In Egypt, the first nation in the region in which oil was discovered, the petroleum sector makes an massive contribution to the growth of the local economy. In fact, its role in the economy has taken on new importance since 2000, when the Ministry of Petroleum set up a comprehensive strategy that included a number of new implementation mechanisms focusing on adjusting and developing the structure of the sector.

Export-oriented mega-projects aimed at maximizing exports have since bloomed, and state-of-the-art technology is deployed throughout the industry. Also included in the strategy was a human-resources development plan to create new job opportunities.

During those six years, 98 agreements were struck, totaling $2.6 billion. These consisted of 63 agreements on new oil and gas exploration, 21 amended agreements, and 14 agreements amending pricing policies. The agreements were made under the new governing laws allowing maximum profit and revenue generation for the government side while preventing the exploitation of the discovered sites against the nation’s interests.

Since July 2000, agreements with foreign investment partners brought in an excess of $6.8 billion and saved the local economy from recent price swings in the petroleum market.

Following a string of major discoveries, natural gas exploration has gained greater attention, and natural gas is now being exported to Europe and the United States as Egypt has become the world’s sixth-largest producer of the fossil fuel.

New discoveries numbered 227 in all — 153 crude-oil discoveries and 74 natural gas. These new discoveries increased reserves by an estimated 8 billion barrels of crude oil, a figure equivalent to approximately 78% of total proven reserves, as well as about 82% of the total added natural gas reserves.

FY2004-05 alone saw 49 new petrochemical discoveries, 38 being crude oil and 11 natural gas. Proven reserves of crude oil and condensates reached a record 15.5 billion barrels, compared to 11.8 billion barrels in 2000. Production increased from 14.6 million tons in 2000 to 25.5 million tons this past year, a 75% rise.

The capacity of the local refining industry is currently estimated at 35 million tons per year. The Egyptian petroleum sector turned out a record 31.4 million tons of refined product in 2005 — all produced by public-sector refineries such as MIDOR.

The petroleum sector has since taken several effective steps towards further increasing its ceiling. Increased production, quality petrochemical products and compliance with new environmental regulations will help secure Egypt’s share of the international market and boost profitability.

The petroleum sector recorded approximately 18.5 million tons in total exports in FY2004-05 (a 30% increase compared to 1999-00) as export receipts climbed to $5.4 billion, a 125% increase compared to the 1999-00 figure of $2.4 billion.

Investments by foreign and joint-venture companies operating in the field of exploration and development reached $9.5 billion, reflecting the attractiveness of the petroleum sector to major multinational investors. This comes as a result of the prevailing political and economic stability and the ability of the local market to support mega-projects.

In addition to foreign investment, Egyptian investors from the public and private sectors sank an additional $3.5 billion into the sector: $2.7 billion from the public sector, $515 million private and $325 million from local banks. These investments went toward oil exploration, production, refining, processing, transport and marketing. Total investments in the fields of liquefaction and natural gas exports alone topped $3.2 billion.

Since mineral resource activity was added to the responsibilities of the Ministry of Petroleum and the subsequent establishment of the General Authority for Mineral Resources in 2004, Egypt’s oil sector now consists of five bodies: the Egyptian General Petroleum Corporation, the Egyptian Natural Gas Holding Company, the Egyptian Petrochemicals Holding Company, Ganoub El-Wadi Petroleum Holding Company, and the Egyptian General Authority for Mineral Resources.

BG Group in Egypt is one of the largest investors in Egypt’s natural gas industry. A pioneer in liquid natural gas (LNG) shipping with expertise dating back to the first-ever trans-Atlantic shipment in 1959, BG has operated in Egypt since 1989. It is a leading player in the development of the local gas business — together with its partners its investments here are worth over $4 billion — and is committed to supplying both the domestic and international markets.

Currently, BG Group operates the largest share of Egypt’s gas production, accounting for over 40% of the country’s gas output, and continues to actively explore for more gas. BG Egypt supplies a large portion of the gas produced for sale in the Egyptian domestic market, in addition to gas processed in the Egyptian LNG (ELNG) project.

Initial drilling established world-class gas discoveries, and in 2001 the concession agreement was amended to allow the concession holders to export LNG from Egypt. In 2002, an LNG sale and purchase agreement was signed with GdF to purchase 3.6 million tons per annum of LNG from Train 1 of the facility.

Bechtel was commissioned to construct the liquefaction plant, which includes storage tanks, a port for receiving and dispatching LNG cargos, a one-kilometer breakwater and associated utilities. Egyptian LNG projects have been consistently breaking industry records, setting a benchmark by delivering the first LNG cargo just four and a half years after the initial gas field discovery.

