oil and gas

Oil - Exploration: ''Tunisia has potential for completely reversing trend in a few years'' (expert)

March 22, 2021

(TAP/Interview conducted by Meriem Khadraoui) - Several international oil companies have left or are preparing to quit. The oil sector does not have a bright future in the country, because of the accumulation of many difficulties.

Hamed El Matri, expert engineer in oil exploration and production, advisor to a former Minister of Energy, in charge of the hydrocarbon portfolio and member of the Executive Committee of TenS (Tunisia Energy Society), analyses in an interview with TAP, the situation of the oil sector in Tunisia and the reasons for the departure of oil companies from the country.

TAP: Several international oil companies are packing up and preparing to leave Tunisia, though some oi fields entered into production. Why, do you think?

Hamed El Matri: This is unfortunately true. The fact remains that this is not new, the last few years have seen several departures, large and medium-sized companies have quit the country and given up their shares in Tunisia to micro-operators. This trend has unfortunately increased recently, because of all the difficulties they have encountered.

It is no longer a secret that ENI and Shell, the only two 'Majors' operating in Tunisia, are looking for buyers for their stakes in the country. OMV had already started a 'Divestment plan' since 2017, with the sale of its shares in the joint ventures (Serept & TPS), to limit its activities to the Nawara field and its surroundings. Even the ''small'' companies seem to be losing patience and hope and are considering leaving.

TAP: What do you think are the reasons for this disenchantment?

Hamed El Matri: I believe that behind this disenchantment, there are three main reasons. First, the financial problems, with on the one hand, the successive falls in oil prices in recent years, against relatively high operating costs in Tunisia and on the other hand, the repeated delays in payments from the Tunisian side (both for commitments of ETAP, as well as bills from STEG).

Second, there are difficulties in dealing with national authorities, a certain stiffness of officials and the lack of strategic vision for the sector, in addition to problems amplified by political instability (more than ten ministers since 2011, and twice the Ministry of Energy was created, dissolved and recreated!).

Third, social and security problems in addition to recurring strikes, road blockades and social unrest have become threats even to the integrity of employees, activities and facilities, amid the state’s inability to impose order and law. The sit-in and blockade of El Kamour was actually just another episode in a long series of similar events.

In such conditions, it is unfortunately normal that companies fear for their interests, and prefer to invest elsewhere.

In short, investors in the sector have seen almost everything (social problems, political problems, land management problems, strikes, blockades, contractual conflicts, political pressure and influence).

This is a perfect recipe for turning any promising project into a dead loss. No one would want to commit to an investment if they were not sure of being able to make it profitable, or even complete it.

As good patriotic Tunisians, we always try to make up the situation, to sell an image a little less worrying for our country. However, the situation is so impossible that four of the last five seismic campaigns (first step in the process of oil research) were cancelled (with dry losses amounting to millions of dollars, each) because of force majeure (related to social problems and blockades, strikes, and access to land)!

Even ETAP, the national company, was unable to complete its seismic acquisition programme at the 'Chaal' permit and had to abandon it due to force majeure!

If exploration is no longer possible, it is only natural that there will be no more discoveries, or production.

TAP: What about new discoveries?

Hamed El Matri: The latest discoveries in Tunisia are the Nawara (gas, South) and Halk-El-Menzel (oil, Gulf of Hammamet) fields. Although encouraging, they are both symptomatic of the ills affecting the sector.

The Halk-El-Menzel concession was for some time at the heart of legal controversies and political bidding, and its start was delayed by two years, causing huge losses to its investor.

As for Nawara, its production finally took nearly 8 years of delay!

TAP: do you think this departure announces the beginning of the end for the oil exploration sector in Tunisia? Is this due to the depletion of resources or the inability of the state to sustain exploration activities?

Hamed El Matri: When experts began to talk about the 'agony' of the sector, some saw this as an exaggeration. However, this 'beginning of the end' is perceived today as a real threat. The depletion of resources has little to do with this observation. The fields in place are being exhausted, certainly, but it is at the level of renewal of reserves, there is a blockage.

