Integrating the Mashreq Gas Market and the European Internal Gas Market “Gas exports from by Pipeline & LNG”

By Ahmed Said El Ashmawi Head of the Minister’s Technical office Ministry of Petroleum-Egypt

19 th of June 2008 1 Energy as a driving force for Integration • The European “Coal & Steel Treaty” has launched the European community integration in 1952, and was very largely a “Peace project” between France and Germany and provided a model for promoting social change through a new form of co-operation at European level. Energy was thus at the heart of the original idea of European integration and still covers a crucial role in the European policy today.

2 Integration of the Euro-Mashreq Gas Market In the same manner, The establishment of an interconnected Mashreq gas market, that could be further extended to Europe, can play an important role as a vehicle to enhance the security and safety of energy supplies, and in the same time promote regional cooperation and integration.

3 Features of the Euro Mashreq Gas Market

4 EU: a Gas Turkey is the bridge to Europe ,There are excellent importer that market opportunities for AGP is seeking to secure and Syria has Potential to play a major role diversify its in exporting, and transporting natural supplies gas. Turkey Iraq: Large gas reserves. Akkas Iraq Lebanon: a Gas Field offers fast export potential importer Located close to Syrian border it could utilise existing neighbouring gas infrastructures to provide access to AGP

Egypt: Adequate gas reserves Jordan: a Gas importing for domestic demand, regional and transit country supply and export to Europe.

5 Features of the Mashreq Gas Market What Does It Take To Establish A Regional Gas Market 1. A physical infra structure to link buyers and sellers 2. A legal and Regulatory Frame work that allows the Market to operate smoothly and attract investors 3. Qualified technical expertise to operate safely, efficiently, and according to industry standards

6 Euro-Mashreq gas Cooperation Center “To contribute to the integration of the gas markets of Egypt, Jordan, Lebanon & Syria in view of creating a regional internal gas market to be integrated with the EU Internal Gas Market”

Timing 33 months, from 1 st February 2006 to 31 st October 2008

€7 million, of which EU grant €6 million, beneficiary countries Budget €1 million in kind contributions

Location Egypt, Jordan, Lebanon, Syria

The Euro-Arab Mashreq Gas Co-operation Centre, Mechanism headquartered in Damascus

Approach Gas Master Plan, Legislation/Regulation, Know-How Transfer

7 Overview of Egypt’s Oil &Gas Industry

8 Overview of Egypt’s Oil & Gas Industry • Egypt is one of the world pioneers to start oil activities. • First discovery of crude oil in Egypt in recent history was in 1868. The first oil well drilled in Egypt in 1886, and the first commercial production started in 1909. • Morgan Field, the first major oil field in Egypt, was discovered by Amoco in 1963. • The first gas field “Abu-Madi” was developed in 1975.

9 SOLAR- 1 SERPENT SCARAB SEMIAN TEMSAH SETI SAFFRON TENNIN RENGA SIGAN SAPPHIRE SIENNA N. WAKAR / KERSH SAURUS-1 DENES TERSA TUNA FAHD HJ-1 BARACODA K-1X SETH BARBONI ROBY-1 HAPY ZARAF-1

L-1X N. ASSAD AKHEN SEMAN OCTOPUS EL MAX-1 E. BALTIM KARAWAN TAO MYAS KAMOSE ABU SIR - 1 S. SQUOIA S. BALTIM ABU SEIF ROSETTA EL WASTANI NIDCO ASFOUR THEKAH N. NOURAS EL QARAA EL BAHIG N. IDKU KAROUS S.E.PORT FOUAD WASTANI EAST ABU MADI PORT FOUAD DARFEEL EL KING W. ABU QIR Aqiq KHALALA

ABU QIR DESUQ SHERBEEN FAYROUZ S. BILQAS GELGEL QANTARA MANSOURIYA-1

S. BATRA More than 1 TCF (11) ABU MONKAR KABER More than ½ TCF (21) MANSOURA S-1 EAST DELTA-S 10 Less than ½ TCF (45) 9 Egypt Proven Gas Reserves (TCF)

