Thursday, May 5, 2016

OTC '16: Egypt’s petroleum minister touts country’s upstream assets

HOUSTON -- In an obvious attempt to jump-start E&P activity to a higher level, Egyptian Minister of Petroleum & Mineral Resources Tarek El Molla recited a laundry list of reasons as to how the E&P investment climate will improve, and why operators should be investing in his country. His remarks came during a topical breakfast session on Tuesday at the Offshore Technology Conference (OTC) in Houston.

“We are focusing on energy security by boosting supply and diversifying supply,” said El Molla while explaining his government’s aims and attitudes. “We’re also trying to improve financial stability and modernize our sector governance.” To that end, added El Molla, the government has 23 different policy measures in effect or proposed.

“In shaping our policies, we have identified our five biggest problems with regard to oil and gas,” continued El Molla. “These are: 1) Foreign currency; 2) Our need to reduce IOC arrears; 3) A need to attract more investment; 4) Our ongoing efforts to balance supply and demand; and 5) Energy subsidies.” He noted that natural gas constitutes 53% of the Egyptian energy mix, with oil accounting for another 41%. Moreover, gas fires 63% of the country’s electricity generation. Yet, lamented the minister, “we are much below the EU, when it comes to power efficiency.”

Nevertheless, Egypt already possess significant oil and gas reserves as an established producing nation, and there is much exploration potential beyond the current numbers. “We rank 16th in gas reserves worldwide, and rank 15th in gas production,” noted El Molla. “And in the Nile Delta Cone, we have an estimated 223 Tcf of undiscovered gas reserves. Furthermore, in the Upper Egypt and Red Sea areas, we know that we likely have significant, undiscovered gas reserves, but the potential has yet to be determined.”

Meanwhile, the country has signed 66 concession agreements over the years, and more are likely on the way. “During 2016, we will have, in the coming weeks, a new bidding round for 28 blocks over both onshore and offshore areas,” explained the minister. “And a key discovery on the Shorouck Block offshore, the Zohr project, is being fast-tracked by Eni. It eventually will have 20 wells, with six in the first phase. The discovery was declared commercial in August 2015, and we expect it to go onstream in December 2017, just a little over two years later.” In addition to Zohr, two other ongoing projects are North Alex and Atol fields, both operated by BP. The Zohr discovery has raised foreign companies’ interest in Egypt’s deepwater areas, added El Molla.

Among the leading operators in Egypt are Apache, BP, Shell, Eni, Edison and IPR. Representing Apache at the topical breakfast was CEO and President John Christmann IV. He noted that while North America has become problematic for Apache in this era of low oil prices, “we do have two really strong international businessesEgypt and the North Sea. In a sub-$50/bbl environment, the international assets really shine through.”

Apache’s head man reminded the audience that his firm is by far the leading explorer in Egypt, and the leading acreage-holder in the Western Desert. He said that during 2016, 23% of Apache’s capital program will go to activities in Egypt. “We will spend about $300 million to $400 million, net,” said Christmann. “Berenice and Ptah are two significant discoveries in the last couple of years, and we will drill 60 to 70 wells during 2016 and average six rigs running for the year.”

Ironically, added Christmann, “we have just four rigs running in the U.S. at the moment, but we have five rigs running in Egypt. We are encouraged by the fact that our average well costs have gone down in Egypt, from $5.8 million per well to $1.9 million per well. And over the last six years, our production in Egypt has been very stable.”


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