. Moreover, there is a structural reform, taking place in Egypt’s petroleum sector.

A further key development is deregulation. We support the government’s moves to encourage direct sales of gas to industrial users. Opening up the market in this way will help to strengthen the market and the Egyptian economy.

Egypt is key to our business. It is one of our prime locations for sustained investment and long-term economic, environmental and social development. Over the last 20 years, together with our partners, we have invested more than $6 billion in upstream and downstream operations in Egypt.

BG has a long journey in Egypt that has been so successful, especially with the high cooperation we have with the Egyptian government. Our journey in Egypt has been exciting and rewarding. We have been fortunate, indeed, to find in the government a wise and patient partner, able to appreciate the long-term perspective, which our industry requires.

We established ourselves as one of the biggest investors in Egypt’s growing natural gas industry – certainly the largest British-based company – and one of the largest foreign direct investors in the country currently accounting for some 15 percent of FDI. At BG Group, we are proud of the role we have been able to play in helping the government develop and deliver its coherent, strategic vision for the Egyptian energy industry.

Over this long journey, what were the major achievements of this partnership?

The results of our joint efforts speak for themselves: gas production has tripled since the 1990s, enabling Egypt to

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build a global leadership role in LNG while continuing to grow its domestic gas market. Our sustained exploration and production success and our access to export markets for LNG have made BG Group a key partner in both the national and international strands of Egypt’s natural gas industry.

Today our operations account for more than 40 percent of the country’s total gas production, and the LNG business, we have helped to build, generates more than one billion dollars a year for the national economy.

In your opinion, what is the future of gas industry in Egypt?

I am expecting more expansion for the gas industry. Egypt is becoming a reliable domestic market and a more sophisticated one, for instance the EGPC and EGAS have now done an outstanding job of striking this balance. Last year’s specific roles that serve the Ministry strategy to develop the changes to gas pricing are an important step in the right direction and will be key to the sustainable future of the industry. gas industry.

Moreover, with global demand for LNG projected to double Have you postponed or cancelled any project due to by 2020, Egypt is well–placed to continue to make substantial the current economic crisis? gains by exploiting its strategic geographical position close to No, BG Egypt has not changed, altered or cancelled any high value markets in Europe, Asia and the United States. plan. It is important to remember that the global financial As we look to the future, we look forward to playing our part crisis has put pressure on all the players in the gas chain. in shaping the new blueprint for Egypt’s sustainable energy future. Together, we want to realize the full potential of Egypt’s Companies are seeking to target efficient exploration and proenergy resources, playing our part not just in the upstream and duction; governments need to maximize their share of international risk capital in an midstream, but also contributing our knowledge and expertise to BG Group become one of the biggest inves- increasingly competitive marketplace. In this conEgypt’s supply-side energy strattors in Egypt’s – certainly the largest British- text, issues such as pricegy. We are committed to being part of Egypt’s energy future for based company – and one of the largest foreign ing, exports, subsidies, and streamlining of prodirect investors in the country currently acthe long haul, but to do so we realcedures are of critical imcounting for some 15% of FDI ly do need fiscal stability, security portance to us all. around receivables and strengthIs there any new ened and streamlined governmenTogether with our partners, we have invested project/investment to tal processes, to ensure that new more than $6 billion in upstream and downopportunities are progressed as be announced soon? stream operations in Egypt efficiently as possible.

With our partners, we decided to sanction a furWhat do you think of exportther $1 billion investment this year and potentially a $2.5 biling the Egyptian gas to Europe via Turkey?

Currently, Europe is seeking the diversification of its gas lion project commencing next year. Both will extend our gas supplies in order to maintain its energy security. And, as I supplies to the domestic market and existing export contracts.

We were also delighted to be awarded a further new exsaid, Egypt is making the best use of its energy resources, ploration block, Block-1 in the North Gamsa offshore, in the whether on the domestic level or the export one as well. So, latest EGAS international bid round 2008, announced last this is a good opportunity for Egypt, especially that Europe is seeking the countries enjoying the highest value of gas. I month, which hopefully in the fullness of time will enable further investments and developments. think this is a positive step for Egypt.

And, with our production volumes continuing to grow, we Egypt has the reserves base to continue to answer growing domestic demand and to provide vital export revenues. But are continuing to invest in our businesses here and remain targeting value in a cost-conscious international market re- alive to new opportunities in both the upstream and downquires careful management, and the Egyptian government has stream sectors.

June 2009 / Issue 30

“A marked drop in financing activity!”

William Stevens, Global Head of the Upstream Oil & Gas, Director of Resources and Energy Group, HSBC Bank sheds light on the financing strategies and the projects calendar in 2009, in the shadow of the current credit crisis What is HSBC’s projects calendar for 2009 and has it been affected by the economic crisis compared to last year?

I would say that for projects, which are highly capital intensive where there is a requirement for a substantial amount of debt over longer tenors, we have seen a marked drop in financing activity since 2008.

Refineries and petrochemical projects have also become harder to finance, as concerns on a potential supply glut are compounded by concerns on slowing global demand.

This does not mean that raising long-term financing for midstream and downstream projects is impossible in the current market, only that lenders are being highly selective, are tightening terms and conditions, and are prioritizing their core clients. Further, lenders are requiring a considerable premium to margins and substantial ancillary business to support the allocation of capital.

As far as HSBC is concerned, we have a number of active advisory mandates relating to downstream projects, which are likely to come to the market as liquidity returns, and refinery/ petrochemical margins improve.

Reduced activity in midstream and downstream has been offset by a strong deal flow in the upstream sector.