80 73.0 70 60

50 44.9 40

30 24.2 20 12.3 10 8.1

0 11 1986 1989 1992 1995 1998 2001 2004 2007 10 Yet to Find (YTF) – Deepwater Potential Only

60,000 Assuming all YTF discoveries are gas, this equates to ~ 90 Yet-to-Find Reserves 50,000 tcf Remaining Reserves Produced Reserves 40,000

30,000

20,000

10,000 Reserves (mmboe)

0

-10,000 UK Italy India Brazil Egypt Congo Nigeria Mexico Angola Canada Norway Malaysia Australia Indonesia Mauritania Philippines Cote d'Ivoire Mozambique Equatorial Guinea Trinidad & Tobago US Gulf of Mexico

12 Diversified Natural Gas Market

13 12 Egypt among the First Twenty Countries in the World In Natural Gas Production

14 Shapas

Repco Gas m G .

k

Denies Wastany L N G Fenosa M E 3 Rehab ps North 32 “ 165 k.m 9 Taurt Akhen L 3 Eidku Roseta Burullus ElQar’a / - Baltem Temsah P Scrab & Safron 24 “ 50 k.m “ e North N. in 6 r 3 Samra ps Alex. Hapy Theka a D M West Naf Abu Madi G Abu Sair 42 “ 150 k.m U Port Fouad Bardwell ElSheikh ELObyed Abu Qir South Batra Zowayed Matruh Abu South Port Said Helm Arish Belkas Flower Qir 30 “ 26 k.m Talkha Manzalla P.S Town P.S 12 “ 40 k.m Gas N. Sinai 22 “ 40 k.m 42 “ 40 k.m Fayroz Salam King Town Gas m East gas Egypt Gas 42 “ 40 k.m 36 “ 196 k. Bahig EL Max Natgas Abu Shabshir El-Tina Hommos 24 “ - 45 k.m –36 78 آ South Shams 34 28 “ 40 k.m South .m Romana 28 “ 16 k.m 7 k “ Sedi “ 16 Transgas Mansora 32 32 “ 60 k.m 36 “ - 33 k.m e اد - Um Barakh Tarek 2 Kreir P.S 3 Natgas Town Gas Sinai n 4 Intergen 2 k 24 “ 45 k.m 8 24 “ 125 k.m 16 “ 165 k.m Cement i .m P.S Mahmudya p.s “ l 18/16” 13km 8 & Ind. Area Egypt Gas 6 e 12” 14.5km k EL Shabab p 1 .m 24” 15km .m National Gas E i Vegas k 8 42” 65km 40 Qusina El Kasr Ameriya “ a P “ 4 .m Alkaram Natgas 2 Abu k Abu Abu Soultan 114 s - Zabl “ s 24 “ 26 k.m W.D.G. Nobaria P.S 16 Soltan P.S t 2 Banha 10 th of a Complex 32” 70 km 1 32 Ramadan G “ G 2 Egypt 2 Mleha 2 Ameriya 24 “ 26 k.m 00 Natgas k Gas 4 a .m 30° m “ Deeps k . Cement s r k Borg Egypt Gas 1 j . Natgas 1 El Sadat 4 P m 8 Elarab Town Gas 5 a 1 Cairo 32 “ 110 k.m Town Gas k i - 12 “ 14 k.m 6 October F . p Neag Mostorud I. A m South “ e 4 Natgas Suez Shell 2 2 l 4 i 42” 80 km ” 24 “ 25 k.m n / Ayoun 2 e Bed-2 0 Moussa ” “ Fayum Gas off take Aqaba 6 Bed-3 5 City 36 “ - 264 k.m Dahshour k Gas Aqaba . Abu Sannan m P.S Bed-1 24 “ - 265 k.m Town Gas Taba Sinai Manganez Abu Tebbin El Ghradik Fayum Gas Qarun 22 “ 87 k.m Sokhna 24 “ 10 k.m 36 “ 88 k.m Koraymat Suco Fields 18 “ 162 k.m Abu Rudies Vally off take Za’frana P.S PPC 20 “ - 208 k.m 30 “ 28 k.m 16 “ 192 k.m

