Egypt’s Gulf of Suez remains to this day the main source of the country’s oil production, following the discovery of several large offshore fields in the 1960s. However, much of the new investment in exploration and development over the past 20 years has been in the Western Desert and in the offshore Nile Delta, with the emphasis on natural gas.

Egypt’s overall production is in decline, particularly from its older fields in the Gulf of Suez, but these are being offset by new discoveries and enhanced oil recovery techniques. New offshore deepwater fields in the Mediterranean, along with shallower finds in the Gulf of Suez and the Nile Delta may help reverse declines and provide sustained oil and gas resources in the future.

UK oil major BP estimates the country’s crude reserves at 4.3 billion barrels, along with 2.2 trillion cubic metres of natural gas. More than 80 per cent of Egypt’s natural gas reserves and 70 per cent of its production is located in the offshore Mediterranean and Nile Delta areas.


Egypt currently dominates offshore oil and gas activity in the Mediterranean and is by far the region’s leader in deepwater exploration.

Exploration has begun in the offshore Mediterranean, onshore Nile Delta and in the Western Desert. Two of the country’s best prospects are deepwater targets: UK/Dutch Shell Group’s Northeast Mediterranean (Nemed) Deep Water concession, and the Raven discovery off the North Alexandria coast, operated by BP. The Nemed wells, which are being sunk to 4,000-4,500 metres in water depths of 2,400-2,750 metres, are the deepest in Egypt.

But more complex exploration brings higher costs. While a 2,000-3,000 horsepower onshore drilling rig can be hired for about $30,000 a day, a high-spec, semi-submersible rig can cost up to 20 times that amount.

After a slowdown in deepwater exploration between 2006 and 2010, the Egyptian government revised its pricing policies, agreeing to pay more for natural gas produced in these areas.

BP was the first to secure an agreement with the government for higher gas prices for production from its deepwater areas. The firm produced almost 450 million cf/d of gas in 2011, and plans to increase output through new discoveries in the Gulf of Suez and the Mediterranean.

For several years, BP has been discussing plans to develop fields it has discovered in offshore blocks in the western part of the Nile Delta, in partnership with Germany’s RWE-Dea. The terms for this $9bn development, which will add about 5 billion cubic metres a year to Egypt’s gas production, were finally agreed in 2010, but progress has been hit by the political uncertainty since the recent revolution.

UK-based energy company BG Group has emerged in recent years as a leading force in the Egyptian gas industry, having pushed through a series of rapidly executed exploration and development projects in the offshore Nile Delta. The firm produces about 40 percent of Egypt’s total gas production, which amounted to almost 800 million cf/d in 2011, mostly from its offshore Nile Delta discoveries.

Shell Group has a long historical connection with Egypt, dating back to 1911, with net production of 110,000 barrels of oil equivalent a day. Its main areas of operation are the Western Desert and Nile Delta, including some shallow-water offshore acreage.

Shell made a major play for the deepwater offshore segment in the early 2000s, when it took over the huge Nemed block. But it finally relinquished the block in 2009 after disappointing results. The Nemed block has now been repackaged into smaller blocks and will be offered in the November 2012 bid round.

Upstream development work is managed by joint ventures formed by concession-holders and state-owned Egypt General Petroleum Corporation (EGPC), with the Egyptian partner holding a 50 per cent stake.

There are currently 12 offshore projects planned or under way in Egypt’s offshore oil and gas sector, worth an estimated total of $16.9bn, according to Middle East projects tracker, MEED Projects.

While most oil and gas projects in the country have some input from EGPC’s affiliates on the engineering, procurement and construction side, international firms such as Saipem and Technip tend to play more prominent roles in offshore projects.

Key stakeholders

Oil Minister: Osama Kamal

Egyptian General Petroleum Corporation chairman: Hani Dahi

Egypt Natural Gas Holding Company president: Mohamed Shoeib

Offshore operating firms: BP, Shell, BG Group, RWE

Source: MEED