In Egypt, how far did the crisis affect the financing of petroleum projects?

Since the credit crisis began to take effect, there has been no major proof of illiquidity with respect to the financing of projects in Egypt. However, sponsors and financial advisors alike are cognizant of the challenges of raising debt and are structuring and pricing their facilities accordingly.

Some sponsors are sitting out the crisis due to a combination of factors including: (i) the need for cost re-evaluation amidst movement in oil prices, (ii) weighing up the benefit of revisiting the front end engineering design to add more sophisticated processes to ensure higher net margins, and (iii) the cooling international demand for products.

As far as upstream oil and gas financings are concerned, there is likely to be greater activity as lenders are attracted by higher returns, the promise of greater ancillary business, the shorter tenor of these transactions and the fact that upstream independents tend to refinance often as they replace reserves.

Are you planning to expand your investments by financing oil and gas projects in Europe?

We are active in upstream oil and gas financings in Europe as well as in other parts of the world. My remit since I joined HSBC has been to collate the existing book and develop a comprehensive strategy for future Reserve Based Lending activity at the Bank. We have now supported clients in seven key transactions in the last two years, most notably for Premier,

where we co-led the acquisition finance of Oilexco’s North Sea assets, Apache, where HSBC co-led its $350 m facility in Australia, for PICO, where HSBC provided a $100 million bilateral facility in support of its Egyptian assets, and Salamander Energy, where HSBC acted as MLA for the $200 million financing of its development assets in Indonesia and Thailand. Most recently, we joined a bridge facility for Cairn plc, supporting its subsidiaries assets in India, and acceded as MLA to an existing facility in favor of Melrose Resources, a well-respected oil and gas independent with an extensive presence in Egypt.

In what way does financing upstream differ from regular financings?

Reserve-based finance is where a loan is collateralized by the value of the reserves of a company or project and where repayment of the debt comes from the revenue derived from sale of the field or fields’ production. Such facilities permit oil and gas companies to raise debt against future production, allowing them to meet ongoing working capital requirements, fund acquisitions or provide for development costs associated with non-producing assets. Structures are typically bespoke to take into account the specific nature of the asset portfolio of the borrower in question.

How do you determine the appropriate debt amount for your clients?

Essentially, borrowing availability is limited to the lesser of the forecast discounted cash flows from the oil and gas assets over the loan life divided by a cover ratio (in this case, the Loan Life Cover Ratio) and the forecast discounted cash flows over the asset life divided by a cover ratio (in this case, the Field Life Cover Ratio). Further, borrowing availability is restricted by a reserve tail – typically Lenders give no value to any cash flow beyond the point at which less than 25 percent of the economic reserves are left in the fields.

The reason independents benefit from Reserve Based Lending Techniques is that the facility is highly flexible, acting as and incubator for smaller oil and gas companies. In essence, the amount the borrower can draw is re-determined every 12 months according to revised production forecasts, and every six months according to capital and operating cost assumptions, as well as economic assumptions, including prevailing oil and gas prices. The principle is that for as long as the borrower is able to replace reserves or if commodity prices rise, it can continue to borrow more within a pre-agreed facility limit.

How do you see the future of upstream oil and gas projects over the coming two years?

With more certainty over oil prices and falling development costs, there is a strong opportunity for independents of criti-

cal mass to raise financing against their reserves. Tenors are typically up to seven years for upstream financing, thus the level of liquidity for this type of transaction is likely to remain healthy. To tap this liquidity, Borrowers need to demonstrate a strong management and technical capability, fully funded capex plans and a strong track record of reserve replacement.

Are there any new projects or investments for HSBC to be announced soon?

We have a strong pipeline of transactions for 2009 and in an ideal world I would like to work on most of them. We must however remain client focused and strategy not transaction driven, no matter how strong certain opportunities may seem.

One key transaction we are currently working on is a new facility for PICO in Egypt.

What are the major countries HSBC is focusing on to invest in upstream projects?

In line with the general strategy of HSBC, our target clients are likely to have a core focus on emerging market risk, particularly in areas in which the bank is committed to expanding its credentials, namely N. Africa, S.E Asia, W. Africa and the Middle East. Notwithstanding this, should the opportunity arise in OECD areas, particularly the North Sea, we are considering on a case-by-case basis.

What is HSBC Egypt play role in HSBC’s global oil and gas investments?

The Cairo office plays an essential role in the development of our oil and gas business in Egypt. We are lucky to benefit from strong domestic Project Finance arranging and advisory expertise with support from our offices in London and the Middle East. What HSBC Egypt also provides is strong onthe-ground client contact, an understanding of the key independents operating in the country and the nature of the fiscal regime underpinning the assets.

Many industry players predict a big hike in oil prices. Do you agree with this analysis?

The market is characterized by over-reaction at present.

Any spike will be short-lived and I agree with the in-house HSBC view that oil prices will settle at $75 per barrel by the end of 2009.

Are you considering renewable energy as a key part of your business going forward?

HSBC has an exceptionally strong renewables advisory and lending business. A dedicated team in London handles all our renewables activities, with a particular focus on the wind and solar sectors. With respect to oil and gas transactions, it is important to note that for all of our investments we conduct thorough due diligence and ensure that they conform to the Equator Principles regarding social and environmental standards.

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Political Review Obama picks Egypt as speech venue U.S President Barack Obama will visit Egypt this month to deliver his promised address to the Muslim World, culminating a long and politically sensitive selection process by choosing Egypt as his venue Egyptian President Hosny Mubarak has cancelled his visit to the U.S scheduled last month due to the death of his grandson, the White House spokesman said.

