Eni Signs New Concession Agreement in The Western Desert

Italy’s Eni has signed a new concession agreement to operate in the South-West Melehia block in the Western Desert of Egypt, as Cairo continues to look to international operators to boost its flagging production.

Egypt’s oil production has stagnated in recent years, with production in 2013 averaging 714,000 b/d, down from some 750,000 b/d 10 years previously, according to BP’s latest Statistical Review of World Energy.

Its natural gas output in 2013 was 56.1 bcm, down from a high of 62.7 bcm in 2009.
The latest license award to Eni for the South-West Melehia block follows the state-owned Egyptian General Petroleum Corporation-organized December 2013 bid round.

The block covers an area of 2,058 sq km (1,276 sq miles) and is immediately south of the Melehia license, operated by Agiba, a joint venture of Eni and EGPC which manages Eni’s operations in the Western Desert.

Eni said in late September it had been awarded three new exploration licenses in the Western Desert in bids held in December of last year.

It was also awarded the operator-ship of two blocks — 8 and 9 — by state-owned Egyptian Natural Gas Holding Company, offshore in the Mediterranean near the maritime border with Cyprus.

EGPC continues to offer up new acreage for exploration.

On Thursday, it launched a new round for three blocks — to be offered as one — in the eastern part of South Sinai.

In a statement, EGPC said there had been indications of oil reserves in the area.

The three blocks are Sidr, Mtarma and Assal, covering a total area of 95 sq km, but should be treated as a single package for bidders.

Egypt has continued to hold bid rounds despite the challenging operating environment given the political uncertainty in the country since the Arab Spring.

One of the main causes for concern has been Cairo’s inability to keep up with payments to international operators for past production.

But the country has been making significant payments in recent months, not least a $350 million payment to the UK’s BG Group at the start of 2015.

Another main player in Egypt, UK-listed Circle Oil, said Friday it had now received a payment of $15 million as part of Cairo’s recent special payment distribution.

This, Circle said, has resulted in a significant reduction in the outstanding debt owed to the company.

Circle CEO Chris Green said the payment — both for the company and in the larger industry context — “should be seen as a very positive step.”

In November, Circle said its production from the NW Gemsa and Geyad permits in Egypt was continuing in line with “predicted production profiles.”

Oil output was varying between 9,300 b/d and 9,700 b/d and gas delivery at 10,000-11,000 mcf/d.

Source: Platts


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