TransGlobe reached an agreement with the Egyptian General Petroleum Corporation (EGPC) to merge the company’s three existing Eastern Desert concessions into a new modernized concession agreement, according to a statement.
The agreement will take effect in February, where the West Gharib, West Bakr, and North West Gharib concessions in the Eastern Desert will be merged. The contract’s validity is set at a 15-years development term with a 5-year extension option. The agreement is expected to bring forth new investment opportunities as well as utilizing new technologies in the mature fields. This would be possible through improving cost recovery terms to support investment in higher-cost mature fields and having production sharing terms scaled to the oil price climate.
Randy Neely, TransGlobe’s President and CEO stated that “the efficiencies gained from the consolidation of our Eastern Desert concessions, along with the improved netbacks and extended term, are expected to provide TransGlobe with the fiscal incentive and time to unlock meaningful additional reserves and production through the application of modern technology and optimization of infrastructure. This will also allow us to move forward with important ESG initiatives to improve our environmental footprint as well as continue to be a major employer in the Ras Gharib region for the foreseeable future.”
After the merger, the company is estimated to have an economic contingent resource volume of 59.1 million barrels oil (mmbbl). TransGlobe will also pay EGPC an initial equalization payment of $15 million and a signature bonus of $1 million by February 2022, with an additional five annual equalization payments of $10 million each until February 2026. Additionally, a new joint venture (JV) will be established by Dara Petroleum Company, West Bakr Petroleum Company, and North West Gharib Petroleum Company to include their assets, facilities, and infrastructure in order to increase operational efficiencies.
The agreement was built on the Minister of Petroleum and Mineral Resources’ Modernization initiative to increase oil production and reserves by 20% from brownfields. TransGlobe and EGPC have since been examining methods to increase recoveries and production from its existing producing fields.