“The president and first lady pass their condolences to President Mubarak and his family on the tragic and untimely death of their grandson,” Robert Gibbs, White House Press Secretary, told reporters.

On the other hand, President Obama planed to deliver a speech in Egypt on U.S. relations with the Muslim World when he sets out on an overseas trip early this month.

Obama had promised to make an Arab country the setting for a major speech on U.S. relations with the Muslim World. Asked about the reason behind choosing Egypt, Gibbs said the country in many ways represents the “heart of the Arab World.”

U.S support for Mubarak and other Arab leaders has been interpreted across the Middle East as a hypocritical element of American foreign policy, par-

ticularly over the past eight years, during which the Bush administration made promoting democracy the centrepiece of its diplomacy in the region.

But Gibbs said that the selection of Egypt for the June 4th speech should not be viewed as an endorsement of Mubarak’s government. He said that Egypt “in many ways represents the heart of the Arab world” and noted that “the issues of democracy and human rights are things that are on the president’s mind, and we will have a chance to discuss those in more depth on the trip.”

“This is not a speech to leaders,” Gibbs highlighted.

“This is a speech to many, many people and a continuing effort by this president and this White House to demonstrate how we can work together to ensure the safety and security and the future well-being, through hope and opportunity, of the children of this country and of the Muslim world.”

Three key factors have contributed to millions of Muslims’ bitterness toward the U.S; the Bush administration’s war in Iraq; detention and interrogation policies (embodied by the military prison at Guantanamo Bay, Cuba, and the prisoner abuse at Abu Ghraib) and a tilt toward Israel in its conflict with the Palestinians.

The U.S is placing great importance on improving relations with Egypt and with veteran Egyptian Presi-

By Ahmed Morsy dent Mubarak, after tensions during the Bush Administration.

On the other hand, the Zionist lobby in Washington launched an intensive campaign to oppose the decision made by Obama to visit Egypt where he will address the Islamic World.

Bush administration officials said that this campaign will have no effect at all because the choice of Cairo came after a study of all the proposed alternatives, including the Indonesian capital, Jakarta, the largest Muslim country in terms of population and the country where Obama lived part of his childhood.

Western experts said that Obama kept in mind the U.S interests before anything else, when he chose Cairo to direct his speech to the Islamic world to achieve the greatest possible spread of the impact of his speech.

Oil vs. tourism in the North Coast The wheel for exploring new areas to boost the oil production in Egypt has been searching in every corner. Lately, the North Coast Area, used to be known as a magnificent touristic spot, has attracted the focus as a new virgin area for oil and gas E&P In his recent visit to the sites of oil fields situated in the Western Desert, President Hosni Mubarak asked the Minister of Petroleum Eng. Sameh Fahmy about the possibility of having oil and gas locations in the Mediterranean region, especially in the northern coast. Despite the Minister’s clarification that no attention has been given to this area in order to avoid any negative effect on tourism, the President commented directly, “if the oil would have higher yields and greater income than tourism, then it is time to prioritize oil over tourism”.

Certainly, with the increased oil and gas discoveries in the Mediterranean Sea area, the possibility of having the North Coast beaches in international bid rounds to discover oil and gas is linked to many conditions and vital considerations. Firstly, evaluating the volume of oil or gas reserves to guarantee that the discovery brings commercial production.

Secondly, in case of achieving the first condition, the international oil operating companies should work within the obligations of taking into consideration the preservation and protection of the en-

16

vironment as it is happening now in the Red Sea, country’s top hard currency earner, has started to especially near the touristic villages and resorts. feel the pinch of the global financial crisis, with Today, one of the hot spots of the national tour- hotel bookings down 30 percent in January 2009 ism in Egypt is the North Coast, specifically the compared to the same month in 2008. However, area between Alexandria and Marsa Matrouh. the Egyptian central bank said in December 2008 Egypt’s Mediterranean Coast is regarded as the that revenue from tourism in the first quarter of the 500-kilometer shoreline spanning from the resort 2008/09 fiscal year, which started in July, rose 15.2 town of Agami just West percent to some $3.3 of Alexandria, until the billion. remote village of Marsa On the other hand, the the surplus of the domestic oil sector in surplus of the domestic Matrouh approaching the 2008-2009 is 33 billion dollars and repre- oil sector in 2008-2009 Libyan border. sents 66 percent of the total surplus of In sum, although peis 33 billion dollars and troleum, remittances, the represents 66 percent of the government economic bodies Suez Canal and tourism the total surplus of the were crucial resources to government economic Egypt’s economy and balance of payments, their bodies. Hence, the equation between tourism and long-term potential was limited. Oil prices fluc- oil will not be a piece of cake for the government. tuated, and Egypt could deplete its exportable oil Whether they should concentrate by choose one within the coming twenty to thirty years, if there of them and losing the other sector or balance beare no new discoveries. tween them and make the extreme profit by giving As for tourism, Egypt’s tourism industry, the no priority for one side over the other.

June 2009 / Issue 30

New bid-rounds for old potentials

The first-ever Afghanistan bidding round attracts major players

The Ministry of Mines, on behalf of the Government of the Islamic Republic of Afghanistan, launched the First Afghan Hydrocarbon Bidding Round 2009 to initiate hydrocarbon exploration in Northern Afghanistan.

Northern Afghanistan has been divided into 11 blocks, of which three were offered in this licensing round. The three blocks are Jangalikalan, Juma-Bashikurd and Kashkari; all of which have known hydrocarbon-bearing accumulations. Most of the fields in these blocks were discovered by the Soviets in the 1970s excluding the Angoat oil field, which was discovered in 1959. Except for the Angoat and Kashkari fields, the rest of the fields in the blocks on offer (Jangalikalan, Juma and Bashikurd gas fields and Aqdarya oil field) have yet to commence production. The Angoat field is the only oil fields currently on production, though the Kashkari field produced briefly in the 1980s.

