Egypt's oil industry is growing rapidly

The oil and gas sector has long been one of the major strengths in the Egyptian economy, along with other natural resources such as minerals, gold and natural gas.

But the high point of oil production in the 1990s has steadily declined, with domestic demand growing, Egypt’s role as an oil exporter has been reversed and the country is now an oil net-importer, making the economy vulnerable to shifts in the market and the price of oil.

In 1993 the state owned Egyptian General Petroleum Corporation (EGPC) was churning out 941,000 barrels per day (bpd) of oil, and in 2005 this figure had decreased to just 696,000 bpd. At the same time, domestic consumption began to outstrip the country’s production with demand increasing with a growing economy.

The government has in recent years, along with international consortiums and countries around the world, taken steps to address this situation.

In the financial year of 2001 18 crude oil fields were discovered in Egypt’s territorial waters, and this figure rose to 45 in 2005. Egypt’s oil industry now appears to be on the up and up again, with estimates for 2009 putting the country’s oil reserves at around 3.7 billion barrels.

Consequently, there has been a boom in the industry through 2010. Collaboration between state run EGPC and Saudi Arabian investors has seen a $9 billion oil refinery in northern Egypt developed and slated for completion in 2010.

At the same time, Libya, an OPEC member, has poured $10 billion into oil refinery development on the north coast of Egypt, which was completed in 2010 and has a daily output of 250,000 bpd.

Most recently, China weighed in and joined the fray, announcing in May of 2010 plans to build an as yet unnamed oil refinery in Egypt that would have a yearly output of 15 million tons in its first phase, which would initially cost $2 billion.

The memorandum of understanding was signed between Egypt’s oil ministry and two Chinese companies (Rongsheng Holding Group and China National Chemical Engineering Co. Ltd). Under the terms of the agreement the two companies will have joint ownership of the plant for 25 years.

The investments are expected to exceed Egypt’s domestic consumption and so reverse the trend toward export-dependence for the country, a trend that major importers such as Europe and the US have allowed to take hold.

“The US, for example, hasn’t built a new refinery plant in almost 20 years, while at the same time its domestic oil production capacity falls short of some 3 million bpd,” Magdy Sobhi, a senior economist at Al-Ahram Center for Strategic Studies told Egypt news media.

This is a trend Egypt seems set to avoid.