Factory to produce 20 drills per year by 2012
CAIRO: A consortium of three Egyptian companies and China’s HH Corporation will begin the production of three oil drills in 2007 for local use and export, Minister of Petroleum (MOP) Sameh Fahmy and China’s Ambassador to Egypt Wu Sike announced Tuesday.
The new venture will be supplied with $30 million in issued capital to be divided equally among the four partners. Joining HH, PetroJet, Enppi and Tharwa Companies will contribute the Egyptian share, according to a MOP statement.
Although the location of the new company is yet to be announced, MOP says plans are for the company to increase its production to seven drills by the end of its second year, 10 by the third, 15 by the fourth and to 20 drills by its fifth year in operation or the end of 2012. The company is set to become the first of its kind in the Middle East.
The establishment of the company falls in line with a memorandum of understanding signed by the Egyptian and Chinese sides during the Egyptian MOP visit to China last October to increase cooperation in research and joint production in the petroleum sector. A MOP official was not immediately available to comment on the deal.
The October agreement was followed by the signing of another in November at the China-Africa Summit focusing on science and technology cooperation.
According to the agreement, Egypt will receive assistance in developing its IT, health, agriculture and energy sectors and conduct joint research projects with China to be financed by a joint fund. Alongside, Egypt, Algeria represented the lone other conference participant to sign a similar agreement.
Egypt has signed more than 200 drilling agreements since 2004, according to MOP, and imports 100 percent of its drilling equipment. MOP became the target of strong public criticism in 2006 for accelerating its excavation plan by signing more contracts with foreign companies to drill for natural gas.
In exchange, the foreign partner is allowed to export up to a third of the proved reserve amount discovered in a particular dig.
There are investments being made by our foreign partners which can only be returned through exporting LNG, Fahmy says. Our natural gas export policies are very balanced, and they will continue to be implemented until the High Energy Committee sets alternative policies to raise or lower export quantities.
LNG production reached 38.4 million tons in the 2005-2006 fiscal year on the back of 42 new field discoveries, according to MOP. The production figure represents a 50 percent increase from the 25.5 million tons recorded in 2004-2005.
Fahmy adds allowing sector companies to export large quantities is the only option available to the government to allow these companies to achieve profitability. The other option, he said, would be to request funds directly from the Ministry of Finance in order to meet MOP s commitments as a partner with foreign oil companies operating in Egypt.
But with a booming population and accelerating economy, analysts warn Egypt’s 68 trillion cubic feet of proven natural gas reserves are set to expire in as little as 20 years if current government policies are not altered.
We re not a small country, Genco Group President Tamer Abou Bakr says. We have 70-80 million people and an economy growing at 6 percent, we need to work hard to conserve what we have.