Majors line up for Egypt gas deals despite lack of pricing terms

19 September 2008
At least a dozen international energy companies are to bid in Egypt’s latest gas exploration round, according to industry sources, despite the oil majors having yet to be informed of the pricing terms.

The exploration round, launched on 7 September by the state-run Egyptian Natural Gas Holding Company (Egas), has attracted strong interest from oil majors eager to explore seven new offshore blocks in the Mediterranean Sea. It is the first gas acreage offered by Egypt in two years.

One Egas executive told MEED last month that he expected oil majors to be offered terms of $4-$4.50 a million BTUs, rather than the normal $2.65 a million BTUs, as compensation for the high cost of drilling in the deep-water blocks (MEED 29:8:08).

However, potential bidders have been told the final pricing terms will not be divulged until after bids are submitted on 9 February 2009, according to one oil executive.

“We were hoping to receive clear guidance on this issue,” he says. “The prospects look promising in the [bid] round, but the price that we receive is also an important factor to consider.”

The UK’s BP made a gas discovery at the Satis 1 field in the Oligo-cene reservoir in January, with reserves of 1.3 trillion cubic feet (tcf). Several companies say that the find, which is close to some of the new blocks on offer, has significantly boosted exploration prospects for the bid round. “To hear BP was able to make such a large discovery has reinvigorated interest,” says the Egypt country manager of one US oil major.

The business development executive from another oil major says blocks 2, 3 and 4 are considered the best prospects.

“They are likely to be the blocks to go for in terms of the sub-salt play in this round,” he says. “BP’s good results show there is much more gas to be found.”

BP’s well was drilled to a record depth of more than 6.5 kilometres and was considered the first significant high-pressure, high-temperature, offshore discovery in Oligocene.

Prospective bidders will be invited to review existing technical data on the blocks before submitting their bids.

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