EGYPS 2018 Highlights Industry Achievements and Brings Together Global Key Players in North Africa’s largest Oil and Gas Exhibition and Conference
4 February 2018, Cairo - The Egypt Petroleum Show (EGYPS 2018) held under the patronage of H.E. President Abdel Fattah El Sisi, and the auspices of the Ministry of Petroleum and Mineral Resources, is set to take place February 12th – 14th at the Egypt International Exhibition Center. As the primary platform highlighting Egypt’s substantial progress and ambitious development plans in the oil and gas industry, the show brings together key ministers, government officials and representatives of major global oil companies as well as local and regional national oil companies, and leading technology and service providers.
Speaking at the pre-show press conference, highlighting its strategic significance and the goals of its proceedings, H.E. Eng. Tarek El Molla, Minister of Petroleum and Mineral Resources said, “On the back of the tremendous success achieved by the first edition, we are very optimistic about EGYPS 2018. The show’s diverse participants and attendees and its unique features make us very confident that we are on the right track. This year has kicked off with a lot of success stories for the oil and gas sector driven by local and international efforts. Our achievements to date span four mega projects. For the first time in years, we have added a capacity of 1.6 billion cubic feet of natural gas. Last week we celebrated the inauguration of Zohr gas field, and in the past months we have issued the new law regulating the gas market – one of the most important laws that will support the growth of the gas sector across all phases. We look forward to strengthening Egypt’s positioning on the global industry map as a serious contender and a regional energy hub.”
The second edition of EGYPS boasts a number of new and significant features, making it the prime destination for key regional and international investors to work hand in hand with the Egyptian government to expand its capabilities. Mr. Christopher Hudson, President dmg events Global Energy, said of EGYPS 2018, “We are very proud to be the Egyptian government’s partner in success for the second year in a row. With the significant developments in the industry and the country over the past 12 months, we see our role as even more crucial in terms of bringing together industry professionals setting up a show that is a strategic industry pillar in Egypt and the region, and which champions diversity and inclusion.”
H.E Eng. Tarek El Molla continued, “EGYPS 2018 could not have come at a better time, opening further avenues to mutual long term cooperation between the Egyptian government and major global industry players. This year EGYPS is set to witness even bigger participation and will effectively showcase our success to the world as well as our plans to continue to strengthen our achievements.”
EGYPS 2018’s opening ceremony features keynote speakers and ministerial and intergovernmental panels and includes some of the region and the world’s most prominent energy ministers and leaders including H.E. Tarek El Molla, Egypt’s Minister of Petroleum and Mineral Resources, H.E. Mustapha Guitouni, Minister of Energy, People’s Democratic Republic of Algeria, H.E. Dr Saleh Ali Hamed Al Kharabsheh, Minister of Energy and Mineral Resources, The Hashemite Kingdom of Jordan, H.E. Gabriel Obiang Lima, Minister of Mines and Hydrocarbons, Equatorial Guinea and H.E. Jabbar Ali Hussein Al Luaibi, Minister of Oil, Republic of Iraq, H. E. David Mahlobo, Minister of Energy, Republic of South Africa, H.E. Mohamed Barkindo, Secretary General, Organization of the Petroleum Exporting Countries (OPEC), H.E. Abbas Al Naqi, Secretary General, Organization of Arab Petroleum Exporting Countries (OAPEC), H.E. Yury Sentyurin, Secretary General, Gas Exporting Countries Forum (GECF),
Among the show’s highlights is “The Strategic Industry Conference”, bringing together a host of Oil & Gas executives including Claudio Descalzi, CEO, Eni, Bob Dudley, Group Chief Executive, BP, Grigoris Stergioulis, CEO, Hellenic Petroleum, Lorenzo Simonelli, Chairman & CEO, Baker Hughes, a GE Company and Mustafa Sanalla, Board Chairman, NOC Libya to name a few.
