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Egypt awards 12 concessions to boost oil and gas production

Feb 13, 2019
4 min read
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Egypt awarded 12 concessions in its largest ever oil and gas exploration and production auction to Shell, ExxonMobil and others as the country looks to become a hub for gas production and trading in the Eastern Mediterranean.

A total of eight international companies were awarded contracts as part of the Egyptian General Petroleum Corporation (EGPC) and The Egyptian Natural Gas Holding Company (EGAS) 2018 international licensing rounds.

The awards are expected to bring in an investment of at least US$750 million to $800 million in the first stage of exploration in the total of 12 concessions announced, Tarek El Molla, Egypt’s Minister of Petroleum and Mineral Resources said.

“We became self-sufficient last year and started exporting gas and now, we need to exhaust the full potential of our resources and continue discoveries,” El Molla said at the Egypt Petroleum Show. “We couldn’t do that without concessions, which we have in place now.”

The awards marked Exxon Mobil’s entry into gas exploration in Egypt, joining other international oil companies.

The Egyptian Natural Gas Holding Corporation’s bid round, which was the largest in its history, included border areas in the Mediterranean Sea as well as land areas in the Nile Delta.

Five gas exploration concessions were awarded - in which 20 wells will be drilled - to Shell, Exxon, Petronas, BP, DEA and Eni, the head of Egypt’s state gas board said.

Egyptian General Petroleum Corporation’s (EGPC) tender meanwhile included areas in the Western Desert, the Nile Valley, the Gulf of Suez and the Eastern Desert.

Neptune Energy, Merlon, Shell, Eni and state-controlled EGPC were awarded seven oil exploration concessions in total in which 39 wells will be drilled, Egypt’s petroleum ministry said.

Shell was handed the most concessions - it signed production sharing contracts for three concession in the Western Desert and two concessions in the offshore Nile Delta.

“We are very proud of winning the additional exploration acreage which fits well into Shell’s growth strategy in Egypt,”  said Gasser Hanter, vice president and country chair for Shell Egypt.

“At the same time, we welcome the opportunity to grow our position and footprint in the Nile Delta. Shell has a strong infra-structure position with the West Delta Deep Marine concession- and Egyptian LNG facilities and has firm growth plans to expand its offshore production through an ambitious exploration programme,” he added.

Meanwhile, Germany’s DEA was awarded the East Damanhour exploration block or Block 10, which covers 1,418 square kilometres and is located west of the Disouq development leases, where DEA is the operator with a wholly-owned licence share.

“The proximity of DEA’s Disouq central processing plant and infrastructure provides us with an operational edge, which would enable accelerated development of any discovered volumes as well as considerable synergies and cost optimisations,” said Sameh Sabry, DEA’s Egypt general manager.

Egypt Gas Hub

Egypt’s discovery in 2015 of Zohr, the largest gas field it the Mediterranean Sea with estimated reserves of 30 trillion cubic feet, has helped it to shift from a net consumer to a net exporter last September, while also boosting exploration interest.

This year, will be marked by a significant increase in the Red Sea exploration, El Molla said, as the country looks to multiply sources of gas production to be able to feed into plans for a hub along with neighboring countries to be able to diversify Europe’s gas supply.

Oil and gas executives at EGYPS said the country is well positioned to be a gas hub for Europe, not only geographically, but also because of its infrastructure, human capital, skillset and a strong local demand.

Cairo reached agreements with several neighboring countries on maritime demarcations to enable gas exploration in the Easter Mediterranean and is a major player in the Eastern Mediterranean Gas Forum, that will boost gas market cooperation with seven countries including Cyprus, Greece, Italy, Israel, Jordan and Palestine. 

Egypt has gone through tough economic reforms in recent years to fulfill conditions by the International Monetary Fund for a $12 billion loan to help it recover from the Arab Spring revolution. The country saw the devaluation of the currency as it was unpegged from the US dollar, cutting off subsidies and the deregulation of the gas market.

 

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