EGYPT - 13 GoS Blocks Offered.

EGPC in October 2005 offered 13 blocks in the GoS and the Eastern and Western Deserts for auction in February 2006. The blocks are in the GoS, the Eastern Desert and the Western Desert. The concessions are for 20 years and may be extended by up to five years on EGPC and government approval. They are: South-East Warda, 317 sq km; Ezz el-Orban offshore, 338 sq km; Ezz el-Orban onshore, 537 sq km; West Bitter Lakes, 2,614 sq km; East Cairo, 5,068 sq km; W. Darag onshore, 5,323 sq km; el-Wasta, 3,654 sq km; South Mariut, 4,785 sq km; South Alamein, 3,228 sq km; Bahariya, 4,414 sq km; East Badr el-Din, 83 sq km; East Ghazalat, 858 sq km; and West Obayed, 1,841 sq km.

EGPC launched its first 2005 E&P licencing round in early May which included 15 blocks. That followed the award in late March of three blocks in the Western Desert which were included in EGPC's second bid round of 2004. The round saw Vegas of Greece awarded the licence to explore the 1,075-sq-km Alam el-Shawish West block, Naftogaz of Ukraine taking a 974-sq-km Alam el-Shawish East block, and Dovon Energy of the US winning the 1,589-sq-km Abu Sennan block.

In February EGPC awarded nine exploration and production sharing agreements (EPSAs) to six IOCs after the opening of bids on its first licencing round for 2004. Agip of the Italian energy group EBI scored the biggest success, with its local subsidiary IEOC Exploration taking three blocks, while Devon Energy took two blocks. The bid round included 15 new blocks covering a total area of 30,804 sq km in the Nile Delta, the Western Desert and the GoS. Six blocks were not awarded.

Under EPSAs, the companies have the option to take up a 20-year development lease after the first discovery. The exploration phases vary according to the size of each block and range of one to four years. IEOC's EPSAs are West Sidki, East Obayed and North Bahrein. Devon scored its successes in South October and North Qarun (as mentioned above). Merlon of the US took South-East el-Mansoura, and Apache of US took North el-Diyur. EGPC said 34 bids were received from 32 firms for 11 of the 15 blocks on offer.

The local Tharwa Petroleum Co. in March 2005 farmed out 55% of its interest in four oil blocks in the Western Desert to Shell and Petronas of Malaysia. Shell took 30% and Petronas got 25%, with the remaining 45% being held by Tharwa, which continued to be the operator. The blocks are the 23,300-sq-km el-Farafra, the 7,400-sq-km West Ghazalat and the 16,000-sq-km Siwa, which are between the Qasr field of Apache and the Libyan border. Tharwa got the drilling and production rights to the four blocks in mid-2004, requiring the company to invest a minimum of $86.5m in exploring and developing the blocks. (Shell is major producer and explorer in Egypt, with interests in the offshore Nemed block and West Sitra in the Western Desert. Shell with Petronas and the ExxonMobil is the operator of Nemed. For west Sitra, Shell is to drill eight wells and invest $28.5m by 2012.

Apache in September 2004 announced the results of two new finds at Mattruh and Khalda. The two wells tested at a combined rate of 70 MCF/d of gas and 2,330 b/d of condensate.

Oil Search of Papua New Guinea in September 2005 got 100% in the Eastern Desert Area "A" from Geopetrol SA of France for a "modest consideration reflecting some of Geopetrol's past costs". Oil Search said it the area had the potential to increase production if it succeeded in its exploration. Area "A" consists of four development leases and two exploration licences, covering 400 sq km and is located onshore along the western flank of the highly prospective GoS. Managing director Peter Botten said after studies of opportunities in proven provinces, Oil Search had identified Area "A" as having untested potential for deep Nubian horst block plays - both in the exploration licences and immediately below the existing shallow fields. He said Oil Search planned to drill seven wells over a period of three years, with drilling to start in late 2006.

Botten said: "The historical success rate in this area of the...[GoS] is...[about 35%], with average prospect sizes of between 20-40m barrels". He said drilling costs in the area were low, with an exploration well costing about US$1.5m. "Oil Search's acquisition of the Area "A" service contract in the...[GoS] is part of the company's measured Middle Eastern and North African (MENA) expansion programme in areas where we can fully utilise our expertise in a collaborative manner with host governments in niche areas".

Egas now claims Egypt's proven gas reserves have risen to 68 TCF, from only 3.8 TCF in 1982. "And there is still another 100 TCF out there waiting to be found", Hussein Humouda, vice chairman of exploration and agreements for Egas, claimed at a conference in May 2005 in Marrakech, Morocco. Since 1966, Humouda said, 325 exploration wells had been drilled in the Nile Delta, of which 191 made finds and 17 contained over 1 TCF. Then some 24 fields were producing over 4,000 MCF/d, he said.

Even so, he said, Egas was pressing for more international investment to build on the momentum which had turned the Nile region into a world-class gas hub. Egas by then had signed eight gas E&P deals with IOCs since August 2001, with another five in the works and one under evaluation. Of a total 200,000 sq km of Mediterranean and Nile Delta net acreage, 47% remained unclaimed, Humouda added. While the GoS is a mature oil play, the Red Sea, Gulf of Aqaba and most of Egypt's desert interior remained sparsely explored.

The Petroleum Ministry in November 2005 announced the discovery of a new oilfield in southern Sinai with estimated reserves of 20m barrels and a potential to produce at the rate of 5,000 b/d. The ministry said in a press release that the find's production map was to be drawn out within six months. It said October 2005 witnessed the first well for three discoveries under GoS waters. It said the total confirmed reserves of those wells were 60-70m barrels. It said that was the first time in 40 years that an Egyptian firm made a similar discovery.

Cairo in November called on Russian petroleum firms to expand their presence in Egypt's oil and gas opportunities. In particular, it said, Russian firms had have the opportunity to invest $5 bn to acquire E&P assets, $10 bn in petrochemical projects needed over the next 20 years, about $5 bn in new refineries and projects related to the production of LNG. LUKoil and Gazprom are among Russian companies already actively involved in Egypt.

LUKoil, Russia's top oil producer, on April 1 agreed to boost spending on Egyptian oil and gas projects to compete for market share in Africa with BP and Shell, Europe's two largest oil firms. LUKoil, which in 2004 agreed to explore and develop two Egyptian oil fields in the GoS, wants to bid for more fields when they are offered in early 2006. The firm has already invested about $75m in the GoS, where it is producing 4,100 b/d (see Part 2 in OMT 2). Andrei Kuzyaev, president of LUKoil Overseas Holding, said in Cairo the firm intended to invest $400m in Egypt as it tried to boost production abroad to about 15% of its total output within a decade. Egypt expects to attract $20 bn in direct foreign investment for its energy industry by 2007 to raise output.

"We would like to be the major producer in Egypt with a 10 percent share of local production", Kuzyaev said, adding: "Gas is a promising direction for us, and this is why we would like to participate in the gas business in Egypt". Sergei Nikiforov, head of LUKoil Overseas Egypt, said: "We are interested in gas export projects. Exports may go either through the LNG plants...or through the pipeline to Jordan".

Egas in 2005 offered seven gas fields for E&P in the Nile Delta and the Mediterranean Sea. Egas Chairman Muhammad Tawila said they may hold 3.1 TCM of gas.