Eni’s discovery of the Zohr field on Egypt’s Mediterranean coast has raised foreign companies’ interest and attracted potential investment in the deep water areas nearby, a Petroleum Ministry senior official told Daily News Egypt. The official said that the ministry expected more discoveries in the near future, adding that a number of companies are currently conducting studies and will release their preliminary results soon. Italian Edison, which conducted seismic surveys in the field next to Zohr in December, is one of the firms hoping to find gas in the Mediterranean.
The Zohr field will begin production in 2017, as drilling began in late December 2015, and is expected to produce over 1bcf/d of gas. With the addition of Zohr, Egypt’s total production will rise to 5.3bcf/d in 2017, reducing the importance of imports for Egypt’s energy needs.
EGPC Chairman, Mohamed El-Masry said that the agreement with Eni called for production to increase to 2.7bcf/d of gas by 2019. The price the EGPC will pay for the gas will be linked to an equation with a minimum price of $4 per million British Thermal Units (BTUs) and a maximum of $5.88 per million BTUs. Currently, international gas prices are around $2.30 per million BTU. The agreement, which will be renegotiated in 2019, calls for all gas to go to the Egyptian domestic market, allowing exports only for excess gas: “The agreement states that all the production will be provided to the domestic market. Only in case of excess will exporting be allowed,” El-Masry said.
The Shorouk concession agreement signed between Eni and the Egyptian government calls for 40% of revenues from production in Zohr to go towards recovering the investment in the fields. Eni’s repayment value will cover its $7b investments in Zohr over three years. The remaining revenues will be split between Egypt, which will receive 65%, and Eni, which will receive 35%. This arrangement comes as Egypt has delayed payment to a number of its international partners since 2011, harming production. Reuters now puts Egyptian arrears at $3b.