Companies are required to submit an Expression of Interest (EOI) to pre-qualify to participate in the bidding round, by 15 June 2009. Besides being eligible and qualified as per Articles 30 and 31 of the Hydrocarbons Law, bidders are required to have a market capitalization of at least USD 100 million for Kashkari block, $150 million for Juma-Bashikurd, Jangalikalan blocks and $200 million for all three blocks. Additionally, applicants must have experience in production of sour gas in order to bid for the Juma-Bashikurd and Jangalikalan blocks. Successful pre-qualification applicants will be announced on 1 July 2009.

“We met different companies in different cities. We saw representatives from Total, Shell, BP, ExxonMobil, ConocoPhillips,” the country’s Minister of Mines Ibrahim Adel said on the sidelines of the final road show in Singapore.

However, interest was muted at the Singapore road show. While the turn-out was big in London, Houston and Dubai, where the world’s major oil and gas companies have large teams, only a handful of companies attended the Singapore event.

“This may be because Singapore is more the place for independent companies. And these companies are not really out looking these days,” a consultant who was attending the road show told the news agency.

Officials from China’s Sinochem, Malaysian heavyweight Petronas, which has interests in nearby Turkmenistan, and small independent Australian outfit Twinza Oil, turned up at the Singapore roadshow.

Wells have been drilled on the three blocks, with output at one of the oilfields at 12,000 to 13,000 barrels per day (bpd), when it was in production for a short six-month period.

Kashkari’s proven reserves stand at 64.4 million barrels, with possible reserves seen at a higher 143.8 million barrels.

Juma has proven reserves of 33 billion cubic metres, while Jangalikalan holds more than 19 Bcm. But security concerns and the lack of data could dampen interest in the round.

Afghanistan currently produces about 200 million

cubic metres of gas per year, against up to 5 Bcm during the Soviet era.

Analysts said investment in the country’s unproven hydrocarbons market made little economic sense near term, but long-term investors could see rewards if and when a proposed regional pipeline came on line.

Last April, Turkmenistan, Afghanistan, Pakistan and India signed an agreement for a $7.6 billion pipeline to bring natural gas south from the Caspian to the Arabian Sea.

17

Technology Weatherford Fracturing services Now in Egypt!

After the outstanding success in the US, Argentina, Mexico and Russia, Weatherford Fracturing service is now in Egypt.

Weatherford’s Stimulation & well services Technologies group is committed to providing the highest level of safety, service follow in the Weatherford tradition of service excellence and professionalism.

from reservoir to wellhead. Weatherford team could perform successfully all kind of high permeability, HPHT, highly deviated and multistage jobs. Weatherford has a long existence in Egypt and now adding the hydraulic fracturing. We determine to face the challenges and work with the companies in Egypt to boost quality and enhance reservoir productivity.

The Best Equipment

Fracturing Technologies

Weatherford brings to the table a complete equipment offering that expedites rig-up and minimizes time on location. All of our equipment is new and

is the best available in the industry. This advantage allows the highest level of servicereliability as the standard, without the high incidence of breakdowns that often plagues mature equipment.

Enhancing well productivity and creating client value are hallmark Weatherford competencies. Stimulation is a natural extension of Weatherford’s existing core capabilities. Today we are creating a new benchmark in hydraulic fracturing services by answering our clients’ call for high-quality service and efficiency in conjunction with a focus on advanced technology.

We are taking the opportunity to round out our core service offerings to provide integrated solutions

18

• Safety and Quality Level

Weatherford is implementing the highest QHSE standards and standard operating practices on all jobs.

SPM Safety Restraint System used on all frac treatments to ensure the safety of our operation. We always drive better quality and do the Tracking provides continual improvement plus post Job follow-up.

• The People and technology Factor Buying the best equipment provides a good starting platform, but maintaining it and operating it properly requires competent anddedicated professionals.

Developing the highest performing, state-of-the-art stimulation fluids technologies enables technical excellence, but only if field personnel have the knowledge and expertise to mix and blend accurately. Our

human resources include skilled chemists, knowledgeable engineers and experienced service technicians–handpicked to design the right solution and execute the job efficiently, on time and right the first time.

Our desire to build the best stimulation company in the business has attracted some of the most talented people in the industry who collectively strive to be the best of the best.

• Chemical Research & Development Center (San Antonio, Texas) Having the right chemical technologies is only half the equation. The other half is the knowledge and ability to properly mix the individual components in the field so that the frac fluid in the tank performs as it did in the lab. Weatherford’s stimulation crews are staffed with operators and technicians who are experts in blending the fluid on location so that it has the performance characteristics that the chemists and engineers designed it to have. Providing the right chemical technologies is made possible using Weatherford’s own proprietary Engineered Chemistry products.

June 2009 / Issue 30

19

In Review Renewable Energy Era In 2008, record oil prices caused a big push for clean energy. Demand for Polysilicon drove prices up and producers’ share prices went along with them. Those who controlled the bulk of the supply chain and buffered themselves against spikes were able to make the most out of the panel (price run up). Then oil and the global economy fell off a cliff

By Mostafa Mabrouk Economic Consultant, Ganope According to a report by the International Energy Agency (IEA), it stated that the world would need to invest $45 trillion in order to cut greenhouse gases in half by 2050. When the G8 ministers of environment backed this 50 percent target and did call for it to be officially endorsed, that means any major cuts will require heavy investment in renewable energy resources. The IEA prepared a report, which unfortunately came off as a bit questionable, the study stated that the world will need about 1400 nuclear power plants in order to meet its 50 percent reduction target. But, how would they build 1400 new nuclear power plants while the world have barely enough uranium for the current operations?

