By Tamer Mahfouz

A paramount indicator of the health of the investment climate in Egypt’s hydrocarbon industry is the performance of industry bid rounds. The fluctuating level of interest, value of the deals, and so forth tell tales not only about the investment influx in the sector, but of the confidence in the government as well as the economic prospects of the industry.

Between the second quarter of 2011 and fourth quarter of 2013, the government offered no oil or natural gas tenders. During this period, the Central Bank of Egypt (CBE) was propping up the Egyptian pound (EGP) and little was done in the way of reforms. The uncertainty of Egypt’s political future, however, caused many existing and potential oil investors to withhold investments until the political situation became clearer in the last quarter of 2013.

The first bid round since 2011 was announced during the last quarter of 2013. Up until mid-2017, the Ministry of Petroleum and Mineral Resources had signed around 76 concession agreements for exploration and field development. The deals promise a combined minimum investment budget of $15.3 billion. Signing bonuses were worth just over $1 billion with the companies committing to drill at least 319 exploratory wells.

Tenders are offered by the Egyptian General Petroleum Corporation (EGPC), the Egyptian Natural Gas Holding Company (EGAS), and Ganoub El Wadi Petroleum Holding Company (Ganope). The areas mainly covered are the Western Desert, Eastern Desert, Gulf of Suez, Nile Delta, and the Mediterranean Sea. In 2018, however, other areas in the Red Sea within Egyptian territory waters will be offered for the first time, according to a Tarek El Molla, the Minister of Petroleum and Mineral Resources.

Egypt’s Oil Investments

Exploration investments for hydrocarbons declined from EGP 26.87 billion in 2013 to EGP 4.11 billion in fiscal year (FY) 2015/2016, according to the latest figures from CBE. This was mainly due to the collapse of oil prices worldwide in mid-2014 and the realization that the new average oil price would hover closer to $60 per barrel rather than the excess of $100 a barrel that existed prior to 2014.

Bid Rounds: 2013

A number of concession agreements were signed in the last quarter of 2013. Dana Petroleum was awarded two concessions the West Al Dakhla-1 and the West Dakhla-2, each approximately 17,500 square kilometers (sq km) in the Western Desert, with a minimum investment budget of $24 million and a signing bonus of $1 million. The company agreed to drill a minimum of four exploratory wells. The agreement was signed with Ganope. Furthermore, Dana Petroleum signed an agreement to explore in the South Wadi Dara Concession in the Gulf of Suez, covering an area of 52 sq km. The company committed to a minimum investment of $3.5 million in addition to a signing bonus of $500,000. The agreement was signed with EGPC.

Dana Gas won a tender to explore for natural gas in the 2,980 sq km. Block 6 of the North Arish Concession in the Mediterranean Sea. The agreement was for a minimum investment budget of $71.5 million and a signing bonus of $20 million. Under the terms of the deal, Dana Gas was required to drill three exploratory wells. The agreement was signed with EGAS.

Another EGAS agreement was signed with the Italian Egyptian Oil Company (IEOC). It was awarded the Shorouk Offshore concession, which stretches over 3,765 sq km. in the Mediterranean Sea. The company committed to invest, at a minimum, $150 million in the concession—on top of the $5 million signing bonus—and drill at least two exploratory wells. This concession is where the Zohr field (100 sq. km.) was discovered in 2015.

BP alone won two tenders in 2013. For a minimum investment of $330 million and a signing bonus of $10 million, it was awarded an agreement for the North El Max Offshore Concession, covering an area of 4,680 sq km in the Mediterranean Sea. The agreement required the drilling of a minimum of two exploratory wells. The second bid round that BP won was for the North Tennin Offshore Concession, spanning 5,195 sq km in area. The company committed to invest a minimum of $370 million—not including a $20 million signing bonus—and dig two wells. Both concessions were offered by EGAS.

In the same year, EGAS signed an agreement with Edison to begin exploration in the 3,750 sq km, North Thekah Offshore Concession in the Mediterranean Sea. Edison promised to invest $170 million and dig at least two wells. It also awarded EGAS a signing bonus of $7.1 million.

