EGYPT - The Foreign Operators.

Corresponding to EGPC's Master Plan, each of the biggest foreign companies producing gas in Egypt has its own integrated strategy for the long term.

The ENI group, for many years the biggest gas producer in Egypt and the country's second biggest producer of oil, has a strategy to export Egyptian gas by pipelines - namely:

- one pipeline to the Palestinian Authority's Gaza Strip, for which ENI in October 1998 signed an agreement with the Palestinian Authority; and

- a huge pipeline to be built under the East Mediterranean to Turkey to supply Israel, Lebanon, Syria, Cyprus and the Turkish market.

Operating in Egypt since the 1950s, when it pioneered the 50-50 partnership concept in this country, ENI has an integrated strategy for its Egyptian gas businesses to the year 2020. ENI has 20% in a private franchise venture in the country called City Gas. In Egypt, its E&P operating arm Agip is known as International Egyptian Oil Company (IEOC), and its main oil/gas producing joint venture (50-50) with EGPC is called Belayim Petroleum Co. (Petrobel). Agip's upstream/downstream strategy is based on a 1993 government extension to 2020 of its 14 oil and gas development licences in Sinai, the Gulf of Suez and the Nile Delta (see E&P profiles in Gas Market Trends No. 2).

Amoco, the biggest oil producer in Egypt, has been operating in this country since the late 1950s. Amoco's worldwide operations were acquired by BP at end-1998 and the merger into a super-multinational called BP Amoco was completed in the first quarter of 1999. Now BP Amoco, composed of 126 highly profitable business units operating around the world, has an integrated strategy for its Egypt gas business which is to expand rapidly thanks to huge gas discoveries it and its partners have made in recent years. BP Amoco is promoting a project in Egypt to export LNG to Turkey, Lebanon, Israel and other Mediterranean markets and to Europe. BP Amoco is also planning to build a gas pipeline to Jordan. In Jordan BP Amoco is promoting a gas-related IPP and other gas-fed businesses. It has considered gas-fed businesses in Israel. BP Amoco has also thought that, as a possible alternative to its proposed LNG business and in partnership with Agip and EGPC, a gas pipeline might be built overland to supply Israel, Lebanon, Syria and Turkey - once Lebanon and Syria sign a US-brokered peace treaty with Israel.

The Mediterranean Gas Co. (MGC) was formed in February 1997 as a joint venture between EGPC, Agip (IEOC) and BP Amoco to develop big gas fields in four offshore blocks: Temsah and East Delta Deep Marine blocs which are operated by Agip (IEOC), and Baltim and Ras El Barr blocks operated by BP Amoco. Gas production from the four blocks began in late 1999 and will reach over 1,000 MCF/d by 2003/4. Most of the gas will be exported.

Natural Gas Vehicles Co. (NGVC), a JV between BP Amoco (40%), Egypt Gas (40%) and EGPC's engineering unit Enppi (20%) started operations in February 1996. Now it supplies CNG to a big number of natural gas vehicles (NGVs) and bi-fuel vehicles.

Shell, the second biggest among the world's super-multinationals next to ExxonMobil, has invested over US$3.5 bn in Egypt since 1979. For its Egypt gas businesses, Shell has a long-term upstream/downstream strategy. It is the biggest gas producer in the Western Desert and has a huge block in deep Mediterranean waters believed to be very rich in gas. It already has a marketing gasoline and other oil products along the Alexandria-Cairo highway.

Shell was to sign its 25-year gas franchise deal with EGPC/Gasco in early 2000 and to form a gas pipeline/marketing JV with the Global Infrastructure, a unit of Egypt's private Arabian International Construction (AIC) group. The Shell-led network is to serve the El Fayoum region. Shell is promoting a major gas export project, including an LNG venture.

BG Int'l is relatively a newcomer to Egypt. But it has quickly gained a very prominent ranking among the foreign operators exploring for and producing gas in Egypt. Its discoveries since 1997 have been the most impressive, and the recoverable gas reserves it has found since then are in excess of 11 TCF.

BG is quickly expanding its gas businesses in Egypt, promoting a project to export LNG, for which it received the government's initial approval in late 1999. Apart from its E&P ventures, BG leads a gas marketing franchise in Upper Egypt called Nile Valley Gas Co. (NVGC). Among downstream gas businesses it is considering is a venture to produce and market gas appliances in Egypt. An important part of the gas appliances would be exported to Middle East, African and European countries. BG is also studying a venture to produce gas air conditioning units which, according to Gasco, represent a considerable potential as a market in very hot and dry climates of Egypt and other African and Middle East countries.

Repsol of Spain has a strategy for upstream/downstream gas businesses in Egypt. It has applied for a franchise to market gas in a big industrial part of Greater Cairo. It is to build a 190-kilometre gas pipeline from its fields to an existing national trunkline called Southern Gas Pipeline, running east from the Western Desert gas field of Abu Sinan to the Dahshour industrial zone of Greater Cairo.

The focus of both EGPC and its main operating partners now is on the value-added loop around gas business. This is based on a value chain supported by three main drivers for integrated gas businesses: strong demand for gas and its downstream products in Egypt and neighbouring markets, favourable investment conditions, and a wide range of advanced technologies now made available to Egypt by the world's biggest companies in the hydrocarbon sector and the downstream. These drivers have allowed EGPC and its foreign partners the latitude to adopt various options for tapping into different points of the gas chain, points which are profitable on long-term basis.

Experiences in Europe and elsewhere in the world have shown that once gas reaches a market, demand for this clean and cheap source of energy and feedstock rises rapidly. The experience of Egypt is a good proof.