Oil & Gas

BP invests $1.5bn in gas projects in Egypt

March 1, 2024, 9:55 AM

The Maersk Discoverer rig drilling for BP offshore Egypt. The company could invest up to $6.5bn in gas and oil projects in the country

UK major adds to Egypt commitments
Venture with Adnoc in play this year
Egyptian gas production down

BP will invest $1.5 billion to develop gas projects and drilling in Egypt over the next three to four years.

It was revealed two weeks ago that the UK-based energy business and Abu Dhabi state oil company Adnoc have agreed to pursue a natural gas joint venture in Egypt.

The venture, reported by Bloomberg on Wednesday, citing a BP spokesperson, is expected to be finalised in the second half of this year, with BP holding 51 percent and Adnoc 49 percent.

It will give Adnoc a stake in the Zohr gas field, the largest in the Mediterranean, that was discovered by Italian energy major Eni in 2015.

BP did not respond to requests for comment.

BP CEO Murray Auchincloss last month said the company will invest up to $1.5 billion in oil exploration activities in Egypt, with potential expansion to nearly $5 billion.

Egypt is targeting a 25 percent increase in gas and oil investments for the financial year 2024-25, according to remarks made by oil minister Tarek El Molla at the Egypt Petroleum Show on 21 February. Speaking to Asharq Bloomberg, El Molla said that Egypt is hoping to attract $7.5 billion in foreign direct investments.

El Molla also told reporters that the country’s gas production has fallen to 5.5 billion cubic feet a day, citing natural declines in the gas fields and ageing wells.

According to Bloomberg calculations, gas production is currently the lowest in years. This is down from an all-time high of 7.2 billion cubic feet a day achieved in September 2021.

Egypt has been relying on Israeli gas imports to meet its growing domestic demand, as well as for re-exports, which have been a significant earner of scarce foreign currency.

Despite suppressed production rates, Skip York, chief energy strategist at US-based energy consultancy Turner, Mason & Company, said that investments in Egypt remain attractive.

“The rising interest in developing brownfield projects in mature basins such as Egypt is a global trend since the oil price collapse in 2014,” he said.

Companies are focusing more on consolidating established projects in countries with established gas logistics infrastructure due to uncertainty surrounding the future of natural gas.

“Returns across the gas portfolio could be higher with brownfield investment in Egypt rather than a similar-sized greenfield investment somewhere else,” York said.

According to an Asharq Bloomberg report on Tuesday, Exxonmobil drilled their first exploratory well in October, after the company’s concession to search for oil in the North Marakia offshore block was ratified by Parliament last year.

Exxonmobil told Asharq Bloomberg it intends to drill three further exploratory wells in 2024 at an initial cost of $100 million.

The north African country is on an energy drive and this week signed seven agreements with global companies to develop green hydrogen and renewable energy projects in the Suez Canal Economic Zone, with expected investments worth $40 billion over 10 years.

Investment of nearly $12 billion is expected for a pilot phase, followed by another $29 billion for the first phase, the government’s information department said, citing Hala El-Said, minister of planning and economic development.