Last June, the CEO of Cameco Corporation, the largest uranium producer in the U.S indicated in a press conference that over the next decade, the demand for uranium is expected to increase by three percent annually, but the uranium mining will not be able to keep pace with demand increase. The demand for uranium will exceed supply for the next eight or nine years.

Wind Energy Stocks As a matter of fact, the domestic wind energy market is currently dominated by overseas players. With the exception of General Electric (GE), foreign competitors, mostly from Europe, have taken a strong position as wind market leaders. In its most recent report, the European Wind Energy Association said that wind has become the leader in terms of new installed energy capacity. By 2020, wind is expected to account for 34 percent of new generating capacity. It will account for 46 percent from 2020 to 2030 and the goal of attaining 12 – 14 percent of Europe’s power from wind by 2020 is well within reach. Moreover, it is expected that 180gigawatts of electricity will be supplied by the wind energy, enough for about 107 million European households. An Energy Department study found that wind energy could generate 20 percent of U.S. elect 2030, as compared today’s one percent, that means by 2030, electricity supply would: • Reduce carbon dioxide emissions from electricity generation by 25 percent • Reduce natural gas use by 11 percent • Reduce water consumption associated with electricity generation by four trillion gallons • Increase annual revenues to local communities to more than $1,5 billion Over the next two years, the Global Wind Energy Council (GWEC) predicts that the world’s installed wind power capacity will practically double to 149,5 G.W. With that kind of growth, the investment opportunities will certainly be lucrative.

The U.N and climate change The U.N Secretary-General declared that solving the world’s wide water crisis is a top priority. He stressed that global warming could cost the world roughly $20 trillion over two decades to place the world on a different sustainable energy trajectory that means an average investment of one trillion per year. But current U.N. statistics indicate that the global energy industry invests only $300 billion annually in new plants and other new technologies. For its part, the clean-tech industry brought in $117-billion investments in 2007, compared to only $86,5 billion in 2006. Last year was a banner year for clean-tech which for the first time led all other sectors in venture investment. In North America, $5,9 billion was committed for clean-tech. Over $200 billion in government funding worldwide will be spent on clean-tech in 2009; higher than the total private capital expenditures of $150 billion in 2008.

Green bank financing As if there was not enough money flowing into renewable, legislation has recently been introduced to the U.S. Congress to establish a “Green Bank” to finance clean energy and energy efficiency projects. An alternative energy bank is a creative and needed way jump-starts the private sector’s involvement in renewable and other alternative energy projects. The proposed Green Bank would

20

have an initial capitalization of $10 billion through the issuance of green bonds by the Treasury Department, with a maximum authorized limit of $50 billion in green bonds outstanding at any time. The American Recovery and Reinvestment Act includes more than $ 60billion in clean energy investments for instance: • $11 billion for a bigger grid to move renewable energy from the rural places to the cities where it is mostly used • $5 billion for low-income home weatherization projects • $4,5billion to green federal buildings and cut energy bill, saving taxpayers billion of dollars • $6,3 billion for state and local renewable energy and energy efficiency efforts • $600 million in green job training programs ($100 million to expand line worker training programs and $500million for green workforce training) • $2 billion in competitive grants to develop the next generation of batteries to store energy In conclusion, energy independence is the greatest investment opportunity of the 21st century.

China and pollution China, the planet’s biggest polluter, is being forced to “go green” by its own environment. The country has installed “Environmental Liability Insurance ELI” to pay back the victims of its ecological recklessness. China has left the door wide open for everyday investors to take advantage of their green-energy boom.

Skies over Beijing and Shanghai are as much as 25 percent darker than in decades past. The North end of the country is drying out; the south is subject to more frequent flooding. The World Bank reported the cost of pollution in China, all due to China’s staggering pollution levels. That is why the Chinese leaders have paved the way for the ELI to become law, used to moderate economic loss associated with ecological hazards. In fact, the Chinese clean-tech is estimated to hit $186 billion in 2010 and $555 billion in 2020.

This fund specified to be distributed in three ways to win “green China” as follows.

First, the country focuses on expanding its wind energy capacity to grow by 200 percent between 2008 and 2012; more than twice the estimates for the U.S. China’s year-to-year growth average for wind energy is 31,6 percent. In the last year, the country signed no less than 13 wind energy contracts, including a $315 million deal with Spain’s Gamesa for 405 wind turbines to be installed at seven wind farms across China.

Second, China’s solar power capacity is set to increase by 255 percent in 2012, with yearly growth 37,3 percent. China will have the largest solar power station in the world in 2011, which produces 100 megawatt. Noting that China is the world’s main producer of solar cells and modules and due to its low production costs, China is expected to be the largest supplier of solar materials to Europe and the U.S. Third, the country is witnessing prosperity of electric vehicle market. It is expected that hybrid electric vehicle market to surge by 20 percent per year from 2009 to 2012. Moreover, hybrid and electric vehicles will account for an estimated 10 percent of all auto sales by 2015. Now, China is anxious to take on the global market, and plans to enter the American market as soon as 2010.

