UAE-based energy company Dana Gas has announced an agreement that will see UK-based oil and gas company BP pay its 50 per cent share of the cost of the first well in Egypt’s El-Matariya onshore concession.

Under the terms of the agreement, BP will cover Dana Gas’ costs up to a cap of $39m.

The deal has set the scene for drilling to start in El-Matariya in the first half of 2016, according to a statement published by Dana Gas.

In exchange for covering the UAE firm’s share of the costs, BP has the option to buy a 50 per cent stake in Dana Gas’ West el-Manzala concession.

Dana Gas has also agreed to give BP the option to buy a 50 per cent stake in its recently awarded North el-Salhiya concession if BP covers the costs for a second exploration well to be drilled in the El-Matariya onshore concession

Both options are subject to government approval.

The El-Matariya onshore concession area was awarded to BP and Dana Gas in a 2014 international bid round by Egyptian Natural Gas Holding Company (Egas).

The concession is located onshore in the Nile Delta area and covers an area of 960 square kilometres.

It is located adjacent to Dana Gas’ existing West el-Manzala and West el-Qantara development leases and the recently acquired North el-Salhiya concession area.

Dana Gas is currently the sixth-largest gas producer in Egypt.