BP goes ahead with Egypt gas development
The development will increase the country's gas production by a quarter
In an agreement seen as marking a turning-point for Egypt's troubled gas operators, BP is to develop deep-water fields which will raise the country's gas production by 25%. The $12 billion investment is the first project to go ahead since the government started repaying its debts to producing companies last year.
The agreement covers the West Nile Delta project, under which 142bn cubic metres (cm) of gas and 55m barrels of condensates will be developed to flow 12.4bn cm/y, all to be used in the gas-short country's domestic market. Production is due to start in 2017.
BP's partner in the development will be DEA, formerly a part of Germany's RWE but since early-March owned by LetterOne, a Luxembourg-based investment company controlled by Russian entrepreneur Mikhail Fridman. The fields to be developed lie in the West Mediterranean Deepwater licence, held by BP with 80% and DEA with 20%, and in the North Alexandria licence, held 60% and 40% respectively. BP says that overall it will have about 65% of the equity, and DEA 35%.
The key field in the project is Raven, a 2004 discovery, lying 40 km offshore in 650 metres of water. Raven and the nearby Giza and Fayoum fields are to be developed as long-distance tie-backs to shore, with a new processing plant constructed for Raven while Giza and Fayoum gas will be pro-cessed at the existing, BG-operated, Rosetta plant. Also to be developed are the Taurus and Libra fields, which will flow through a subsea tie-back to existing, BG-operated, Burullus facilities.
BP says its other discoveries off Egypt have the potential to add 142bn-198bn cm to re-serves. Gas has been found in recent years at Taurt North, Seth South, Salmon, Rahamat, Satis, Hodoa, Notus and Salamat - and, just days after the West Nile Delta agreement, the firm made its second discovery in the eastern part of the Nile Delta. The Atoll-1 well, in the North Damietta licence, found 50 metres of gas payzone at a depth of 6,400 metres. With another 1,000 metres still to be drilled, the well will be the country's deepest.
Despite the high potential of Egypt's offshore, exploration and production activity has slumped in recent years - initially because of the previous government's intransigence over the price it would pay for gas for the domestic market, and then because of the political uncertainties following the revolution. Gas production peaked in 2009 and had declined by more than 18%, to about 49bn cm, last year. But consumption has continued to increase, leading to shortages.
The government responded by cutting supplies to the country's gas export facilities. Liquefied natural gas (LNG) plants at Damietta (Segas) and Idku (BG) are shut-down, while the Arab Gas Pipe-line is carrying only minor volumes. LNG imports have been contracted, and are due to start in April when a floating storage and regasification vessel, supplied by Norway's Høegh LNG, is in place.