Egypt and renewable energy In a sunny country like Egypt, the governmental officials should adopt policies to focus on solar energy. As they can prepare tech-

knowledge map for this purpose, most worldwide countries researchers carried out projects in converting solar light or heating to energy. In the U.S, Europe and some Asian countries, the trend in recent years has been for government bodies to channel funds to non-governmental institution, especially universities, for environmental research. The Egyptian environmental legislation is wide ranging. It covers the entire expanse of environmental issues, uses all forms of legislative instruments, administrative orders, laws regulations and by-laws and of course, is linked to international environmental law. The country’s environmental legislation encompasses laws for the protection of nature and natural resources and the safe treatment of contaminants and pollutants. The public policy should adopt the renewable energy policy targets, which already exist in roughly 66 countries around the world, and public policies to promote renewable energy use have become more common in recent years. At least 60 countries, 37 developed and 23 developing countries have some type of policy to promote renewable power generation. The IEA estimates that nearly 50 percent of global electricity supplies will need to come from renewable energy sources in order to halve carbon dioxide emissions by 2050 and minimize climate change impacts. That is why the lawmakers should clearly declare that the year 2009 is an upsurge in renewable energy and necessary procedures to be considered, also incentives, subsidies, loan programs and tax credits to be authorized.

The principal driver of today’s rapid renewable energy growth is the public sector that can play a larger role in 2009 and beyond, due to clean-tech’s potential to provide significant economic and green job benefits, and the need for clean-tech products and services to meet demands created by energy, water and climate policies.

In conclusion, renewable energy uses will create new thousands of jobs to work in this field that includes miscellaneous processes of manufactures and supplies, and will certainly minimize depending on natural gas as source of feed to electrical power stations which can be diverted into export to increase cash inflows. The policy can accelerate economic growth and job generation through the clean-tech sector. The cooperation and coordination between petroleum sector and electricity sector is direly needed in this concern.

June 2009 / Issue 30

INTERGAS V… Future Energy Challenges INTERGAS V became the must-attend event for all companies operating in the oil, gas and petrochemical industries and aiming at enhancing or boosting their businesses in Egypt.

By combining the Ministry-led Strategic Conference with the International Exhibition led by all the Major State-Owned companies together with their international and domestic partners and suppliers, INTERGAS V offered a valuable opportunity for everyone concerned with the industry; an essential strategic overview combined with the perfect commercial showcase for products and services. Thus, over the year, it has become the most important energy event ever to be held in Egypt. Building on the outstanding success of the 2007 edition, which grew exhibitor numbers by 58 percent, INTERGAS V delivers a huge audience of quality trade visitors at Egypt’s most prestigious venue, the CICC. With a proven track record of over 10 years, the strategic conference highlighted business opportunities, best practice and industry updates throughout the Middle East and North Africa (MENA) region. The three-day event had a new record of participation since more than 1,200 delegates from all over the world and 450 companies representing 51 countries showcasing their products and technological excellence to thousands of professional visitors from all the region at what is now the best-recognized international exhibition for the whole MENA region.

The theme of the event was ‘Future Energy Challenges’ to overcome the obstacles and challenges that will face the oil and gas field in the future.

The opening ceremony of INTERGAS V conference was inaugurated with a speech by Eng. Sameh Fahmy, the Egyptian Ministry of Petroleum, in addition to the Ministerial address, special address by OAPEC General Secretary and the heads of ENI, Shell, BG, BP, Novatek and Gail India were given as well.

Despite the unusual “late” opening of the Conference and Exhibition, the number of guests and attendees was recognizable and visitors seized this crucial opportunity to know the latest products and services displayed by the exhibitors.

Building its reputation as the best venue for the oil and gas sector, INTERGAS V has been recognized in collaboration with four categories of sponsorship; Platinum Sponsors, Gold Sponsors, Silver Sponsors and the Bronze Sponsors.

This year’s platinum sponsors included Dana Gas, ENI Ieoc and BG Egypt. While the Gold Sponsors were four major petroleum companies in addition to one bank; they were Shell, BP, Enel, Dana Petroleum as well as Credit Agricole Egypt.

As for the Silver Sponsors, it was led by OMV, Melrose Resources, RWE, Schlumberger, Union Fenosa, Superior Energy Services Inc, the Commercial International Bank (CIB), Damco, TransGlobe Energy Corporation, Egyptian Drilling Company (EDC), CEPSA and Lufthansa.

However, the support and contribution of the private sector have never eliminated the vital cooperation of the public sector as well. The Egyptian Ministry of Petroleum has always been the main supporters of INTERGAS since its first term. Moreover, the contribution of many public authorities and companies such as the Egyptian General Petroleum Corporation (EGPC), EGAS, ECHEM, Ganope and EMRA, has been of a great importance to ensure the success of this major event.

“The planning and preparation process of the 5th INTERGAS was done two years ago, in coordination with the Egyptian Ministry of Petroleum,” said Mr. Ahmed Shiha, the Chairman of Egypt International Fairs, at the opening of the conference.

“In order to get the best image for our event, we attended around 24 international exhibitions to get the experience and bring the latest ideas in order to have the best edition for INTERGAS,” he added.

As for the speech of the Egyptian Petroleum Minister, he stated that there are some noticeable issues facing the global petroleum industry, which led to the domestic decline of the petrochemical revenues by 40 percent. Whereas the decline in the oil and gas was at the rate of 5-10 percent which presents a tough challenge in the field in the light of the crunch credit of the world banks.

“Unless there will be decisions to be taken by the industry officials, the price of the crude oil will reach $200 per barrel.

Nevertheless, Egypt’s situation is not bad despite the economic crisis,” said the Egyptian Minister.

He added that Egypt has planned for the current crisis by scheduling an increase of its crude oil production as well as reserves. Besides, luring more investments was another important factor for Egypt to make good use of this production increase.

