Italy’s Eni expects to invest $6-$10 billion in Zohr
Egypt’s Oil Minister Tarek El Molla said this week that the country hopes to have production from the newly discovered Zohr gas field starting in 2017, a year ahead of its original plan. The field, discovered by Italy’s Eni (ticker: E) earlier this year, will be the biggest in the Mediterranean, with an estimated 30 trillion cubic feet of gas. The Italian energy company plans to invest $6-$10 billion to develop Zohr, reports Reuters.
Officials originally called for production from the new gas field to start in 2018, but Egypt’s oil ministry is looking for ways to speed up output in order to alleviate its need for more energy. Once a net energy exporter, Egypt’s growing demand for energy is quickly outpacing the country’s production.
British oil major BP (ticker: BP) announced in October that it is also planning to move up its plans to produce from its assets in Alexandria to early 2017 from mid-2017. BP’s production should add 1.2 billion cubic feet of gas per day by late 2019 to help meet Egypt’s growing demand.
The total value of Egypt’s natural gas projects, excluding Zohr, is now $13.8 billion, and El Molla said the Zohr discovery had made additional investment much more likely.
“The Zohr discovery whet the appetite of other foreign companies working in Egypt to speed up seismic discovery operations and exploratory wells.”
Current projects underway will add 2.4 billion cubic feet to the country’s daily gas production by 2019, said El Molla. Current production is roughly 4.5 billion cubic feet.
On the back of this, the stock of foreign oil and gas investment in Egypt is expected to increase to $8.5 billion during the current fiscal year ending next June, from $7.5 billion last year, said El Molla.
Drawing investors back in
Renewed interest in Egypt’s oil and gas industry comes as the country looks to revitalize interest in the sector. El Molla, appointed oil minister in September, succeeds Sherif Ismail who launched a program targeted at regaining the interest of foreign investors driven away by low prices and debt arrears.
In July the oil ministry raised the price paid for gas from Eni to a maximum $5.88 for every million British thermal units and a minimum of $4.00, based on amounts produced, from $2.65. It then cut a similar deal with British Gas.
Ismail’s success in reinvigorating the sector, which is vital for economic growth at a time when energy shortages have crippled industrial production, helped propel him to the post of prime minister in September.
The Zohr field
In addition to Ismail’s policies, at an estimated 30 Tcf the sheer size of the Zohr field has been responsible for drawing more companies back to Egypt. The Zohr Field by itself is believed to have more gas in place than several countries, let alone gas plays. Mexico, by comparison, had 17 Tcf of proven reserves in its onshore assets as of year-end 2013. In an interview with CNBC, Claudio Descalzi, Chief Executive Officer of Madrid-based Eni, said the Zohr’s production will be used domestically and “will be able to ensure satisfying Egypt’s natural gas demand for decades.”
The Zohr Prospect was drilled in 4,757 feet of water depth and reached total depth of 13,553 feet, encountering 2,067 feet of hydrocarbons in the Miocene formation. More than 1,300 feet are anticipated to yield net pay. The Cretacious formation will be targeted in a future well. Eni holds a 100% contractor’s working interest in the block, which was awarded in a January 2014 bid round with the Egyptian Ministry of Petroleum and the Egyptian Natural Gas Holding Company.