Tunisia remains promising in terms of its potential in the south, in the Gulf of Gabes, in the Offshore North, there is no lack of resources to develop, but they must be explored and discovered before. I am personally convinced that we have a potential for completely reversing the trend, and even the energy balance, after a few years. However, it is necessary for the wheel of research to restart and we meet the conditions needed for solid operators to come and explore, but we are unfortunately, far from all this.

TAP: Why have successive Tunisian governments failed to regain the confidence of these companies and retain them? Is it because of legislative constraints, since operating contracts relating to natural resources (Article 13 of the Constitution) are now submitted to the specialised committee within the ARP and the agreements ratified about these resources are submitted to the parliament for approval?

Hamed El Matri: The constraints suffered by the sector are older than the revolution, and go beyond the narrow framework of Article 13 of the new constitution. The curves are clear, the slowdown - both in exploration and production - goes back further.

The sector has clear governance problems. It is essentially, problems at the level of the distribution, even the tangle of roles between the ETAP and the line ministry. The code of hydrocarbons had finally shown its limits too. The opacity and heaviness of procedures, as well as structural and regulatory frameworks lacking flexibility, are now weighing heavily on the sector’s attractiveness to investors.

The post-revolution factors, Article 13, but also social problems and all the public campaigns against the sector, have only further complicated an already difficult situation.

TAP: What impact will this departure have on the sector and on the country's image?

Hamed El Matri: We sometimes tend to forget that foreign investment in the hydrocarbon sector is by far the largest in terms of numbers. However, Nawara, for example, is the only project of the order of $1 billion completed in Tunisia since 2011.

When experienced and well-informed multinationals, supported by their embassies and listening to top government officials, lose confidence in the country, it is much more difficult to convince smaller ones to come and invest.

The images of El Kamour, for example, were broadcast around the world (fortunately there were no clashes or violence), and they gave the image of a country unable to preserve the rights of investors, or even to preserve its own strategic interests.

TAP: What do you see as the alternative for this sector? What is the future of ETAP?

Hamed El Matri: Those in charge, both at ETAP and at the Ministry, are working to save the sector. Without their efforts, the sector would have reached the point of no return for some time. That said, this effort remains insufficient since it requires a clear strategy and a real commitment from government authorities.

I continue to believe that all the parameters and trends can be reversed within a few years, if the right measures are taken, if the structures are reformed, and if the legislative frameworks, become more attractive to investors.

TAP: And what about transparency in the sector? It is true that the passage of the former Minister of Energy, Mongi Marzoug was marked by a choice of transparency and openness to the media and the public. But why, in your opinion, none of the reforms you have proposed has been launched?

Hamed El Matri: It is true that the appointment of Mr. Marzoug to the Ministry of Energy had raised many hopes. The effort made to open up to the public and the media was only the first step in a process that should work on three axes: Transparency, Governance & Performance.

Regaining public confidence and adopting a policy of transparency should allow us to launch structural reforms, such as the creation of a regulatory agency to ensure better governance of national resources, but also, rework the code of hydrocarbons, strengthen and modernise the Ministry' s structures so that they can fully assume their mission, and allow ETAP, to focus on its role as a national operator and support it to become as agile and efficient as foreign operators.

We had a very ambitious plan, which was spread over four years, but we finally had no more than four months!

TAP: Some say that Tunisia would benefit from accelerating the transition to renewable energy after the decline of oil activity. This decline could even accelerate the energy transition in the country. What do you think?

Hamed El Matri: There is real confusion among the public about this. The oil business has never been in competition with the energy transition to renewable energy. The transition is a process that needs time and money, and in the meantime, we must ensure the continuity of the national energy supply, and try to heal the balance of trade at this level.

If the country was self-sufficient in natural gas, and consequently in electricity, part of the money intended to cover the deficit would have been used to develop infrastructure such as the national electricity network and to support the industrial fabric. Hydrocarbons will continue to be used for decades to come. Moreover, the energy deficit is delaying the energy transition, not accelerating it.

Natural resources are a strategic opportunity, which our country must take advantage of in a responsible manner and in the national interest.


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