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Egypt’s deal with BP to jointly invest $12 billion to develop offshore gas fields shows that oil companies’ faith in the country’s political stability is gradually being restored.
London-based BP said March 6 that it plans to work at the West Nile Delta (WND) field with hopes of extracting 5 trillion cubic feet of gas resources and 55 million barrels of condensates, the equivalent of about one-fourth of Egypt’s total output, and that further offshore exploration could double production.
In addition, it said, constructing the rigs to extract the energy would mean thousands of jobs, most of them for Egyptians.
This appears to be a new day in gas production for Egypt. At one time several European energy companies such as Eni of Italy, BG Group of Britain and Gas Natural Fenosa of Spain had built large liquefied natural gas export facilities in Egypt, turning it into one of Africa’s leading gas producers.
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But the plants haven’t been used since Hosni Mubarak was ousted in 2011 in a popular uprising. The European companies reduced their investments in Egypt amid the political unrest, leading to a decline in production. Making matters worse, as production stagnated, domestic demand rose, limiting exports and their attendant revenue.
Now, though, BP has decided to invest in Egypt, beginning modestly with its domestic market, not export terminals, at least for now.
That means a lot for Egypt’s economic development after years of uncertainty, according to BP. “The project underlines BP’s commitment to the Egyptian market and is a vote of confidence in Egypt’s investment climate and economic potential,” the company said in a statement.
It also reflects well on the administration of Egyptian President Abdel Fattah el-Sisi, who resigned as the country’s top general in 2013 and ran successfully for its senior civil post, said Catherine Hunter, a gas analyst at the market research firm IHS in London. “A transaction of this scale shows that Egypt’s energy policy has turned a corner,” she said.
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Hunter’s view is parallel with that of BP CEO Bob Dudley. “The WND project investment is the largest foreign direct investment in Egypt,” he said in a statement. “WND production is key to Egypt’s energy security.”
BP will own 65 percent of the project, with the rest under the control of Dea, once the oil and gas unit of the huge German energy utility RWE. L1 Energy, also known as Letter 1, the investment firm of Russian oligarch Mikhail Fridman, bought Dea a year ago.
BP said it would produce gas from two of the company’s offshore concession blocks, North Alexandria and West Mediterranean Deepwater. And it appears it will team up with rival BG Group, using its pipeline to move gas from two other nearby fields, Taurus and Libra, to the Egyptian mainland.
By Andy Tully of Oilprice.com
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Andy Tully is a veteran news reporter who is now the news editor for Oilprice.com