Moreover, the infrastructure played an important role to maintain the same increasing rate in both investments and production. All these factors stand behind avoiding the bad effects of the current economic crisis.

On the other hand, the first day conference also witnessed speeches from Mr. Tim Blackford, BG Egypt President, in addition to Dr. Hany El-Sharkawy, Dana Gas Egypt Country Manager, and Mr. Hisham Mekawy, BP Egypt President.

On the second day, the agenda consisted of four sessions on the Downstream Track focusing on the petrochemicals, marketing and refineries in addition to four other sessions on the Upstream Track.

As for the third day, it was full of the technical sessions which also were in two streams. Stream A focused on the economics in the industry, project management techniques, reservoir evaluation and the well construction. While stream B was about Gas handling technology, improving downstream operation and the deep water well construction in addition to the asset integrity.

21

Industry Statistics Table 2 Table 1

Egypt Rig Count per Area -May 2009

Rigs perArea May 2009

RIG COUNT

Area Gulf of Suez Offshore Land Mediterranean sea Offshore Land

Total

Percentage of Total Area

20

14%

11

8%

11

82

Sinai

Rigs per Specification

7%

10

Offshore Land Eastern Desert Offshore Land Delta Offshore Land

57% W.D.

57%

82

Offshore Land

4% 7% Delta Sinai 8% Med. Sea. 10% E.D. 14% G.O.S.

20

Western Desert

1% Semi-Sub 3% Platform

10 15

10% Jack-up

10%

18%Work-Over

41% Land-Drilling

15 6

4%

6 144

100%

US Dollar 5.622

Euro 7.440

Sterling 8.355

Yen (100) 5.724

Stock Market Prices ( April 2009 / May 2009 ) High

Company Alexandria Mineral Oils [AMOC.CA] Sidi Kerir Petrochamicals [SKPC.CA]

Low

42.64

40.5

9.46

8.37

Wortld Crude Oil Production (Including Lease Condensate) (Thousand Barrels per Day) Libya

Sudan

Other

World

OPEC1

Persian Gulf2

North Sea3

July

1,700

520

2,499

74,823

33,168

22,610

3,912

August

1,700

520

2,523

73,728

33,050

22,474

September

1,745

520

2,524

72,818

32,690

October

1,745

520

2,512

73,771

November

1,700

520

2,517

December

1,650

530

2008 Average

1,715

521

1,600

Persian Gulf3

OAPEC4

OPEC5

World

2008 July

E

8,764

25,117

26,121

36,442

86,697

August

E

8,608

24,995

26,014

36,339

85,533

September

E

7,121

24,634

25,731

35,938

84,015

October

E

8,214

24,554

25,653

35,944

85,530

November

E

8,524

23,776

24,878

35,114

85,210

December

E

8,555

23,148

24,265

34,270

84,236

2008 Average

E

8,498

24,344

25,441

35,709

85,462

2009 January

E

8,731

22,213

23,236

33,120

83,112

February

PE

8,754

22,469

23,476

33,149

83,640

2009 2-Month Average

PE

8,742

22,334

23,350

33,133

83,362

1ÂŤOil SupplyÂť is defined as the production of crude oil (including lease condensate), natural gas plant liquids, and other liquids, and refinery processing gain (loss).

2 U.S. geographic coverage is the 50 States and the District of Columbia. Beginning in 1993, includes fuel ethanol blended into finished motor gasoline and oxygenate production from merchant MTBE plants. For definitions of fuel ethanol, oxygenates, and merchant MTBE plants 3 The Persian Gulf countries are Bahrain, Iran, Iraq, Kuwait, Qatar, Saudi Arabia, and the United Arab Emirates. Production from the Kuwait-Saudi Arabia Neutral Zone is included in Persian Gulf production.

4 OAPEC: Organization of Arab Petroleum Exporting Countries: Algeria, Iraq, Kuwait, Libya, Qatar, Saudi Arabia, and the United Arab Emirates.

5 OPEC: Organization of the Petroleum Exporting Countries: Algeria, Angola, Ecuador, Indonesia, Iran, Iraq, Kuwait, Libya, Nigeria, Qatar, Saudi Arabia, the United Arab Emirates, and Venezuela.

E=Estimated data. RE=Revised estimated data. PE=Preliminary estimated data.

Revised data are in bold italic font.

Average Currency Exchange Rate against the Egyptian Pound ( April 2009 / May 2009 )

2009 January

United States2

27% Standby/Stacking

Total

Table 1

World Oil Supply1 (Thousand Barrels per Day)

540

Table 3

World Natural Gas Liquids Production (Thousand Barrels per Day) Algeria

Canada

Mexico

Soudi Arabia

Russia

Former U.S.S.R

United States1

Persian Gulf2

OAPEC3

2008 July

359

705

374

1,440

423

_

1,856

2,372

3,455

August

360

671

363

1,440

426

_

1,839

22,157

3,755

September

362

662

357

1,440

426

_

32,693

22,077

3,850

October

363

667

362

1,440

424

73,397

32,845

21,284

3,989

November

365

672

349

1,453

December

350

668

364

2,498

72,703

32,109

20,752

4,007 2008 Average

357

682

2,506

73,777

32,468

21,871

3,881 2009 January

350

February

2,531

71,608

30,026

19,877

OPEC4

World

2,833

3,121

8,104

2,386

2,847

3,137

7,932

1,537

2,342

2,818

3,095

7,554

_

1,745

2,343

2,821

3,100

7,922

421

_

1,734

2,358

2,837

3,117

7,926

1,353

420

_

1,604

2,262

2,726

3,010

7,694

365

1,434

422

_

1,781

2,339

2,808

3,088

7,941

669

366

1,305

405

_

1,721

2,202

2,668

2,942

7,721

341

667

364

1,311

402

_

1,792

2,241

2,697

3,965

7,891

346

668

365

1,308

404

_

1,754

2,221

2,682

2,953

7,802

3,913

February

1,600

550

2,508

71,914

30,031

20,094

4,008

2009 2-Month Average

2009 2-Month Average

1,600

545

2,520

71,753

30,028

19,980

3,958

1 U.S. geographic coverage is the 50 states and the District of Columbia. Excludes fuel ethanol blended into finished motor gasoline.

