By Mariana Somensi
Amidst the economic reform ongoing in Egypt, the oil and gas industry has played an incredible role in designing prospects to rebalance the government’s budget. In 2017, the hydrocarbon-rich country has obtained important achievements in the petroleum sector, and upstream activities were marked by several oil and gas discoveries and acquisitions. The natural gas market has been on the spotlight, as Egypt saw a year-on-year production increase of 28.6% to 3.37 million tons in July 2017, in addition to the country’s expectations of achieving self-sufficiency by late 2018. Crude oil production, on the other hand, decreased to 485 barrels per day (b/d) in June from 486,000b/d in May; however, drilling results and new agreements set during the year also make the future of Egypt’s crude oil promising.
Discoveries
West Gharib Concession
Drilling results in Egyptian fields during 2017 reveled new oil and gas discoveries throughout the country. The latest one, announced by SDX Energy in October, consisted of an oil discovery in the West Gharib Concession in the Western Desert. As much as 101.5 feet of net heavy oil pay with an average porosity of 20% were found in the Yusr and Bakr sand formations, located at the company’s Rabul 2 well. In July, SDX drilled Rabul 1 and also discovered 14.5 feet of net heavy oil pay with a porosity of 21.2% at Yusr sands.
North Ras Qattara Concession
Besides SDX, IPR Incorporation also announced positive drilling results. The US company’s Chairman, Mahmoud Dabous, stated to media that the firm’s NRQ-11X and NRQ-9-2 wells were tested at 715b/d and 3,700b/d of oil, respectively, and obtained success. Both wells are located at North Ras Qattara Concession in the Western Desert. The discovery lead to a production increase of 60% to 4,100b/d.
North Damietta Offshore Concession
On natural gas exploration, British Petroleum (BP) found gas in North Damietta Offshore Concession in the East Nile Delta. The company drilled its Qattameya Shallow-1 well, and analysis confirmed the presence of 37 meters of net gas pay in high quality Pliocene sandstones. The well is located 60 kilometers north of Damietta city, and BP has 100% equity in the discovery.
Acquisitions
These announcements bring excitement to a sector that is starting to see the results of discoveries made in the past years. Egypt’s plans of natural gas self-sufficiency, for instance, is on the table due to the finding of new gas reserves, whose fields are about to become operational. Although Egypt struggles against a fast-growing oil and gas demand, the new basins have opened prominent doors for investments, leading to more exploration and production activities. The fruitful environment in Egypt’s petroleum industry has led many companies to seek shares in the country.
Zohr Gas Field
In October, Russia’s Rosneft signed a $1.25 billion agreement with Italy’s Eni to acquire a 30% stake at Eni’s Zohr gas field, which is considered the biggest gas discovery in the Mediterranean, with around 30 trillion cubic feet (tcf) of gas. After the acquisition, Eni retained a 60% share, while BP hold 10%.
Abu Sennan Concession
After signing a farm-out agreement with Kuwait Energy in 2016, GlobalConnect also succeeded in acquiring shares in Egypt. In the beginning of October 2017, the federal government announced its final approval on GlobalConnect’s acquisition of a 25% stake in the Abu Sennan Concession in the Western Desert. The company will carry exploration and exploitation duties as a full partner. Other partners include Kuwait Energy, which is the operator and holds a 25% share, Dover Investment Ltd, with 28%, and Rockhopper Exploration, with 22%.
North Bahariya Concession
Also in the Western Desert, Salah Diab’s Cheiron PICO acquired 50% of Sahara North Bahariya Ltd, which owns North Bahariya Concession in the Western Desert. The acquisition costed $83 million. The amount was paid to EFG Capital Partners, and the company obtained approval from the Egyptian General Petroleum Corporation (EGPC). The concession acquired contains six oil fields: Abrar, Fardous, Jana, Rawda, Sedar, and Rayan. Production exceeds 8,000 barrels of crude oil.
West El Burullus Concession
In the Mediterranean waters, PICO Group subsidiary, Cheiron PICO, signed a deal with France’s Engie and acquired 100% of the French company’s West El Burullus gas concession. The companies obtained approval from EGPC in April. West El Burullus is estimated to have around 200 billion cubic feet (bcf) of gas, and production is planned to reach 100 million cubic feet per day (mcf/d) in 2020.
New Opportunities
The new discoveries, coupled with Egypt’s great efforts to attract investments into the country, has promoted a positive outlook to the Egyptian petroleum sector. By being back to the spotlight, the government was enabled to announce bold targets, such as the country’s goal of becoming an energy hub in the Middle East and North Africa, the prospects of stopping natural gas imports and covering local demand with domestic supply, as well as the possibility of exporting natural gas. Additionally, the foreign direct investment (FDI) facilitations promoted by the government are expect to speed-up the economic recovery and boost exploration and production activities for new discoveries and new output increases.
