With gas production in full swing across a number of sites in Egypt, the country is ready to become a key exporter of energy in the region and beyond, the chairman and founder of investment firm Qalaa Holdings told CNBC.
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“In the oil and gas sectors Egypt remains a very important player,” Ahmed Heikal, told CNBC’s “Capital Connection” on Monday.
Heikal said there was impetus for Egyptian gas to flow to European markets via terminals in Idku and Damietta.
“Gas discoveries and infrastructure, as far as the LNG (liquefied natural gas) terminals in Idku and Damietta, those two have meant that Egypt is ready to perform a very important role as a hub for energy, especially gas exports,” he said.
Egypt is looking to raise $10 billion in foreign investments for the oil and gas sector for 2018-2019, according to Reuters, a 25 percent increase on the year before. It also wants to raise its gas production from new fields, including the giant Zohr gas field that was discovered in 2015 by Italian energy group Eni.
The discovery has been a boon to the Egyptian economy as it means the country will be able to meet domestic demand and shouldn’t have to buy in foreign supplies. In fact, Egypt hopes to stop importing foreign oil and gas entirely by 2019, according to Reuters.
Qalaa Holdings, a Middle Eastern investment firm, is involved in the domestic energy industry with its subsidiary, the Egyptian Refining Company (ERC), having developed a $4.2 billion greenfield refinery in greater Cairo.
The refinery will have a “4.2 million tons capacity that will produce up to 3 million tons of Euro V diesel and jet fuel, enabling Egypt to reduce its current level of diesel imports by 50 percent,” Qalaa notes on its website. It also has a subsidiary, TAQA Arabia, related to private sector energy distribution.
Giving an update on the project to CNBC, Heikal said it would be operating in the fall.
“The ERC project is proceeding at a very fast pace, we’ve started testing the motors, the insulation and painting and I think by August we will have finished totally with construction. And we will introduce hydrocarbon into the refinery by early November,” he said, adding that the project was ” a very big endeavor for a private sector company to undertake.”
The refinery’s operation will come at a time of rising oil prices as Russia and OPEC withhold supply in order to boost prices. Heikal said that oil price volatility was damaging to the Egyptian economy; Egypt is one of the few oil-producing countries in the Middle East that is not a member of OPEC because, as yet, it is still a net importer of oil. Its oil minister has not ruled out joining the oil producing group in the future, however.
“Higher oil and gas prices are not good for the Egyptian economy. Egypt is still short oil and gas because even after Zohr we will have to buy our gas from the foreign partner Eni, in this case, and BP, so that will again mean that Egypt is short oil and gas and this puts pressure on both the trade and budget deficit,” he said.
Heikal praised reforms led by Egyptian President Fattah al-Sisi that have seen fuel subsidies partially scrapped, as well as other austerity measures, in order to rebuild the economy.
“The government has been extremely diligent with following through on those reform programs and something to be commended. This is not a very popular move but it’s a very important move and the government should be commended for following it through despite its unpopularity,” he said.