Taking pride in working closely with Egypt’s oil and gas sector, Capricorn Energy is working hard to build on the success that the industry has enjoyed. Our interview with Capricorn Egypt’s Managing Director Eleanor Rowley reveals the company’s strategy to continue its work in enhancing the sector and unlocking the potential that the Egyptian market can use to become more globally competitive.
Can you tell us a little about Capricorn Energy?
Capricorn Energy PLC is the new name as of 13th December 2021 of Cairn Energy PLC, and I will discuss the reasons for the name change later in the article. What is important to know about us is that we are one of Europe’s leading independent oil and gas exploration, development and production companies. We have been listed on the London Stock Exchange for more than 30 years and are a member of the FTSE 250 index. The company has explored for, discovered, developed and produced oil and gas in a variety of locations throughout the world as an operator and partner in all stages of the oil and gas lifecycle. Our production, development, and exploration activities are focused on Egypt, with further exploration activities in the UK North Sea, West Africa, and Latin America.
The company is well known for its exploration successes, including creating a world class oil province in Rajasthan, the largest onshore discovery in India for more than 25 years with the potential to provide more than 30% of India’s daily crude oil production. More recently, the company made play-opening discoveries offshore Senegal which will lead to the country’s first offshore oil and gas development.
Right now, we are evolving and in September 2021, we entered Egypt, acquiring a 50% working interest in Shell’s Western Desert assets for an acquisition value of $323 million, with our partner Cheiron acquiring the other 50% working interest. This is the most important asset in the Capricorn business, and we are focussed on its success in the years to come.
I am very proud to be leading the Capricorn Egypt Limited subsidiary. We are currently recruiting, and I am delighted that our investment in the country will allow us to add many talented Egyptians who will be at the heart of building a successful business for the company in Egypt.
How encouraging do you see your new partnership with Cheiron in Egypt?
The partnership of Cheiron and Capricorn, brings together an experienced Egyptian operator that has significant mature field management capability with a nimble international operator, strong in exploration, and keen to invest and expand our production base. Together we very quickly identified and agreed that there was strong potential in the assets, and we were able to develop a shared vision on production ramp up, value-adding exploration, as well as the need to initiate decarbonization projects.
Another key partner is our Joint Venture Company – Badr El Din Petroleum Company (BapetCo). BapetCo has had a long and successful relationship with Shell of more than 35 years. We wanted to ensure that the transition went smoothly and BapetCo staff understood our ambition to invest in the assets and really open up a new and exciting chapter of growth. We are very pleased with the first 100 days where BapetCo has successfully ramped up production by around 8,000 barrels of oil equivalent per day (boepd) at the time of writing, with a plan to further ramp-up in 2022. In addition, we wanted to reassure them that the high technical standards, including best practices in health, safety, security, and environment (HSSE), would continue under the new partnership.
I also want to acknowledge the very positive engagement we have had with the Egyptian General Petroleum Corporation (EGPC) from taking over the assets. They have been supportive of our plans for the operations, which we have very much welcomed.
Could you highlight the significance of your acquisition of the Western Desert assets from Shell?
Strategically, the acquisition is a first step in Capricorn’s goal of diversifying and prolonging our production base and will also provide near-term development and significant exploration potential for both oil and gas. Importantly, it also adds significant gas production volumes to Capricorn’s current portfolio. The Western Desert is attractive as we wish to rebuild an onshore presence with assets that are resilient through the energy transition. Successful exploration onshore the Western Desert is lower cost, with short tie-in times and gives us access to an extensive infrastructure network that will allow us to commercialize new discoveries quickly. In other words, the resources we target through the exploration and production (E&P) cycle here are advantaged barrels, and we are delighted to have acquired this material position that offers potential growth.
Capricorn will operate the majority of the exploration assets (West El Fayum, South East Horus and South Abu Sennan) whilst Cheiron will operate the North Um Baraka concession located adjacent to the Obaiyed field. The operated exploration blocks have a total area of more than 8,700 square kilometers and we intend to acquire two new, state-of-the-art wide azimuth seismic surveys as well as drill up to nine new exploration wells. An additional seismic survey and 1 exploration well will be drilled in the Cheiron operated block..
