Egypt prepares for oil and gas exploration in Red Sea
Cairo - Egypt said it expected to invite international oil and gas companies to start exploration in its Red Sea territorial waters during the first half of 2018 after the completion of seismic and geophysical studies.
Petroleum Ministry spokesman Hamdi Abdel Aziz said two companies will “most probably finalise their studies early next year. The finalisation of the studies will make us able to invite international companies to submit their bids to explore oil and gas.”
The state-run Ganoub El Wadi Petroleum Holding Company signed a $750 million contract in July for international companies to conduct seismic and geophysical studies off Egypt’s Red Sea coast for the first time.
American Schlumberger and British TGS have reportedly met with officials from international oil and gas companies to sell the findings of their studies on the area.
Egypt and Saudi Arabia signed a maritime boundary demarcation deal in 2014 to define their Red Sea territorial waters in preparation for oil and gas exploration.
“The government could never have invited international companies to conduct studies on potential oil and gas reserves in the area without the deal,” said Salah Hafez, a former vice-president of the General Petroleum Corporation, the executive arm of the Egyptian Petroleum Ministry.
“International companies are always afraid that the money they spend on studies such as this will get lost in the event of border disputes between countries,” he said.
The maritime boundary demarcation deal included the controversial repatriation of two Red Sea islands to Saudi Arabia, a move that was met with widespread discontent in Egypt over the perceived selling off of its land.
Reports indicate that there are huge gas and oil reserves in the Red Sea area. Abdel Aziz said the ministry expected there would be 8 billion barrels of oil off the Red Sea coast.
Oil experts said this could be just a fraction of what might be discovered in the area. In August, an unnamed Petroleum Ministry source told al-Watan daily that expected reserves off the Red Sea coast could turn Egypt into a major oil-exporting country in the next decade, describing the reserves as a “game changer.”
Egypt produces 147 million cubic metres of natural gas daily, which is expected to rise to 176 million cubic metres next year when production goes online from a major Mediterranean field discovered in 2015 by Italian state-owned Eni. Egypt consumes about 6 billion cubic metres of gas every day.
Egypt produces about 2.4 million barrels of oil every month. It imports an additional 1 million barrels per month to satisfy domestic demand.
A seismic study in 2009 indicated the presence of natural gas in the Red Sea area. In 2013, Saudi state-owned Aramco discovered three oil and two gas fields in the Red Sea region after using a deep-water rig. Work was halted in 2015 because of the cost of exploration and the declining price of oil.
With oil prices picking up, energy companies are expected to look towards exploration in the region.
“This actually makes us optimistic about the prospects of this region in the future,” Hafez said.
There are, however, challenges, not least the cost of deep-water exploration in the Red Sea compared to the Arab Gulf. Depths in the Arab Gulf rarely exceed 100 metres but in the Red Sea they can be ten times deeper.
“The seafloor in the Red Sea is known to be rough and salt deposits are also thick,” said Egyptian energy expert Ibrahim Zahran. “This, in fact, raises the cost of exploration, which can at the end scare oil companies away.”