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Government’s amendment to oil agreements, price review prompt industry to rise again: Shell

Shell Egypt’s total natural gas production level is 350m cubic feet per day, says  Moataz Darwish

As international oil companies change their business plans to keep pace with recent mega gas discoveries in Egypt, and the government formed a fuel automatic pricing committee to set fuel prices according to global prices, besides amending existing exploration agreements, Daily News Egypt interviewed Deputy Country Chair for Shell Egypt Moataz Darwish. Royal Dutch Shell is one of the companies that have developed their investment plans and switched its focus to gas exploration in deep-water areas.

Plunging gas prices are forcing Egypt to change its gas-selling strategy, how does Shell see this move?

The recent amendment and update of oil agreements by the Ministry of Petroleum led the sector to revitalise strongly, and prompt foreign partners to achieve many oil and gas discoveries, as the Egyptian market became more attractive.

Foreign companies’ increasing interest to invest in the Egyptian oil sector was a result of amending oil agreements in terms of required investment volume and project development costs. The Egyptian government’s periodic review of gas prices also contributed to encouraging foreign partners to implement development programmes and increase production rates.

What is Shell Egypt’s total natural gas production level?

Shell’s current gas production level is estimated at about 350m cubic feet per day. The Burullus deep-water field in the Mediterranean is the company’s largest gas field. An exploratory well is currently being drilled in the Burullus concession region, and we seek to drill a second well after completing the first.

What is the production level from Badr El Din fields?

The production of Badr El Din fields, which are located in the Egyptian Western Desert, reached around 120,000 barrel of oil equivalent per day.

When would Shell start exploration in the concessions it was awarded recently?

Shell Egypt intends to start the seismic survey and drilling exploration wells in the concessions that it recently won in the next fiscal year.

Last year, Shell Egypt was awarded exploration rights to five concession areas in two auctions, of which three are for searching for oil: West Fayoum, Southeast Horus, and South Abu Sinan, and the other two are for natural gas: North Sidi Gaber and North El Fanar offshore areas.

How is your operation contract of Idku liquefaction plant going amid low global gas prices?

We have a company that specialises in contracting and exporting gas to global markets. It has a large portfolio of gas supply contracts because Shell is the largest company in the world in terms of LNG exports.

Idku Liquefaction Plant, currently operated by Shell, was launched in 2005 in partnership between the Egyptian General Petroleum Corporation (12%), the Egyptian Natural Gas Holding Company (12%), British Gas (35.5%) -which was acquired by Shell- Malaysia’s Petronas (35.5%), and ENGIE (5%).

How do you see the recent amendments to the law regulating the gas market in Egypt that allow foreign partners to sell gas directly to the private sector?

This mechanism is followed in many countries around the world and we are waiting impatiently for its implementation because it is the best solution to liberalising the market.

[The law regulating the Egyptian gas market includes an article that allows a foreign partner to obtain a license to sell its share of local gas fields to the private sector at prices set by the Gas Regulatory Authority, as part of the government’s plan to liberalise the energy market locally.]

When will you start developing your recently acquired concession in the Red Sea?

Shell Egypt has been awarded two concessions in the Red Sea bid round, which was launched in March 2019. The first concession is located in Block 4 which was awarded to Shell in partnership with Mubadala (30%), while the second concession is located in Block 3 with Shell being the sole licence holder.

We are awaiting the Egyptian parliament’s approval, and then we can start the seismic survey and drilling the first exploratory well to know the size of reserves.

What are the updates of the Aphrodite gas field off the southern coast of Cyprus, of which Shell has a share?

No plan has been put in place to develop the Aphrodite discovery in the deep waters of the Mediterranean so far, as there is no way to link production at present.

US Noble Energy is the main operator of the field, while Shell is one the partners.

What does Shell see the future of the Egyptian oil market in light of the decline in gas prices globally?

Shell has a strategy based on global market studies until 2050, which expects an increase in market demand rates, which requires more discoveries. The existing gas discoveries will not cover global demand in light of urban and economic expansion worldwide.

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