Petroceltic won the tender for the South Idku Onshore Concession, with an overall area of 1,575 sq km. in the Nile Delta. The minimum investment was set at $23.5 million and the signing bonus at $5.1 million. A minimum of three exploratory wells had to be drilled per the agreement. The contract was signed with EGAS.

Sea Dragon Energy won a contract for South Disouq Concession in the Delta was signed for a minimum investment budget of $17 million and a signing bonus of $4 million. A minimum of three exploratory wells had to be drilled per the agreement, which was signed with EGAS.

DEA, formerly RWE Dea, won a bid round for the 45.6 sq km. Ras Budran Concession in the Gulf of Suez. The contract requires a minimum investment budget of $17 million and signing bonus of $4 million.  The tender was auctioned by EGPC. Under the terms of the contract, DEA committed to dig at least three wells.

TransGlobe made several expansions throughout the year. It signed concession agreements for the exploration rights in the concessions of Northwest Gharib (655 sq km), Southwest Gharib (195 sq km) and Southeast Gharib (508 sq km) in the Eastern Dessert. Moreover, the company was awarded the South Ghazalat Concession (1,414 sq km) in the Western Desert. The combined minimum investment requirement for these concessions was $101.1 million with signature bonuses of $40.6 million, according to the company’s website. Each concession has an initial three-year exploration period with the option to extend it by two two-year terms. The company agreed to drill a minimum of 70 exploratory wells. All these agreements were signed with EGPC

Bid Rounds: 2014

There were far fewer concession agreements in 2014 than in 2013 as global oil prices more than halved during the second half of the year. Tharwa Petroleum Company was awarded the Abu Sennan Concession, covering an area of 1,600 sq km in the Western Desert. The company agreed to invest at least $15 million in the concession in addition to granting a $5 million signing bonus. The agreement was signed with EGPC.

Apache signed a concession agreement with EGPC to explore for oil in the West Kanayes Concession, with a total area of 1,027 sq km. It committed to invest a minimum of $28 million and drill seven wells. The agreement came with a signing bonus of $15 million. Apache and Tharwa Petroleum Company signed a second agreement with EGPC to drill for oil in the Siwa Concession, agreeing to invest $16 million and drill four wells. In addition, the companies gave a $10 million signing bonus.

Dragon Oil signed a concession agreement with Ganope for the East Zeit Bay Concession in the Eastern Desert, which covers 93 sq km. It agreed to invest $39 billion to explore for oil and drill three wells; in addition to granting a $6 million signing bonus.

Bid Rounds: 2015

This year saw a second surge in the number of concession agreements offered by the three government bodies. By the end of the year, however, there were unmistakable signs of a massive foreign-exchange supply shortage that would create the deep-rooted black market the following year.

HBS International Egypt Ltd. Was awarded a contract by EGPC, to invest a minimum of $9 million and drill at least four exploratory wells in the Halif Concession in the Western Desert. The signing bonus was $1 million.

Similarly, Eni won several blocks that year. One tender was for the Ashrafi Concession with an area of 124 sq km in the Gulf of Suez. Eni co-signed with Engie to invest a minimum of $40 million, with a signing bonus of $9 million and a drilling commitment of a minimum of two exploratory wells. Together with BP, Eni won a second concession agreement for the Baltim Concession (1,250 sq km) in the Mediterranean area. The companies agreed to invest a minimum of $80 million and dig at least two exploratory wells. The contract was signed with EGAS.

EGAS awarded IEOC the North Leil Offshore Concession with an area estimated at 5,105 sq km in the Mediterranean Sea for a minimum investment commitment of $130 million and a signing bonus of $1 million. In the Western Desert the company won a tender offered by EGPC for the Southwest Meleiha Concession with 2,058 sq km in area, agreeing to invest at least $37 million and grant a signing bonus of $20 million. Furthermore, the company co-signed with BP a concession agreement for the Karawan Offshore Concession covering an area of 4,565 sq km. The companies committed to invest a minimum of $145 million—on top of a signing bonus of $5 million—and dig two wells.