2 The Persian Gulf countries are Bahrain, Iran, Iraq, Kuwait, Qatar, Saudi Arabia, and the United Arab Emirates.

3 OAPEC: Organization of Arab Petroleum Exporting Countries: Algeria, Iraq, Kuwait, Libya, Qatar, Saudi Arabia, and the United Arab Emirates.

4 OPEC: Organization of the Petroleum Exporting Countries: Algeria, Angola, Ecuador, Indonesia, Iran, Iraq, Kuwait, Libya, Nigeria, Qatar, Saudi Arabia, the United Arab Emirates, and Venezuela.

- - = Not applicable. E=Estimated data. PE=Preliminary Estimated data.

Revised data are in bold italic font.

Notes: Monthly data are often preliminary and also may not average to the annual totals due to rounding.

1 OPEC: Organization of the Petroleum Exporting Countries: Algeria, Angola, Ecuador, Indonesia, Iran, Iraq, Kuwait, Libya, Nigeria, Qatar, Saudi Arabia, the United Arab Emirates, and Venezuela.

2 The Persian Gulf countries are Bahrain, Iran, Iraq, Kuwait, Qatar, Saudi Arabia, and the United Arab Emirates. Production from the Kuwait-Saudi Arabia Neutral Zone is included in Persian Gulf production.

3 North Sea includes the United Kingdom Offshore, Norway, Denmark, Netherlands Offshore, and Germany Offshore.

Revised data are in bold italic font.

22

June 2009 / Issue 30

US Dollars per Barrel

Table 6 International Stock Schlumberger [SLB] NYSE [US Dollars] Halliburton [HAL] NYSE [US Dollars]

Exxon Mobil [XOM] NYSE [US Dollars] Atwood Oceanics [ATW] NYSE [US Dollars] Weatherford [WFT] NYSE [US Dollars] Shell [RDS.A] NYSE [US Dollars] Apache [APA] NYSE [US Dollars] Baker Hughes [BHI] NYSE [US Dollars] BJ [BJS] NYSE [US Dollars] Lufkin [LUFK] NYSE [US Dollars] Transocean [RIG] NYSE [US Dollars] Transglobe [TGA] NYSE [US Dollars] BP [BP.] LSE Pence Sterling BP [BG.] LSE Pence Sterling Dana Gas [Dana] ADSM US Dollars Caltex [CTX] ASX Australian Dollars RWE DWA [RWE AG ST] Deutsche-Borse Euros Lukoil [LKOH] RTS [US Dollars]

Table 4

International Stock Prices Mid-April 2009 - Mid-May High

Low

56.53

46.63

23.33

19.64

70.80

66.23

26.25

21.09

19.20

15.69

49.83

42.74

84.89

66.05

39.36

32.72

16.62

13.26

40.84

31.5

75.43

64.37

2.88

2.43

521.00

442.50

1128.00

1026.00

0.90

0.75

10.76

9.19

58.77

52.94

50.70

42.70

OECD1 Countries and World Petroleum (Oil) Demand (Thousand Barrels per Day)

France

German

United OECD South United Other 2 Italy Kingdom Europe Canada Japan Korea States3 OECD4

OECD1

World

June

1,897

2,430 1,588 1,708 14,773 2,295 4,340 1,993 19,553 3,462 46,415

NA

July

1,924

2,623 1,751 1,623 15,327 2,407 4,437 2,028 19,412 3,673 47,284

NA

August

1,855

2,623 1,534 1,576 14,894 2,297 4,174 2,028 19,267 3,505 46,164

NA

September

1,994

2,858 1,680 1,721 15,994 2,326 4,290 2,167 17,796 3,399 45,972

NA

October

2,048

2,855 1,679 1,726 15,810 2,360 4,337 2,023 19,643 3,371 47,545

NA

November

1,881

2,596 1,578 1,709 14,910 2,276 4,565 2,059 19,001 3,301 46,112

NA

December

2,086

2,471 1,653 1,709 15,165 2,305 5,097 2,271 19,199 3,557 47,595

NA

2008 Average

1,956

2,561 1,630 1,698 15,199 2,318 4,742 2,153 19,419 3,503 47,333

2009 January

2,007

2,375 1,544 1,734 14,712 2,345 4,804 2,306 19,125 3,281 46,573

NA

1 OECD: Organization for Economic Cooperation and Development.

2 OECD Europe consists of Austria, Belgium, Czech Republic, Denmark, Finland, France, Germany, Greece, Hungary, Iceland, Ireland, Italy, Luxembourg, the Netherlands, Norway, Poland, Portugal, Slovakia, Spain, Sweden, Switzerland, Turkey, and the United Kingdom.

3 U.S. geographic coverage is the 50 States and the District of Columbia.

4 Other OECD consists of Australia, Mexico, New Zealand, and the U.S. Territories.

NA=Not available.

Revised data are in bold italic font.

Notes: The term Demand is used interchangeably with Consumption and Products Supplied.

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June 2009 / Issue 30

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