In 2003 a second, identical train was developed, the entire output of which was sold to BG Gas Marketing via an LNG Sale and Purchase Agreement. Also that year, Edison energy group sold out of the upstream and the downstream projects to an affiliate of Petronas, the Malaysian national oil company, which then become a major shareholder. The ELNG site has been designed to accommodate growth and has sufficient space for an additional four LNG trains, one of which is now under development.

The $2 billion ELNG infrastructure creates trade worth over $1 billion every year. ELNG loads and dispatches an LNG tanker every three days and has become the largest LNG exporter in Egypt. The project helped the country leap into sixth place worldwide, joining an elite club of LNG-exporting countries.

BG Egypt continues to plan for growth. The company is currently working to develop a third train of LNG at Idku. On July 17, 2006, BG Egypt, along with its partner Petronas, signed a concession agreement with the Egyptian government for the exploration of gas and oil in the North Sidi Kerir Deep Offshore Area.

BG Egypt operates and holds a 50% interest in the North Sidi Kerir Deep Offshore Concession Area, which is located offshore of the Nile Delta, adjacent to the West Delta Deep Marine Concession Area. Petronas Carigali Overseas holds the remaining 50% interest.

BP Egypt has been involved in the Egyptian oil and gas industry for more than 40 years. It produces almost 40% of Egypt’s entire oil output and has invested close to $14 billion in the local economy, making it the single largest foreign investor in the country.

BP began oil exploration in the Gulf of Suez in 1963, and by the mid-1980s was producing more than 500,000 barrels per day. In the past four decades, BP has produced almost 5 billion barrels of oil in Egypt.

As Egypt’s domestic market continues to grow, BP is actively working to ensure that its needs are met. BP is searching for more natural gas in the Nile Delta and investing heavily to develop and increase production from existing discoveries. BP and Gulf of Suez, in a joint venture with the Egyptian General Petroleum Corporation (EGPC), have outlined a strategy that focuses on upgrading infrastructure, drilling to reach technical limits, and continuing infrastructure-led exploration.

BP and its partners currently produce over 1 billion cubic feet of gas per day (gross), which represents nearly 30% of domestic gas demand. In the next five years, BP plans to increase both its production and market share by developing existing discoveries in the eastern part of the Delta, as well as bringing on additional production from discoveries in the Western Delta.

Egypt has become one of the leading suppliers of LNG in the world, with three LNG trains in 2005 supplying Europe and points beyond from its strategic location in the Mediterranean.

BP is well placed to have a key role in supporting Egypt’s plans for LNG exports. BP Egypt and its partners have signed an agreement to deliver natural gas to the EGAS in 2008 to supply the first Spanish Egyptian Gas Company LNG train at Damietta. In addition to supply, BP Gas Marketing is also purchasing LNG under a long-term sales and purchase agreement from EGAS.

Another of BP’s major projects in Egypt was the construction of a natural gas liquids extraction plant, complete with the associated export facilities, on Egypt’s Mediterranean coast. The project, which is owned by a joint venture called United Gas Derivatives Company, has the capacity to process 1.1 billion standard cubic feet of natural gas per day. It can annually export over 300,000 tons of refrigerated propane, in addition to producing over 330,000 tons of liquid petroleum gas and 1 million barrels of de-butanized natural gasoline for domestic sale in Egypt.

BP owns 40% of the Natural Gas Vehicles Company, which in 1996 opened the first public compressed natural gas (CNG) fueling station in Africa and the Middle East. Today, Egypt is firmly established among the top 10 CNG-producing countries. The success of BP’s 51 stations is a testament to the importance of this environmentally friendly alternative.

BP is also privileged to partner with organizations including the Fulbright Commission, the Future Generation Foundation and the LEAD Foundation to provide training and skills development. Furthermore, BP’s School Renovation program is set to help the renovation of public schools, which aligns with its efforts to help enhance the quality of public education in Egypt.

Committed to the development of Egyptian natural gas distribution, the National Gas Company (NATGAS) is constantly advancing its technology and working towards sustainable development of the industry. NATGAS has continually increased its business in natural gas infrastructure development, investing about LE 2.5 billion since 1998.

NATGAS is committed to delivering value and economic balance to the natural gas distribution business. It has experienced rapid growth in the number of contracted and supplied customers, whether domestic, commercial or industrial. The company earned the trust of its 150,000 new clients by building new and improved infrastructure, laying the groundwork for its future projects. Client numbers are increasing in all sectors within NATGAS concession areas —El Salam City, Nahda City, Sixth of October City, Damanhour, Kafr El-Dawar, Borg El-Arab, West Alexandria and Agamy. The company expects to reach 450,000 domestic, 2,000 commercial and 300 industrial clients by year 2010.