Beni Suef 16 “ 256 k.m Petrobel Ras Bakr 32 “ 150 k.m Unit 103 Gupco Ramadan Minya Esma 2 Esma 8

City Gas Badri 20“ - 40 k.m Abu Qurqus 16 “ 75 k.m Sharm Morgan Elshekh Existing.Existing. P/LP/L Ras Shukier Suco Under Cons. P/L Unit 104 Gupco Sho’ab 32 “ 136 k.m Agiba Ali Oil Gulf Under Study. P/L Sea New Assiut Bird ExistingExisting Comp.Comp. StationStation Assiut 24 “ 127 k.m Under Const. Comp. St. FutureFuture Comp.Comp. StationStation Gas Fields 32 “ 125 k.m 24 “ 48 k.m FutureFuture GasGas FieldsFields 20 “ 38 k.m Sohag Dar El-Salam FacilitiesFacilities Safaga New P.S Gerga Deshna Distribution Station 30 “ 147 k.m Total Length Queft PowerPower StationStation Nag Quena hamady Kuos IndustrialIndustrial AreaArea 16.5 Thousand Luxor Consumer 30 “ 240 k.m

Distribution Co. Off Take Esna ExportExport Km 31° Edfo

Kom 15 Ombo 13 Aswan

Nov. 2007 KIMA Gas Share in the Local Market 2006/2007

Residential Cement 2% CNG Industry 6% 1% 10% Natural Gas Oil Products 50% 50% Petroleum 10% Electricity 61%

Fertilizers 10% Total Local Local Gas Consumption Hydrocarbon Consumption By Sector 16 Egypt ’s Gas Export Projects

FRANCE

ITALY

SPAIN TURKEY

USA SYRIA LEBANON

Arish JORDAN Idku Damietta

EGYPT 17 DamiettaDamietta LNGLNG ComplexComplex

 Investments 1300 MMUS$ (including LNG Tankers)  Markets Spain/Italy  Shareholders Union Fenosa Gas 80% EGAS/EGPC 20%  Capacity 7.5 BCM/Year  Start-Up Jan. 2005  General Kellogg / Brown&Root Contractor Enppi/Petrojet  Subcontractor 18 14 IdkuIdku LNGLNG ComplexComplex

 Investments 1900 MMUS$ (2 Trains)  Markets France/ USA/Italy  Shareholders BG 35.5% Petronas 35.5 EGAS/EGPC 24% Gas De France 5%  Capacity 10.0 BCM/Year  Start-Up May-2005 (1 st Train) Sep-2005 (2 nd Train)  General Contractor Bechtel  Sub Contractor 19 Enppi/Petrojet 15 Shipments of Egyptian LNG Exported to Europe January 2005 – End of May, 2008

Others 56%

Europe 44%

Total Shipments of LNG Exported = 450 shipments 20 The Arab Gas pipeline

21 TheThe ArabArab GasGas PipelinePipeline

The Arab Gas Pipeline, aims to transport and distribute Egyptian Natural gas to Jordan, Syria and Lebanon in its first phases. The project can be further expanded to allow Iraq and other Major gas producers in the region to export their natural gas to Europe, or even in the opposite direction through additional networks and loops thus forming the “Arab Gas Network ”.