While the “CEO Strategic Roundtables” focus on the roles upstream, midstream and downstream sectors play in helping the country achieve its sustainable energy development objectives. Equally of note is the “Finance and Investment Lunch Briefing”, connecting government representatives, NOCs and IOCs with local and international banks, and private equity firms.
Continuing on the show’s other features, Hudson added, “the technical conference will run parallel to EGYPS 2018 exhibition, encompassing 31 sessions that cover more than 11 technical disciplines intended to tackle some of the most eminent matters in the energy sector.” Hudson indicated that the convention also includes the “Women in Energy Conference” - and its newly introduced Awards - and the Security and HSE in Energy conference, he said, “ “The Women in Energy” conference and awards reflect the government and industry’s commitment to inclusion and diversity, saluting and recognising the outstanding achievements and contributions of women in the sector. EGYPS 2018 will also feature the newly introduced “Security and HSE in Energy” conference, which comes at a time when the health, safety and security of human resources and infrastructure is more crucial than ever.”
EGYPS 2018 will host over 400 exhibiting companies, 15,000 attendees, 11 country pavilions from major oil producing countries that include Bahrain, China, France, Germany, Italy, Norway, Russia, Scotland, United Arab Emirates, United Kingdom and the United States of America, more than 1,000 conference delegates, in addition to over 150 expert speakers taking part in over 50 dedicated industry sessions.
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The week started off ominously. Qatar, a member of OPEC since 1960, quit the organisation. Its reasoning made logical sense – Qatar produces very little crude, so to have a say in a cartel focused on crude was not in its interests, which lie in LNG – but it hinted at deep-seated tensions in OPEC that could undermine Saudi Arabia’s attempts to corral members. Qatar, under a Saudi-led blockade, was allied with Iran – and Saudi Arabia and Iran were not friends, to say the least. This, and other simmering divisions, coloured the picture as OPEC went into its last meeting for the year in Vienna.
Against all odds, OPEC and its NOPEC allies managed to come to an agreement. After a nervy start to the conference – where it looked like no consensus could be reached – OPEC+ announced that they would cut 1.2 mmb/d of crude oil production beginning January. Split between 800,000 b/d from OPEC members and 400,000 b/d from NOPEC, the supply deal contained a little bit of everything. It was sizable enough to placate the market (market analysts had predicted only a 800,000 b/d cut). It was not country-specific (beyond a casual mention by the Saudi Oil Minister that the Kingdom was aiming for a 500,000 b/d cut), a sly way of building in Iran’s natural decline in crude exports from American sanctions into the deal without having individual member commitments. And since the baseline for the output was October production levels, it represents pre-sanction Iranian volumes, which were 3.3 mmb/d according to OPEC – making the mathematics of the deal simpler.
Crude oil markets rallied in response. Brent climbed by 5%, breaking a long losing streak, as the market reacted to the move. But the deal doesn’t so much as solve the problem as it does kick the can further down the road. A review is scheduled for April; coincidentally (or not), American waivers granted to eight countries on the import of Iranian crude expire in May. By April, it should be clear whether those will continue, allowing OPEC+ to monitor the situation and the direction of Washington’s policy against Iran in a new American political environment post-midterm elections. If the waivers continue, then the deal might stick. If they don’t, then OPEC+ has time to react.
There are caveats as well. OPEC members, who are shouldering the bigger part of the burden, said there would be ‘special considerations’ for its members. Libya and Venezuela - both facing challenging production environments – received official exemptions from the new group-level quota. Nigeria, exempted in the last round, did not. Iran claims to have been given an exemption but OPEC says that Iran had agreed to a ‘symbolic cut’ – a situation of splitting hairs over language that ultimately have the same result. But more important will be adherence. The supply deals of the last 18 months have been unusual in the high adherence by OPEC members. Can it happen again this time? Russia – which is rumoured to be targeting a 228,000 b/d cut – has already said that it would take the country ‘months’ to get its production level down to the requested level. There might be similar inertia in other members of OPEC+. Meanwhile, American crude output is surging and there is a risk to OPEC+ that they will be displaced out of their established markets. For now, OPEC remains powerful enough to sway the market. How long it will remain that way?
