Egyptian hydrocarbons sector expands rapidly

Jul 16, 2001 02:00 AM

Recent times have seen significant developments in Egypt's hydrocarbons sector, which is expanding rapidly. Most recently, BP Egypt announced on July 5th that it had come to an agreement with TotalFinaElf to buy their 50 % stake in a concession area off the Nile Delta.
The Egyptian General Petroleum Corporation also announced on July 3rd that the country's oil production has continued to rise, to an average of 627,333 bpd in June from 596,452 bpd in May of this year. Officials at the Midor complex stated that the refinery was already operating at 70 % capacity. Meanwhile talk has been continuing in the industry and in official circles about international co-operation with petroleum exploration with Cyprus and gas exports to the US.
The announcement from BP Egypt came on July 5th, although the deal had been signed on June 19th. The reason for the delayed announcement was not given, nor was the sum for the transfer of 50 % of the interest in the drilling concession in the West Mediterranean Deep Water Area, off the Nile Delta. BP already owns the other 50 % of the concession, hence the deal is still subject to approval by the Egyptian ministry of petroleum.

The concession had originally been granted to BP and Elf Hydrocarboures Egypte in May of 1999 for a five-year term and a commitment by the oil companies to spend at least $ 48 mm and to drill at least one well. BP claims that it will drill a first exploration well later in the year in the concession area.
Now that BP has acquired the other half of the concession, it can complement it with their other off-shore positions in the North Alexandria and the North Idku concessions, also in the western off-shore Nile Delta region. The company has already drilled four successful wells in these two areas, and claims to have proven gas resources of more than 2 tcf.
This new acquisition should boost BP's gas presence in Egypt yet more, especially as the company has a deal with the Egyptian General Petroleum Corporation and with ENI of Italy toconstruct a LNG terminal on the Mediterranean coast. In a further announcement, Centurion Energy International of the US claimed that its well in the El Manzala concession area has come up with gas and condensate. This is the fourth such discovery in the concession area, but it is as yet unsure exactly how much potential the field has. The company is certainly optimistic as it has field facilities under construction that are due to come on stream at the end of the third quarter of 2001.

Sources at the Middle East Oil Refinery (MIDOR) claimed on June 28th that the newly constructed refinery was operating at 70 % of full capacity, as the facilities were still undergoing a checking process. There have been some initial teething problems during the set-up process, but the majority of these seem to have been solved. Once it is fully operational the refinery will process up to 100 000 bpd of oil.
The same source noted that last month the refinery made some naphtha and gas oil exports, and that the refinery had entered into a long-term contract for the export of light and middle distillates, although details were not given. In April it awarded a tender to sell 180 000 tons of gasoline and 150 000 tons of jet fuel for loading between April and June.
Since the withdrawal of the Israeli Merhav Group from the high profile confidence-building project earlier this year, 60 % of the refinery has been owned by the Egyptian government through the Egyptian General Petroleum Corporation, although observers believe that the government is seeking to sell off a substantial part of the project.

Meanwhile the Egyptian minister for electricity and energy, Ali Fahmy al-Saidi, announced that he would visit Cyprus in late July to discuss joint exploitation of oil and gas reserves off the island. The statement came right after a deal was signed on June 26th between the two entities promoting bilateral commercial links, beyond the $ 70 mm annual trade. The south-eastern corner of the Mediterranean is expected to contain significant hydrocarbon reserves, and the concern is that without proper delineation of the continental shelf dispute could arise over the produce.
In a bold move, Britain's BG is negotiating with various US buyers to export Egyptian LNG to the US. Construction will begin early in the second quarter of 2002 on a gas terminal in Louisiana, belonging to CMS Energy, and BG will have use of 80 % of the capacity at the terminal from January 2002. The Egyptian LNG project is due to come on stream in September 2005, and shortly after that BG is to have full use of the 630 mm cfpd Louisiana facilities, from which to pass the gas onto US buyers.
BG is planning to spend a total of $ 4 bn in Egyptian gas over the next five years, much of it going to a gas hub and processing terminal near Alexandria. It is expected to process 800 mm cfpd, all for the domestic market, from 2003.

Source: The Oxford Business Group
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