22 Main Milestones for the Arab Gas Pipeline

(December 2000) : Signature of the MOU between Egypt, Syria and Lebanon to construct the Arab Gas Pipeline (February 2001) : Jordan joins the Agreement (June 2001) : Signature of Gas Sales Agreement between Egypt and Jordan (September 2001) : Arab Funding agents agree to finance the Project

23 Turkey ArabArab GasGas PipelinePipeline Phases:Phases: Turkey Turkey --Over Over allall length=length= 15001500 kmkm --Nominal Nominal capacity:capacity: 1010 BCM/YBCM/Y Syria Syria Phase -1 Arish -Aqaba Banyas (264 km) July 2003 Homs Phase -2 Aqaba -Rehab (394 km) February 2006 Phase -3 Rehab -Syrian Tripoli Borders (30 km) completed early 2008 LebanonLebanon 36” Phase -4 Rehab -Homs Damascus (330 km) completed early 2008) Rehab Phase -5 Homs -kilis (220 km) Arish Amman (under negotiation ) Phase -6 Port Kilis -Turkish Network (90 km) 3 Jordan 6 Said ” (under tendering) Sinai Egypt Lebanon Branch completed 24 CAIRO Taba Aqaba Responsibility :Botas • 36” dia Pipeline (Kilis-Türko ğlu Interconnector) • Length 94 km Status: Under Realization

kilis

Arab Gas 25 Pipeline Gas to Europe: Nabucco and ITGI

26 Key success factors

1. Political will and support

27 2- Completion of phases 1 &2 in record time due to efforts of dedicated consortium of Egyptian petroleum sector companies

mines swamps Loose soil

Gulf of Sand mountains Aqaba dunes Gulf of Aqaba crossing

snow rocks Depth 850m

28 21 33-- SecuringSecuring ofof requiredrequired Finance:Finance: The projects are economically feasible, a number of reputable financial institutions have responded swiftly to finance a portion of the completed phases. For phases 1 and 2, 430 million US dollars , were provided by the following financial institutions : -- European Investment Bank (120 MMUS$) -- The Kuwait Fund For Arab Economic Development (100 MMUS$) -- The Arab Fund For Economic And Social Development (50 MMUS$) -- The Jordanian Housing Bank for Trade and Finance (Commercial Bank) 29 (160 MMUS$) EU Support

30 The EU’s Vision The 3 rd Euro-Mediteranean Energy Ministerial Meeting- Athens (2002)

The Arab gas Pipeline will play a major Role in connecting with Europe and Asia 31 24 The Euro-Med Energy Ministerial Conference in Rome in December 2003

During the Euro-Med Energy Ministerial Conference in Rome in December 2003, two Declarations of Intent were signed to study the extension of the Arab Gas Pipeline and define a gas pipeline corridor to Central Europe.

32 Egypt as An Energy Hub “A New Horizon”

33 Egypt as An Energy Hub

• Egypt, with its strategic location can be a hub for oil and gas playing a major role in securing part of the Euro-Med energy supplies. • This vision will help to achieve the EU’s objective to improve Energy Security and Supply Diversification.

34 Egyptian Assets

• Political And Economical Stability. • Appropriate Fiscal Incentives. • Availability Of Skilled Human Capital. • Transparent Regulations. • Positive Relationship Between Petroleum Sector And Our Partners. • The Success Already Achieved This Far Coping With Our Planned Strategic Goals. 35 29 30 31 32 33 34 32 NewNew PlannedPlanned RefineriesRefineries

Gemsa Abu Qir Damietta

Alexandria El Max Port Said Marsa Arish 31 Matrouh Sedi Krir Ameria Damanhour Tanta 

Banha Ismailia Cairo Mostorod Suez 30

Sukhna

Beni Suef G 29 u llf o Bakr f Gharib S u e Menia Shoukeir z 28

Assuit

27 Existing Refining Capacity 35 MM Tons Planned Refining Capacity 31 MM Tons 36 27 Skikda Arzew

ExistingExisting Gas Gas Pipelines Pipelines GasGas Pipelines Pipelines Projects Projects ProposedProposed Pipelines Pipelines LNGLNG Exports Exports Egypt as an Energy Egypt as an Energy37 Re-gasificationRe-gasification Units Units LNGLNG Plants Plants Hub 28 38