Considered as one of the pioneering companies in the area of North Sinai, the North Sinai Petroleum Co (NOSPCO) has engraved its production achievements in this remote area from deep waters of its acquisition area of the eastern side of Nile Delta and the Mediterranean Sea. Eng. Abed Ezz El-Regal, the third recently appointed President of NOSPCO, reveals the company’s new fiscal plan, obstacles challenging its implementation and shares the E&P strategy

What is NOSPCO’s new strategy?
One thing you must know is that the company operates on behalf of the shareholders, whether the EGPC or EGAS or the foreign partner (the French Prenco). Before we start executing any of our plans, we must take the approval of the members of the general assembly and this leads us to set a challenging plan. The new plan included signing three new development contracts of Tao, Kamose and Seti Plio fields. The primal stage of development included only Tao field, which was not formally developed. The upcoming stage consists of the full development of Kamose and Seti Plio fields, in addition to more studies of the deeper layers, which revealed positive results through the seismic and geological studies that were conducted.

What is the number of wells drilled so far?
Up to now, there were four wells drilled in the Tao field.

What is the total amount of gas produced by NOSPCO?
Our current production rate stands at 180 million cubic feet of gas per day. We are working hard to sustain this rate and to increase the reserves, which is considered a major challenge for us. We have been working on our tanks reserves since we started producing, as any increase would cause an augment in the water produced from the well. We faced this problem before and we had to suspend the layer producing water and we worked on a new layer.

What are the foremost obstacles facing NOSPCO?
As I mentioned, increasing the production is considered our main obstacle, adding to the reserves is considered the next obstacle. Through various studies conducted, similar to the ones done in Seti Plio field and showed high positive results, we take fully advantage of the production facilities offered by the ministry whether the facilities owned by our company or the nearest ones possessed by other companies.

What are NOSPCO total investments?
The total amount that was invested by the foreign partner is $409 million. Initially, the field production was held by AMOCO, which was the original partner before the shares of fields were sold to French Prenco. Hence, this number of investments is limited to the development stage solely, and not including the acquisitions or drilling operations.

Do you plan to increase your investments in the coming period?
Actually, we adopted the new fiscal plan for the next year, which will cost $180 million. In addition, we agreed to some amendments to the previous timetable of operations episodes set in the last general assembly meeting, in early December 2009. We are adding new points to the development contracts for the next stage. The new rig will arrive in next June to start operating by mid August 2011.

What is NOSPCO rank in the list of gas producers?
If the production of Rashid and Burullus companies are combined, then NOSPCO will be ranked the 7th between the gas producing companies. In my opinion, I believe this is a good position because the companies ahead of us are major companies that started operations long time ago.
Moreover, our production is derived from one acquisition area only and this is the production rate we planned for, if not more. We went beyond our actual capabilities to reach this production level. This is can be considered as a challenge to keep a steady production rates as we had a problem of utilizing a specific gas compression equipment that needed regular maintenance and caused a production postponement for a quite time.

What is the rig used in the drilling operations?
The rig used in drilling is El Qahir-2, owned by EGAS and GANOPE. It is a type of Jackup rigs, used for the first time in the area of North Sinai. We are in the middle of some negotiations to limit the daily rental price of the rig.

Do EGAS or EGPC impose a specific rig on the foreign partner?
There are no obligations done by EGAS or EGPC, but there are rules to rent a rig through the conduction of bid rounds. Our new rig is classified as one of the top in terms of technological advancements. A representative from NOSPCO went to Singapore to check it and make sure that the selected rig will give the company the best results. This representative already wrote a report to inform us with all the specifications of the rig.

What is the current daily rental cost of such rigs in the market?
It averages from $109 to $169 thousand per day.

What is the total cost of drilling those wells?
It depends on the nature of the rig, whether land or marine rigs. The deep drilling operations are more costly than the land drilling; sometimes it costs from $250 million and reaches up to $500 million. The deeper you drill, the more you pay.

What are the commitments of foreign partner in the drilling operations?
The contract with the foreign partner includes the drilling of six wells in addition to establishing a new platform. The foreign partner is obligated to pay specific amount of cash for the operations. Also, the contract includes conventions incase the foreign partner did not fulfill its commitments.

They say that the gas is the future of energy, how is that working with NOSPCO?
We have our production rate that we are obligated to reach and to add to it too, and this combines with the policy of the ministry of seeing that gas is the future to the energy in Egypt. We are conducting lost of studies to keep our production rates and to increase it too.

Is it difficult to produce gas from deep waters?
I believe that the geological nature of deep waters is the main challenge facing any gas production process in these areas.

Which service companies do you work with?
We pick companies through bid rounds and we chose the ones that will help us reaching our goal to keep a steady production rate and even work to increase it. There is a priority given to the Sinai Service Company that operates in the area of Sinai. This specific choice follows the guideline of the Minister of Petroleum Eng. Sameh Fahmy, who has attributed special attention to the area of Sinai.

What are your responsibilities towards the Sinai community?
We try to help the Sinai district as much as we can, so we hire most of the workers and engineers from the Sinai district. Also, the foreign partner did lots of social activities for the Sinai district.

How do you see the services market in Egypt?
Following the global crisis, the market witnessed huge competitive struggles. But the companies, which provide the high-quality service at the most reasonable prices, meaning quality and fixed prices, will always win the struggle.

What is your opinion about companies using “the under-table concept” to secure bid winning?
I do not think that our oil and gas sector has such a thing! There are rules and I believe our companies follow these rules.

But how do you see that some companies offer good bids, but still others win?
It all stands on the need of each well; the ministry always picks the right service company to meet the needs of each well drilled.

Do you see more foreign partners joining the Egyptian market?
We can surely notice the interest of more foreign companies to join the Egyptian market. As a matter of fact, Egypt has maintained an attractive investment atmosphere.

Does attracting foreign partners depend on the global gas prices?
Till now, there was no fixed prices for the gas worldwide, and do not forget that gas contracts are considered long-term deals.

Do you think that Wikileaks cables will affect the oil and gas market?
The Middle East is considered as a major role player in the oil and gas market, so whatever affects this player then it will affect the prices whether on the long or short terms.

What are your hopes and expectations for the coming period?
I am hoping the best for the petroleum sector in Egypt, and for my company NOSPCO. I hope that NOSPCO will be able to maintain its rates of production and keep increasing it.