Al-Ahram Weekly Online   26 June - 2 July 2003
Issue No. 644
Current issue
Previous issue
Site map
Published in Cairo by AL-AHRAM established in 1875
Text menu
Comment Recommend Printer-friendly

Restructuring regional energy

A conference on the future of regional energy stressed the need for better integration between Eastern Mediterranean, Caspian and Black Sea energy markets. Eman Youssef reports from Istanbul

Key energy decision-makers from the Middle East and Europe met in Istanbul last week to discuss the increasing integration of Eurasian energy markets and the main issues influencing the future of energy in the Caspian, Black and Eastern Mediterranean Seas, as well as in the Middle East.

Organised by the Cambridge Energy Research Associates (CERA) and the Turkish Foreign Economic Relations Board, "A Tale of Three Seas: Conference for the Energy Future of the Caspian, Middle East and Russia" attracted a host of international companies, senior officials from France, Germany and Russia, representatives from the Middle East and a number of local councils.

"For a long time, we have been discussing the transport of Caspian oil and natural gas through Turkey to Western markets," said Turkey's president, Ahmet Necdet Sezer, at the conference opening.

Turkey, blighted by economic difficulties in the last year, is reviewing its energy policies and taking steps to diversify and secure its energy supply. Although it buys natural gas from next-door Russia and Iran, Turkey is banking on being a junction for the natural gas pipelines originating in neighbouring countries.

Sezer said that Turkey is to become a transit country in the supply of gas to southern Europe and that the government has taken concrete steps in this direction.

Egypt, too, is closely eyeing its energy options. Rising domestic oil demand is sparking fears that the country could become a net oil importer by 2005-2010. Exploration activity, particularly in new areas, is being counted on to supply sufficient oil in the coming years to maintain crude production comfortably above 800,000 bbl/d. Egypt's proven crude oil reserves are estimated at 3.5 billion barrels.

In March, British Gas (BG) Group and its partners delivered the first gas from the Scarab Saffron fields to the Egyptian domestic market. The Scarab Saffron development is in the BG-operated West Delta Deep Marine (WDDM) Concession and is a central part of BG's rapidly developing gas business in Egypt.

Scarab Saffron, located 120 kilometres north of Alexandria, is the largest gas field development project in Egypt. Their aim is to be the premier gas operator in Egypt by 2006, when 40 per cent of total domestic production is expected to come from fields they operate. By then, predicted production is set for 330 million standard cubic feet of gas per day.

Egypt's gas sector is becoming increasingly important and is growing rapidly. Operators working in the country have discovered that Egypt offers opportunities that many larger oil and gas producing countries cannot match.

"Gas will play an increasingly important role in the world's energy mix through the 21st century and Europe's gas demand is forecast to grow substantially," Joseph Stanislaw, CERA's president, told Al-Ahram Weekly. "Oil is still the indispensable fuel for today's ever-industrialising world and it will certainly not relinquish its primary position at least over the next three decades."

From now to 2020, oil demand is forecast to grow at an average of 1.5 million bbl/d annually, Stanislaw said. By then, worldwide demand growth will require some additional 30 million bbl/d of oil supply -- a figure equal to a full 40 per cent of today's production.

"Economies racing ahead on cheap oil will come to a speedy halt," said Laurent Ruseckas, CERA director of Caspian Energy. "Two or three years of low oil prices can lead to economic and financial crises in the countries whose economies are highly dependent on the petroleum sector. Low investment and shortage of supply could trigger significantly higher prices than the current OPEC basket price of $22-28, increasing the potential for a global economic crisis."

Keeping in mind the anticipated 30 million bbl/d of increased global demand by 2020, the investment capital needed to achieve and maintain this level of production amounts to some $120 billion annually, Ruseckas said.

Meanwhile, the situation in Iraq is expected to lead to major structural changes in the global energy industry. "The war is over in Iraq and the post-war situation is unfolding in ways that might not have been expected," said Issam Al-Chalabi, Iraqi former minister of oil and a private consultant specialising in oil and gas in the Middle East. "We need to be realistic in viewing Iraq's oil prospects. We have to encourage international investment to develop its production to a level more compatible to the country's huge reserves."

Al-Chalabi said a new Iraq is in the making, although its shape and destiny are largely unknown. He said all future Iraqi oil revenues, Iraqi money abroad and all assistance granted to Iraq will be deposited in the Development Fund.

"The strength of Iraq's position when it returns to the world markets remains to be seen," he said.

Whereas the country's pre-1990 production capacity stood at 3.5 million bbl/d, production prior to last March was 2.7 million bbl/d. In fact, Iraqi oil exports reached a level of nearly 2.2 million bbl/d through certain periods of the Oil-for-Food programme.

Al-Chalabi said it took several weeks for the oil establishment to restore production to meet local consumption needs. After having fallen to a meagre 200,000 bbl/d, production rose to 700,000 bbl/ d in early June. By July, output is expected to reach 1.3 million bbl/d and increase gradually to around 2.7 million bbl/d by year's end. Exports are expected to fluctuate, possibly starting at around half a million bbl/d and increasing gradually to around two million bbl/d by year's end.

"The oil industry situation in Iraq today is in a state of dilapidation," Al-Chalabi told the Weekly.

Much assistance will be needed from foreign companies, including service, drilling, construction and engineering firms. The estimated cost for these programmes at present is around $5 billion, Al-Chalabi said.

Iraq's production capacity can be increased to eight million bbl/d on its current proven oil reserves of 112 billion barrels, Al-Chalabi said, although this may not happen before 2010. But to achieve this, major involvement of foreign investment, technology and expertise must be counted on.

"Today, there are those who are proposing that Iraq should withdraw from OPEC," he said. "This is against the country's interests and will serve no purpose. But Iraq cannot be properly represented in OPEC or any other international organisation until a recognised government is installed."

He said that a project to export gas to neighbouring countries, and possibly to Europe, should be among Iraq's future projects.

© Copyright Al-Ahram Weekly. All rights reserved

Comment Recommend Printer-friendly

Issue 644 Front Page
Egypt | Region | Interview | International | Economy | Opinion | Press review | Letters | Culture | Living | Features | Heritage | Sports | Profile | People | Time Out | Chronicles | Cartoons | Crossword
Batch View | Current issue | Previous issue | Site map