The business ventures of NATGAS have created hundreds of employment opportunities for the Egyptian workforce, providing jobs as contractors, subcontractors and direct office staff across the country. In addition, the company strives to avoid importing supplies, preferring to use locally produced materials to support Egyptian business rather than buying them from abroad.

Natural gas is the most cost-effective fuel currently available in Egypt. Users of this fuel have seen their costs reduced dramatically as a result of their conversion to natural gas. NATGAS customers have paid fuel bills that were significantly lower — 20% to 70% lower — than their previous bills, depending on the type of fuel they converted from. But even more valuable than cost is the added measure of safety, convenience and reliability that NATGAS has given its customers.

NATGAS business activities in the conversion from liquid fuels to natural gas have directly resulted in tremendous improvements to the environment and to the living conditions of many people. Natural gas burns much more cleanly than ordinary gasoline or diesel fuel. The increased use of this fuel source results in the reduction of both sulphur dioxide air pollutants and carbon dioxide emissions. Natural gas is less prone to dangerous fuel spills and related accidents caused by daily transport of liquid fuel by hundreds of trucks. An improved environment will also improve the quality of food products.

NATGAS believes that only through commitment and leadership can it achieve its goals for better health, safety and environment (HSE). The company puts safety first and feels obliged to raise awareness of the importance of HSE among its customers and the communities in which it operates.

NATGAS has very high aspirations. Shareholders, management and staff all strive to meet company goals to improve sustainability, support the local economy, be environmentally responsible and foster relationships with customers and investors. Profitability is not the only goal of NATGAS. The company looks to develop a real partnership with its stakeholders while also striving to develop long-term relationships with its customers, to meet their needs and deliver value in the services it renders them.

Egypt has a special place in Shell’s heritage. Shell’s operations in Egypt date back to 1911 with downstream marketing services. For well over a quarter of a century, Shell has been an active participant in exploration and production both onshore in the Western Desert and, more recently, offshore in the Nile Delta concessions. Shell Egypt’s chairman, Zainul Rahim, believes the future also holds great potential for significant growth.

Despite continuing efforts to cover the growing global demand for energy with alternative and renewable energies, nearly two-thirds of the new demand will probably be met by oil and gas. As hydrocarbon resources become increasingly scarce onshore and in shallow offshore continental shelves, the trend is to explore new prospects in exceptionally challenging environments.

Deepwater, one of the promising areas for further major discoveries, is a relatively new development in an industry that itself is only about a century old. It was only in the 1980s that Shell started to develop its capacity to unlock hydrocarbons in deepwater — today, the company has the capability to successfully operate in “ultra” deepwater, down to 10,000 feet (3,000 meters) water depth.

An aggressive offshore exploration program is planned for the North East Mediterranean Deepwater (NEMED) concession in 2006. Shell will embark on a three-well program, with an option for an additional well in the fourth quarter of this year. The last drilling campaign in NEMED was in 2004 and resulted in two hydrocarbon discoveries and we hope the upcoming campaign will confirm sufficient volumes for commercialization.

Given the massive investment needed to develop deepwater fields, Shell believes it is only economically feasible to pipe the gas to shore for the export LNG market. We believe an LNG export scheme will be a win-win one for Egypt and Shell.

Shell is also committed to onshore exploration and development. Shell Egypt operates a daily production of about 21,000 barrels of oil and condensates and 420 million standard cubic feet of gas from its Western Desert concessions. Maximizing the value of Shell Egypt’s existing assets is one of its main thrusts to grow its operations in Egypt. This requires maximizing production from the development leases, increasing its pace of near-field exploration drilling and lastly fast-tracking commercialization of exploration activities.

Through our joint venture, Badr El-Din Petroleum Company, we have a three-rig operation, drilling exploration and development wells in the BED, Obaiyed and the North East Abu Gharadig Extension. We have also expanded the scope of our onshore presence by acquiring a 50% stake in two onshore Nile Delta concessions owned and operated by Centurion Energy International. A five-well program is planned for the concession in 2006.

The future lies in partnership between international oil companies and national oil companies, between operators and contractors, and with niche operators who can contribute very smart solutions to the challenges we face, stimulating new thinking and new ways of working that continually refresh the industry. Egypt has a very strong skill base, which explains why more than 75% of employees at Shell companies in Egypt are Egyptian nationals.

The government has played a unique role by creating a climate that is conducive to investment and long-term development. The economic and fiscal reforms of recent years have made Egypt a much more attractive investment destination. Shell is committed to collaboration that increases the talent pool of science and technology graduates. The company has signed a protocol with the Faculty of Science at Cairo University to support the faculty’s laboratory and encourage research. We strongly support the petroleum course at Matruh Technical Secondary School, which prepares students for jobs in the petroleum sector. Shell encourages entrepreneurship and self-employment through our flagship Intilaaqah program, which has already provided training for 475 people.

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