Edison signed a concession agreement with EGAS for the Northwest Habi Offshore Concession, covering an area of 2,468 sq km in the Mediterranean Sea. Per the agreement, the company was to invest at least $86 million with a signing bonus worth $1.5 million, and committed to dig a minimum of two exploratory wells. Furthermore, the company won the license to the Northwest Gendy Concession, covering 1,955 sq km in the Western Desert. It agreed to a signing bonus of $3.1 million, minimum investments of $20, and the drilling of at least three wells. The company also co-signed with Petroceltic to explore for natural gas in North Port Fouad Offshore Concession (3,440 sq km) in the Mediterranean Sea, agreeing to invest $100 million, dig two wells, and grant a signing bonus of $5.1 million.  Edison co-signed with DEA an agreement to search for oil in the Northwest El Amal Concession (365 sq km) in the Gulf of Suez worth $45 million with a signing bonus of $2 million. The companies committed to digging two wells.

DEA was awarded the Ras Fanar Concession –187 sq km in surface area— in the Gulf of Suez. The company agreed to invest at least $45 million in the concession and dig four wells. Additionally, it granted a $1.5 million signing bonus.

HBS signed a concession agreement with EGPC to explore for oil in the Southwest Alamein Concession (2,888 sq km) in the Western Dessert with minimum investments of $12 million and a signing bonus of $8 million. It committed to drilling three wells. In addition, the company signed a concession agreement with EGPC for the North Ghazalat Concession (1,856 sq km) in the Western Desert with minimum investments of $15 million and bonus of $12 million. HBS agreed to dig a minimum of five exploratory wells.

Total signed a concession agreement for the North El Mahala Onshore Concession, covering an area of 1,088 sq km in the Nile Delta region. The company agreed to invest a minimum of $20 million, dig two wells, and grant a $3 million signing bonus.

Furthermore, EGAS signed a concession agreement with Dana Gas for the North Salhiya Onshore Concession –1,524 sq km in area—in the Nile Delta for a commitment to invest a minimum of $22 million in the concessionary area and dig to five exploratory wells. Dana Gas also gave a $5 million signing bonus. Dana Gas and BP co-signed another concession agreement for the El Matareya Onshore Concession (960 sq. km.) in the Nile Delta, agreeing to invest $75 million, grant a signing bonus of $15 million, and drill a minimum of three exploratory wells. That agreement was also with EGAS.

TransGlobe won the tender for the Northwest Sitra Concession, with a total area of 1,946 sq km in the Western Desert, for a minimum investment budget of $16 million and signing bonus of $2 million. The company agreed to dig at least two exploratory wells. The agreement was signed with EGPC.

Badr el Din Petroleum Company signed an agreement for the Sitra Concession (700 sq km) in the Western Desert. Under the terms of the agreement, it is obligated to invest $200 million in the concession and drill a minimum of three exploratory wells. The company granted a $100 million signing bonus.

EGPC awarded Apache the South Umm Baraka Concession in the Western Desert for a minimum investment of $30 million, and a signing bonus of $25 million. The agreement requires Apache to drill at least two exploratory wells.

Bid Rounds: 2016

Despite an increasing gap between the dollar’s formal exchange rate at banks and the exchange rate on the black market throughout 2016, new concession agreements were successfully tendered throughout the year. IEOC and BP co-won agreements for two Mediterranean Sea concessions which were offered by EGAS. The first was the North El Hammad Offshore Concession (1,389 sq km) for a minimum investment budget of $80 million and a signing bonus of $3 million, requiring the companies to drill two wells. The second was for the Ras El Esh Concession (1,927 sq km) for a minimum investment budget of $75 million and signing bonus of $3 million, agreeing to dig two wells.