Infographic: OPEC+ December Supply Deal
Headline crude prices for the week beginning 10 December 2018 – Brent: US$62/b; WTI: US$52/b
Headlines of the week
The Permian is in desperate need of pipelines. That much is true. There is so much shale liquids sloshing underneath the Permian formation in Texas and New Mexico, that even though it has already upended global crude market and turned the USA into the world’s largest crude producer, there is still so much of it trapped inland, unable to make the 800km journey to the Gulf Coast that would take them to the big wider world.
The stakes are high. Even though the US is poised to reach some 12 mmb/d of crude oil production next year – more than half of that coming from shale oil formations – it could be producing a lot more. This has already caused the Brent-WTI spread to widen to a constant US$10/b since mid-2018 – when the Permian’s pipeline bottlenecks first became critical – from an average of US$4/b prior to that. It is even more dramatic in the Permian itself, where crude is selling at a US$10-16/b discount to Houston WTI, with trends pointing to the spread going as wide as US$20/b soon. Estimates suggest that a record 3,722 wells were drilled in the Permian this year but never opened because the oil could not be brought to market. This is part of the reason why the US active rig count hasn’t increased as much as would have been expected when crude prices were trending towards US$80/b – there’s no point in drilling if you can’t sell.
Assistance is on the way. Between now and 2020, estimates suggest that some 2.6 mmb/d of pipeline capacity across several projects will come onstream, with an additional 1 mmb/d in the planning stages. Add this to the existing 3.1 mmb/d of takeaway capacity (and 300,000 b/d of local refining) and Permian shale oil output currently dammed away by a wall of fixed capacity could double in size when freed to make it to market.
And more pipelines keep getting announced. In the last two weeks, Jupiter Energy Group announced a 90-day open season seeking binding commitments for a planned 1 mmb/d, 1050km long Jupiter Pipeline – which could connect the Permian to all three of Texas’ deepwater ports, Houston, Corpus Christi and Brownsville. Plains All American is launching its 500,000 b/d Sunrise Pipeline, connecting the Permian to Cushing, Oklahoma. Wolf Midstream has also launched an open season, seeking interest for its 120,000 b/d Red Wolf Crude Connector branch, connecting to its existing terminal and infrastructure in Colorado City.
Current estimates suggest that Permian output numbered around 3.5 mmb/d in October. At maximum capacity, that’s still about 100,000 b/d of shale oil trapped inland. As planned pipelines come online over the next two years, that trickle could turn into a flood. Consider this. Even at the current maxing out of Permian infrastructure, the US is already on the cusp on 12 mmb/d crude production. By 2021, it could go as high as 15 mmb/d – crude prices, permitting, of course.
As recently reported in the WSJ; “For years, the companies behind the U.S. oil-and-gas boom, including Noble Energy Inc. and Whiting Petroleum Corp. have promised shareholders they have thousands of prospective wells they can drill profitably even at $40 a barrel. Some have even said they can generate returns on investment of 30%. But most shale drillers haven’t made much, if any, money at those prices. From 2012 to 2017, the 30 biggest shale producers lost more than $50 billion. Last year, when oil prices averaged about $50 a barrel, the group as a whole was barely in the black, with profits of about $1.7 billion, or roughly 1.3% of revenue, according to FactSet.”
The immense growth experienced in the Permian has consequences for the entire oil supply chain, from refining balances – shale oil is more suitable for lighter ends like gasoline, but the world is heading for a gasoline glut and is more interested in cracking gasoil for the IMO’s strict marine fuels sulphur levels coming up in 2020 – to geopolitics, by diminishing OPEC’s power and particularly Saudi Arabia’s role as a swing producer. For now, the walls keeping a Permian flood in are still standing. In two years, they won’t, with new pipeline infrastructure in place. And so the oil world has two years to prepare for the coming tsunami, but only if crude prices stay on course.
Recent Announced Permian Pipeline Projects