Did foreigners monopolize Egypt's oil wealth?

Abdel Hafez El Sawy

Energy is an important strategic issue in Egypt, in light of its needs for domestic consumption, which is increasing annually by about 3%, and in the midst of new trends aimed at Egypt to be a regional energy center, especially after the operation of the field "Zohr" full capacity in the East The Mediterranean, and the signing of an agreement between Egypt and the Zionist entity worth 15 billion dollars for ten years, under which Egypt imports natural gas from the Zionist entity, in order to liquefy and export to the external market.

Since the second half of the 1970s, Egypt has become an oil exporter, albeit in small quantities. Egypt has five holding companies to manage its wealth of oil, natural gas and mineral wealth, and through these five companies there are subsidiaries, including what is owned by the public sector by about 12 companies, in addition to 41 joint companies working in the field of oil and gas.

However, despite the large number of Egyptian state-owned companies, or in which the private sector is involved, foreign companies dominate Egypt's oil and natural gas wealth. Most of the discoveries are made through contracts with these companies.

Major fields have also been discovered and the investments needed to produce them have been paid for by foreign companies, such as in the Zohr field in the Mediterranean, by Italy's Eni, or the West Delta field controlled by the British Gas Company.

Foreign Investments
According to the data of the Central Bank of Egypt's annual report on the Egyptian economy; the inflows of foreign investors in the oil sector represented $ 46.8 billion between 2012-2013 and 2017-2018, with an annual average of $ 7.8 billion.

It is noteworthy from the analysis of the data of foreign investment flows to Egypt during the same period, that foreign investments in the oil sector accounted for between 53 and 70% of the total foreign investment flows, which means that the sector is the focus of foreign interest for their investments in Egypt, and that they generate profits to pay for this the focus.

Foreign companies have traditionally monopolized research, exploration and production in Egypt over the past decades, especially the British Oil Company and Italy's Eni, along with companies from Spain, Malaysia, France and America.

Lost opportunity
Despite the presence of oil and natural gas in Egypt since the mid-seventies, as well as the presence of oil and gas in large quantities in neighboring countries of Egypt, such as Libya, or in other Arab countries in the Gulf, Egypt did not turn to invest in oil and gas, especially exploration and production activities, although it has the resources Necessary human, scientific potential across universities.

Egyptian investments in the oil sector were limited to oil refining or transportation of petroleum products. Natural gas liquefaction activity, in which Egypt participated with the participation of foreign companies in small shares, won these companies later in monopolizing this activity.

Egypt has two large gas liquefaction plants; the first is in the city of Edko, with a 24% ownership interest in Egypt, while a British company owns a 35.1% stake, Malaysia's Petronas 35.1% and France Gas 5%.

The plant in Damietta was controlled by Italy's ENI with a 40% ownership, a Spanish company with a similar 40% stake, and Egypt with only 20%.

Thus, the benefits of liquefied natural gas (LNG) activity in Egypt go largely to foreigners, and Egypt has only a small share.

This unloads the agreement to import natural gas from the Zionist entity, which was concluded in 2018, worth 15 billion dollars for ten years, for two reasons: First, the carrier and owner of the pipeline (Eastern Mediterranean Gas Company) joint ownership between Egyptians and Israelis, and therefore they are partners in Revenue from transportation and sale of natural gas.

When the gas arrives for liquefaction in Egypt, the largest share of the proceeds of the liquefaction goes to the benefit of British, Italian, Spanish, Malaysian and French companies.

Complementing Egypt's modest return on oil activity, statistics on oil exports include the foreign partner's share of 35-40%.

Thus, accurate calculations require that foreigners' share of Egypt's oil exports be excluded, so that we are aware of the correct revenues of Egyptian oil exports.

Preparation of export data in this way follows the rules of the International Monetary Fund, which considers that the exit of goods from a country is classified as one of its exports.

Looted gas fields
In mid-2019, Egypt announced self-sufficiency in natural gas, after the full capacity of the Zohr field came into effect, at 2.7 billion cubic feet per day.

However, we must show the nature of ownership in this field, as well as in the field of "West Delta", which was signed by Egyptian President Abdel Fattah al-Sisi at the Sharm el-Sheikh conference in March 2015, and was scheduled to enter the field of production in 2017.

The West Delta field includes five fields, and was the subject of a dispute between the successive governments of Egypt during the era of Mubarak and the British company, but Sisi ended this dispute by signing a new agreement, under which the British company pumps $ 12 billion in investments in the field, in return for ownership of the entire field, as well as provided The British company supplies production to the local market for Egypt at a price of three to four dollars per million thermal units, and the British company does not commit to anything else with Egypt except duties and taxes.

The Zohr field was a spoil for Italy's Eni, which receives 40% of the field's revenue to recover investment costs, in addition to a 35% share of the field's revenues. The company's share should be only 35% of the revenues of the field after the recovery of investment costs estimated in billions of dollars.

However, after entering the project, the Italian company sold part of its stake to other foreign companies, and Egypt only received a commission to transfer ownership.

The nature of these deals is that the share of the partner should be re-evaluated based on the market value, which undoubtedly increased after the confirmation of gas extraction and the start of production, and we can imagine that Egypt is far from these profits. , For receiving just a commission.

In conclusion, when economists described waste of resources as characteristic of underdeveloped countries, they were right, because development management does not mean hollow slogans such as Egypt becoming a regional energy center, but the lesson of the added value that Sisi's governments should have maximized towards Egypt's oil and gas wealth, Its distribution is not in favor of foreign countries, or the marketing of the interests of the Zionist entity, in order to support the Sisi regime regionally and internationally.