Increasing exploration and production ‘in a responsible manner’ is necessary due to high oil and gas prices, Tarek El Molla says

Egypt is seeking investments in all aspects of energy production, whether it be in traditional fossil fuels or renewables, the Minister of Petroleum and Mineral Resources Tarek El Molla said.

“I cannot say that we will do one bucket on the account of the other. We have to do them all,” Mr El Molla said at the Egypt Petroleum Show in Cairo on Tuesday.

“We need investments in exploration, we need investments in [the energy] transition, we need investments in renewables, we need investments in decarbonisation ... We need investments in all aspects and I wouldn't prioritise any of them.”

Oil demand is set to reach 102 million barrels a day this year and increase to 110 million barrels per day by 2025, Opec Secretary General Haitham Al Ghais said at the opening of the industry conference on Sunday.

The disruption of the market following Russia's invasion of Ukraine a year ago has pushed up prices of oil and natural gas, particularly in the heavily dependent European market.

Oil prices closed 2022 with a second straight annual gain with Brent gaining about 10 per cent and US crude rising about 7 per cent.

Wholesale prices of electricity and gas in Europe have surged as much as 15-fold since early 2021, according to the International Monetary Fund.

Egypt, which hosted the UN climate conference Cop27 in November, has committed to sourcing 42 per cent of its energy from renewable sources by 2030 from an estimated 20 per cent currently.

However, as the country suffers from the economic fallout of the Russia-Ukraine war, it is also looking for ways to solve its foreign currency crunch and maximise its natural gas exports as Europe looks for new energy suppliers.

Mr El Molla said earlier this week that the state is planning to offer three international gas and oil tenders this year and has an “ambitious plan” to drill more than 300 exploration wells by 2025.

“Because we have seen the prices of oil and gas are extremely high now … this will have a negative impact on many economies in the world. Therefore, we need to increase the production of these fossil fuels, but in a responsible manner,” Mr El Molla said.

“Otherwise, less investments means less production, that means higher prices, and it is going to be a vicious cycle.”

Natural gas

Egypt expects to produce about 7.5 million tonnes of liquefied natural gas this year, in line with production in 2022, when it shipped 80 per cent of its LNG to Europe, according to Mr El Molla.

Egypt and Israel signed a framework agreement with the EU in June to increase LNG sales to European countries. Under the deal, Israeli gas is transported by pipeline to Egypt’s LNG plants before being shipped to Europe.

But expansion in export capacity under the deal will take time and significant investments, industry leaders said at a panel on Tuesday.

Egypt has the capacity to export about 13 million tonnes annually through its Idku and Damietta plants, said Magdy Galal, head of state-run operator EGas.

Adding five production trains to the two plants could bring total capacity to more than 30 million tonnes, but “it is not cheap”, Mr Galal said.

Yossi Abu, chief executive of Israel’s NewMed Energy, said he is confident the two countries will reach a final agreement “that creates a win-win to everybody”.

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