Like many countries in the developing world, Egypt sees foreign exchange generated by oil exports as one of the main engines to stimulate its economic growth.
But Egypt faces the classic developing world dilemma. An expanding local economy and even a modest rise in desperately low levels of personal income also stimulates demand for oil products.
And as the domestic oil market gathers momentum, it sucks in more local crude oil production that previously went for export and generated revenues that kept the economy moving forward.
WHAT'S BEING DONE
Egypt has been more aware than most developing nations that it cannot allow this spiral to accelerate, particularly in an era of low oil prices.
Egypt's oil minister, Hamdi al-Banbi, outlined the extent of the problem and policies being pursued to ensure reserves are available to sustain crude oil exports while local demand for oil products is kept within reasonable limits.
He told a meeting of the Foreign Press Association in Cairo local demand is about 540,000 b/d and still increasing at rates economic planners find uncomfortable.
The job of maintaining the reserve base is placed almost exclusively in the hands of foreign oil companies which are encouraged to remain in Egypt by flexible policies designed to sustain interest in geological prospects that are unpretentious compared with Middle East countries.
The other key element in the policy is exploitation of Egypt's gas reserves, currently about 12 tcf.
A pipeline network to move gas from the main sources of supply in the Nile Delta, Gulf of Suez, and Western Desert to main centers of population is in place.
The minister said Egyptian gas consumption is likely to average about 1.35 tcf during the next 20 years. New gas developments at al-Qara and Abu Qir are in the final phase of construction, and a number of other prospects are being engineered for early start-up. By 1993 gas production capacity should be about 1.4 bcfd.
Previous governments recognized that increasing the role of natural gas in the economy requires annual replacement of reserves. At one stage oil companies had no interest in exploration in gas prone areas because any reserves found reverted to the state.
But pioneering of a gas clause in production sharing agreements led foreign companies into exploration for gas, as shown by a major strike by a unit of Italy's Agip SpA at Halawa in the Nile Delta.
REPLACING OIL RESERVES
Replacing oil reserves presents a more difficult problem. The current reserve base is only 3.5 billion bbl, and apart from a recent large discovery by British Gas plc in the Gulf of Suez, most new finds have been modest.
Al-Banbi said measures have been taken to ensure that foreign investment in Egyptian exploration remains viable through the introduction of a new crude oil pricing mechanism, fine tuning of production sharing contracts, allowing evaluation of open acreage, and the first seismic options in deepwater and frontier areas.
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