Egyptians join great oil rush

Press, 3 February 1981, Page 19

Egyptians join great oil rush

From

DAVID ROGERS,

NZPA-Reuter, in Cairo

Egypt', its economy revived by oil revenues, is stepping up a search fo r new fields, from the Mediterranean coast of Sinai to desert areas near the Libyan border. A total of 36 exploration contracts have been signed with foreign oil companies since last May — almost twice as many as were previously agreed. For a share in the oil field, foreign companies are committed to spending more than a billion dollars in the next few years to try to achieve Egypt’s/ long-cherished goal of producing one million barrels per day. ',- President Anwar Sadat originally set 1980 as the year production should reach this level, but although output has crept up, sometimes topping 700,000 bpd, last month’s average was only 680,000 bpd. t . The indistry’s failure to fulfil ambitious early predictions has been more than compensated for, however, by the rise in oil prices and earnings. Although Egypt, • which does not belong to 0.P.E.C., exports less than

one-third of its oil, oil income now matches remittances from Egyptian workers abroad, which have for years been the biggest exchange earner. Oil income has jumped from $311.8 million in 1976, when Egypt first became a net exporter, to an estimated $2.85 billion last year. Egypt is expected to record a 1980 balance of payments surplus of $1.2 billion, while oil has be-

come an economic lifebelt for a Government whose popularity rests on. its ability to subsidise prices of imported food for a population growing by one million every 10 months. About three-quarters of Egyptian oil comes from offshore wells in the Gulf of Suez. There are smaller fields in Sinai, the Sahara, and the eastern desert. Last month, the oil search broke new ground when Mobil Corporation subsidiaries struck oil for the first time in Egyptian waters in the. Red Sea.

Tests still have to confirm whether it is a commercial field, but Egyptian officials predicted it would encourage others to drill in the region. Egypt started giving concessions to foreign companies in 1973 and the search has intensified in recent years. With the signing of recent contracts, exploration is set to increase dramatically. “Last year it was the seismologists who were

coming in; now it is the drillers,” one company official said. With a world-wide shortage of rigs, officials say it will be some . months before the companies are geared up for the new phase. The search will continue to be centred on the Gulf of Suez. Foreign companies have now bought up every exploration block in the Gulf, where Egypt’s three biggest fields, Morgan, Ramadan, and July, are located, The last remaining

blocks in the Gulf went to the American company, Conoco, and Total of France. They undertook to spend at least $176 million on exploration, by far the biggest contract concluded by the Egyptian General Petroleum' Corporation, the state body that runs the industry. Egypt’s reserves are variously estimated at between two and three billion barrles; its topquality Suez crude is now selling

at $40.50 a barrel. Israel is the biggest single buyer, with 40,000 bpd, and other exported oil is sold on an auction basis. Despite official optimism, some experts in Cairo have reservations about Egypt’s long-term position. They point out that new finds are needed to make upi for the depletion of the biggest fields and that fast-rising domestic consumption seems to rule out a big increase in oil for export in the near future. Petrol, which sells for less than half European

prices, Is one of numerous products subsidised by the Government. “The price is absurdly Tow and the waste is awful,” a Western diplomat commented.

Domestic consumption accounts for almost half Egypt’s production and foreign experts say .it is going up more than .10 per cent annually with no sign of effective curbs in sight. After the oil companies have .taken their share, some 160,000 bpd is at present left for export.

The surge in oil prices since early 1979 has made that sufficient to give a new look to Egypts financial statistics. The balance of payments deficits of. the 1970 s have become a surplus.

Next week, Egypt has a meeting with its major Western aid donors in the southern resort town of Aswan. In the past these conferences have centred on prickly debt problems and helping Cairo balance its books. “This time it is a meeting we can really look forward to and oil is chiefly to thank for that,” a Finance Ministry official said.