Deeper drilling, deeper challenges

With the focus shifting to the potentials of the Mediterranean Sea, the deepwater will be shallow by focusing more on the challenges facing the IOCs at sea

Egypt has always been very successful in attracting foreign investment and establishing successful partnerships with the major international oil and gas companies due to many reasons. The success of these partnerships is owing to the continuous support of the Egyptian Government and has been enhanced by many reasons that make Egypt’s energy industry an attractive location for investment: its strategic location, the expertise of the state energy company EGPC, economic and political stability and petroleum related legislation.

An important goal of Egypt’s strategy is to recognize the full potential of its natural gas resources, much of which lies in the deep water of the Mediterranean. Due to major recent discoveries, natural gas is likely to be the primary growth engine of Egypt’s energy sector for the foreseeable future. According to the EIA, Egypt is on its way to becoming a leading supplier of natural gas throughout the Mediterranean region.

However, there are challenges confront the IOCs in the Mediterranean Sea for investing more and develop as well as establishing the production facilities.

“The high cost in the Mediterranean region is a major obstruction to oil companies interested in establishing production facilities as a result of the high cost of extracting oil and gas,” Eng. Mohamed Nashaat, Assistant Exploration manager at Rashid Co., assured to Egypt Oil and Gas (EOG).

“The specialized authorities should facilitate the procedures for foreign investors in bidding for new concessions in thw Mediterranean Sea in order to play a key role in the local market needs for the production of oil and natural gas, and to increase the surplus for export abroad,” Nashaat added.

In addition to that he asked for compensating the foreign partner for the high costs which are disbursed in the exploration and extraction of oil and gas by increasing their proportion of profit in the contracts for drilling operations in deep waters.

Dr. Hussein Hussein, Managing Director of OMV (EGYPT) Exploration GmbH, has the same belief.
“The high cost of the deep drilling in the Mediterranean is considered the main reason behind the poor production facilities and had a bad effect on the production facilities,” Hussein told EOG.

Asked what he expects from the government with regards to drilling in the Mediterranean, Hussein replied: “We would expect encouraging companies with generous Fiscal terms and minimize the Bureaucracy.”

On the other hand, an official within EGAS believes that the high cost of deepwater drilling in the Mediterranean Sea is not considered an obstacle.
“The production facilities in the Mediterranean do not present an obstacle for those interested in investing in this area”.

He also demonstrated that bid-rounds’ rate of success in the past year exceeded 70%, as where there were seven international companies bidding and it was agreed on four of those companies.

He commented by saying: “The role played by EGAS is to overcome the obstacles facing the foreign partners in order to explore and produce oil and gas in the shortest possible time.”

He also pointed out that there is a committee which prepares feasibility studies for the promising areas that attract famous foreign companies engaged in exploration processes, and we managed to gain the confidence of those companies by the evidenced of their continuation to work in the Mediterranean so far.

Moreover, the low natural gas price is also considered as a barrier for companies operating in the Mediterranean in the shadow of the high cost of deepwater drilling.
“The companies are aware of the drilling, production and development in the Mediterranean is very expensive, which represents a major obstacle especially with the low gas prices compared to the price of crude oil,” Nashaat said. Besides, he called for a fair price for gas as the global prices of crude oil.

Conversely, the official source within EGAS declared that whenever the IOCs tackle challenges or hindrances, they use their latest technologies to rise above those obstacles.
“The financial crisis was one of the obstacles that have affected the activity of companies operating in the Mediterranean.

“Although it did not significantly affect the activities as companies began to shift from production to maintenance of wells to ensure the preservation of the highest rates of production of natural gas and crude oil. Besides, these companies use the latest technologies to overcome obstacles.”


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