Separately, BP signed an agreement for natural gas exploration in the North El Tabya Concession (2,084 sq. km.) in the Mediterranean Sea with EGAS for a minimum investment budget of $65 million and a signing bonus of $3 million. The company agreed to drill two wells. It also signed an agreement to develop the Northeast Ramadan Concession for a minimum investment budget of $46 million and signing bonus of $5 million, committing to dig at least three exploratory wells.

Apex International Energy was awarded two concessions in the Western Desert by EGPC. The first was the West Badr El Din Concession (4,180 sq. km.) for $19.4 million with a signing bonus of $1.7 million. The company agreed to drill three wells. The second was for the Southeast Meleiha Concession (2,058 sq km) for a minimum investment budget of $5.26 million and a signing bonus of $3.5 million. Per the terms of the contract, the Apex will dig six wells.

Moreover, EGPC signed a concession agreement with Royal Dutch Shell, awarding it the North Um Baraka Concession (5,624 sq km) in the Western Desert for a minimum investment budget of $35.5 million and a signing bonus of $18 million. Shell agreed to dig seven wells.

IPR and Cypriot Medtera co-signed an agreement with Ganope to explore for oil and gas in the North El Baraka (11,860 sq km) and South El Baraka (10,900 sq km) concessions in the Western Desert. The North El Baraka agreement was for a minimum investment budget of $1.85 million and a $100,000 signing bonus and came with a requirement to dig at least one exploratory well. The South El Baraka agreement required $2.45 million in investments and a $100,000 signing bonus. The companies agreed to dig one exploratory well at the concession.

Another agreement that Ganope signed was with Trident Egypt Petroleum Company to develop the Northwest Tair El Bahr Concession, covering an area of 241 sq km, and to drill six wells for a minimum investment budget of $4.5 million and a signing bonus of $500,000.

Bid Rounds: 2017

In 2017, there have been a limited number of concession agreements as the EGP has stabilized after it was floated in late 2016.

In November, Trident Petroleum Company signed a concession agreement to develop the Esh El Melaha Offshore (North Magawish) Concession, with an area of 194 sq km. The company committed to drill at least four exploratory wells for a minimum investment budget of $2.4 million and a signing bonus of $500,000. The agreement was with EGAS.

Apache signed two agreements in the Western Desert; one for the North West Razak Concession, spanning across 4,764 sq km, with minimum investments of about $61 million. The second agreement was for the South Alam El Shawish Concession, covering 1,591 sq km in area also with investments of about $12 million.

Bids in progress

EGPC currently is offering two concession areas in the Eastern Desert. One is for the Wadi Dara Concession (50 sq km). The other is for Block G in the West Gharib Concession (20 sq km). The submission deadline is set for December 28th.

Furthermore, Norwegian PGS is conducting seismic tests in the Western region of the Mediterranean for bid rounds that are expected to be announced during the first half of 2018, an unnamed ministry official told Al Shorouk News.

EGPC has indicated that there will be several tenders for Gulf of Suez concessions in 2018, including the Northeast October, Northeast El Hamad, Northeast Ramadan, East Badry, and North Asran Offshore Concessions. Additionally, EGPC is preparing to offer tenders in the Western Desert for the Northwest Razak, Southeast Meliha, South Alam El Shawish, and Southeast Siwa Concessions.

Meanwhile, Ganoupe is currently in the assessment phase of its latest two bid rounds for 10 blocks in the Western Desert and Gulf of Suez. This phase is set to end before the start of 2018 with bid rounds announced in due course. Conducting the geophysical sweep are WesternGeo Schlumberger in the Gulf of Suez for $670 million and TGS in the Western Desert for $50 million, as reported by Trade Arabia.

During the second half of 2018, the ministry of petroleum and mineral resources (MoP) announced that it will hold two bid rounds in Blocks A and B, each covering 20,000 sq km in the Red Sea. Winners are expected to be announced, and agreements signed, by the first quarter of 2019. Similarly, Ganope will offer Block C in the Red Sea, at roughly the same time. MoP is hoping to announce at least one bid round in the Red Sea every year starting 2020, according to various media reports quoting El Molla.