As we ramp up production and re-invigorate operations, we need to be mindful of the carbon footprint. I am pleased that Bapetco is already taking steps to decarbonize, with a large program of diesel to gas turbine replacement. Beyond that, we are assessing additional decarbonization projects, including solarization, removal of permanent flaring, and carbon capture and storage (CCS). We want to move quickly in this space, and it’s wonderful to see Egypt hosting COP 27 which we believe presents an opportunity to accelerate the pace of our investments.
Capricorn Energy has set the ambition to become Net Zero in our Scope 1 and 2 operated emissions by 2040 or earlier, so decarbonization is a key strategic pillar now and for the future.
What are your plans for developing the new assets in Egypt and what potential opportunities are there for this?
Our plans can be summarized into 3 main areas: increase production, add value through exploration, and decarbonize.
Through BapetCo, our plans to increase production are already being realized as we approach 100,000 boepd. In 2022, we will add three rigs to the two rigs we currently have drilling, which will allow us to drill 40 – 50 wells next year across development, water injection, near field exploration, and wildcat exploration. In addition, we will take our workover rig count from four to five.
In parallel, we want to introduce technologies such as deviated wells, newer fracking approaches, and real-time operations to improve productivity and efficiency. In two of our assets, we are working alongside partners – Apache in the NEAG concession and Neptune and Zhenhua in AESW – and we would like to ensure that their ideas and experience on the assets is used to the advantage of all.
Of course, underpinning all our operational plans and activity is the importance of delivering safely.
Capricorn is also excited to contribute to Egypt’s Sustainable Development Strategy and we are looking at ways that we can target our social investment programs to contribute to the pillars of education and health.
Do you have any plans to further expand in Egypt?
We were attracted to the Western Desert because we have a strong belief that it is a basin where there is opportunity to grow, in a country that offers a strong investment proposition. The company is currently focused on using its strong balance sheet to pursue value accretive acquisitions of production assets with attractive growth potential, that could sit alongside the assets in Egypt.
What is your outlook for Egypt’s oil and gas industry?
Through our acquisition of the Shell assets, Capricorn is sending a clear message that we believe in a strong E&P industry in Egypt.
I first came to work in Egypt in 2000 and I can say that more than 20 years later the industry is as vibrant and dynamic as it was then, if not more so. The Modernization program of H.E. Eng Tarek El Molla will ensure the industry continues to evolve and remain competitive. Underpinning the E&P outlook is the fact that Egypt is blessed with two of the world’s super basins – the Nile Delta and the Western Desert – and both continue to have significant remaining potential for both oil and gas. Coupled with the stable regulatory and fiscal environment, the strong support of the Ministry and government authorities to grow the industry responsibly, Capricorn was convinced that Egypt is an attractive place to invest.
It’s a very interesting time as we navigate the journey of the global energy transition. It’s clear there is a determination to capture the opportunities of renewables development here, as well as make progress on decarbonization of oil and gas over time whilst maintaining a vibrant oil and gas sector. We plan to play our own part in this journey, and we look forward to COP 27 acting as a catalyst to drive a new wave of investment that Capricorn will be a part of.
Why are you going to rebrand your company? And how can such a step affect the company’s future?
We renamed the company Capricorn Energy PLC on 13 December 2021, changing from Cairn Energy PLC. The change followed an agreement made at the time of the initial public offering of our Indian business that the name would ultimately be changed. The majority of our subsidiary companies had been known as Capricorn for many years, so the change was very deliberately one of continuity and evolution, rather than signalling any radical change to how the company operates or our strategy.
We chose Capricorn because it is already an established and respected name across our global operations, which will help to maintain stakeholder confidence in how we operate and our long-standing reputation for respect, relationships and responsibility.
What are the company’s future plans to expand its global position?
We have always been a business that thrives on creating, adding and realizing value through active management of our portfolio, and maintaining a very strong balance sheet. We have demonstrated the capability to operate with success in a number of locations worldwide, and always actively consider the best fit for our business to continue to create value for our stakeholders.
Egypt is a very important first step in the extension and diversification of our producing asset base and we will continue to pursue opportunities to add further scale to our global operations.