Egypt has signed several large deals with a handful of oil majors, which could lead to more oil and gas production in the energy-starved nation.
The deals are worth an estimated $220 million, and call for drilling six offshore wells in the Mediterranean. First, there is a $75 million deal with BP and a subsidiary of Eni for an exploration block; a second block for $80 million will go to BP, Eni and Total; and a third block worth $65 million was awarded to BP alone.
Several major international oil and gas companies have been doing unconventional exploration onshore in Egypt, but it was Eni’s blockbuster discovery of the Zohr gas field in the Mediterranean in 2015 that has provided a jolt of interest in Egypt. Eni fast-tracked development of the Zohr, and sold off a stake to BP in recent weeks.
Egypt used to be a net-exporter of energy, but falling production and rising demand have made it not only a net-importer, but also in desperate need of new sources of energy as the country has been wracked with shortages and blackouts. Securing new energy supplies picked up more urgency as Saudi Arabia cut off oil shipments to Egypt last month.
Egypt has stepped up LNG imports to plug its supply deficit, particularly from Russian energy firm Gazprom. Those shipments will increase in 2017.
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But producing domestically will be key for Egypt’s future. The Zohr discovery last year has ignited interest in a country that has not traditionally been thought of as a major energy producer, even as its neighbors to the east and west are energy abundant. But the Zohr was the largest gas discovery ever recorded in the Mediterranean and catapulted Egypt into the forefront of interest for international companies looking for appetizing investments. Egypt has moved quickly to entice development, and it could outpace its neighbor Israel, which has struggled to accelerate development on its own large gas reserves.
There is also potential onshore. BP has been exploring in the East Nile Delta, announcing a discovery last June. Royal Dutch Shell announced a major gas discovery in Egypt’s western desert in August.
Taken altogether, there is ample reason to think that Egypt can turn its energy predicament around. It could take time, but Egypt could become self-sufficient in natural gas and also become a major exporter. The recent deals are a small step in that direction.
By Charles Kennedy for Oilprice.com
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Charles is a writer for Oilprice.com