Maged Halim – Deputy General Manager & Exploration General Manager, Merlon Petroleum, Egypt
Eng. Maged Halim of Merlon Petroleum provides his insights on the Egyptian petroleum industry based on his extensive experience working in the public and private oil and gas sectors for over three decades.
Eng. Maged, can you provide a little background to yourself?
“The positive news is that the current leadership has introduced a new direction for Egypt’s petroleum sector and I believe this is the right track”
Prior to joining Merlon in 2002, I was the Vice Chairman for Petroleum Exploration Agreements and International Relations at the Egyptian General Petroleum Company (EGPC), having worked in a number of state-owned companies both in Egypt and outside, like Algeria’s Sonatrach, Kuwait prior to that.
I had actually began my career with Merlon as the Exploration GM of the Phoenix Petroleum Company, which was the first discovery Khalda Petroleum made – they were the founders of Khalda Petroleum in 1985 – so I have a long-established relationship with Merlon. I subsequently moved to Khalda as an exploration manager, and then I joined EGPC as Vice Chairman of exploration for a decade. In 2002, I decided to return to the private sector because I had a difference of opinion with the government about the direction of Egypt’s petroleum sector.
Then-Minister Sameh Fahmi decided to export the gas, which I thought was a mistake. For instance, in 1998, I had been planning to form a company to explore outside of Egypt within the region, given the strong expertise we had. Egypt is the first country in the region to discover oil in 1868 so we have over 150 years’ of E&P experience. We had discussed partnerships with a number of IOCs like Repsol and Edison, particularly in Algeria, and I actually made several trips there where we were offered two concession blocks! However, this mission was aborted when former Minister Fahmi came in and the blocks went to Anadaro instead, who are now the largest foreign oil producer there. Today, these two concessions are producing a total of 450,000 barrels per day!
The positive news is that the current leadership has introduced a new direction for Egypt’s petroleum sector and I believe this is the right track. The petroleum leadership – Minister of Petroleum Eng. Tarek El Molla and the various heads of the NOCs are all very experienced in the sector and knowledgeable. It is clear that the local industry feels very comfortable with the new strategy that they are implementing. In Merlon, for instance, we feel that the government is supporting us and we are working towards the same goals: to increase exploration, production and investments in Egypt! This is very motivating for the private sector.
Does this new direction explain the continued activity in Egypt despite the global oil and gas downturn in the past few years?
Indeed. The revival really began when the current prime minister (PM) Sherif Ismail was appointed as Minister of Petroleum, and Minister El Molla is extending the positive strategy. This continuity is also very critical to sustained investment and activity.
A key element of their philosophy is to actively encourage American investors to come to Egypt. For instance, I have personally arranged two trips to Houston, the US for I arrange for PM Ismail in 2013, where he gave a good presentation to over 45 companies to incentivise them to come and invest in Egypt. At that time, investors were chiefly concerned about delays in payments owed to international companies but as the highest level of the Egyptian government, H.E. President Sisi, has expressed, the country is committed to repaying everyone and so the industry is very reassured.
Personally, I can tell you that I was in Houston last January and the overall attitude towards investing in Egypt was one of confidence. This makes sense because Egypt is the only stable country in the most politically stable petroleum region in the world, which can be attributed to the continuing peace and harmony between religious groups and a strong military that secures our borders.
Investing in South America at the moment is very difficult while investing in the US is very expensive with the current low-price environment, so it makes sense that investors are turning to the Mediterranean, buoyed of course by the huge Zohr discovery in 2015.
The production sharing agreements (PSAs) Egypt offers certainly number among the most attractive in the world, providing good profit opportunities to investors, which is the cherry on the cake!
The Gulf is typically seen as the mecca of oil and gas production. How competitive do you think Egypt is compared to the Gulf petrostates?
It is undeniable that the Gulf countries are very attractive to oil and gas investors simply for the quantity of their reserves, but there are political tensions there that investors are nervous about too.
In addition, I think Egypt sometimes suffers from the misconception that it is a mature market for exploration. This is simply not true, as there is still huge upstream potential. The Zohr discovery has been an eye-opener for all of us in emphasizing that there may be huge reserves of gas and also oil in the Mediterranean waiting to be explored. The bulk of the Western Desert has also not been explored. The Gulf of Suez has seen eight billion barrels produced but the estimation is that there may be more than 20 billion barrels of reserves, so only less than 40 percent has been uncovered. Upper Egypt is entirely untapped.
This is why I am very optimistic about the future of Egypt’s upstream sector. What we need is to have more strategy continuity at the top level, even more smart and experienced people, and more investment.
More investment is crucial because while we have a very skilled workforce at all levels of the value chain, E&P is inherently a very risky endeavour and requires companies with enough of a risk appetite and capacity.
On a separate note, having worked in both the public and private sectors, were there any difficulties in terms of adjusting to the business cultures and working styles?
Not necessarily. In business, my fundamental principle is that, as long as you are straightforward and honest with everyone you meet, everything will go smoothly.
Also, it is important to note that the concession agreements here have the Egyptian government on one side, and EGPC and its private-sector partner on the other. The point is for EGPC to work together with the private sector so their goals are very much aligned. Sometimes people do not understand this and the need to collaborate with the NOCs.
What is your final message about the opportunities that are in Egypt?
Come to Egypt – Egypt has still a lot of potential! The country is safe, the petroleum leadership have the right vision and strategy in place, and the local workforce definitely has the knowhow and expertise required, so investors will not need to import their own experts and technicians. We have it all!