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Egypt rolls out $1 billion for oil exploration in Western Desert

Egyptian companies are planning more than $1 billion in investments in the oil and natural gas sector in the Western Desert region.
Western Desert, 1942 Battle of El Alamein

Two oil companies affiliated with the Egyptian Ministry of Petroleum are planning to invest more than $1 billion in oil exploration in the Western Desert.

During a virtual meeting held April 28, the head of Khalda Petroleum Co., Saeed Abdel Moneim, said about $830 million is expected to be invested during the 2021-22 fiscal year as part of a plan to search for oil and gas and develop production fields in the company’s concession areas in the Western Desert. The fiscal year starts in July.

Abdel Moneim said the plan calls for drilling 87 wells, including 35 for exploration and 52 for development, or production. This should help achieve an average daily production of about 130,000 barrels of crude and condensate oil, in addition to 630 million cubic feet of natural gas, he added during the meeting.

The meeting involving officials from Khalda Petroleum and Qarun Petroleum Co., held to discuss the planning budget for the 2021-22 fiscal year, was chaired by Tarek el-Mulla, the minister of petroleum and mineral resources. 

The president of Qarun Petroleum, Ashraf Abdel-Gawad, said his company planned to invest $252 million in its concession areas in the Western Desert. The plan includes drilling 24 development wells and five exploration wells in tandem with the ongoing implementation of a plan to repair and maintain wells to achieve an annual production rate of about 9 million barrels of crude oil, he added.

Abdel-Gawad said all precautionary measures will be abided by to ensure the safety of workers and achieve the fields' production objectives in light of the coronavirus pandemic.

Between July 2014 and June 2020, 84 petroleum agreements were signed by the Egyptian state with international companies for oil and gas exploration. These investments were for at least $14.8 billion. This is in addition to grants of about $1.1 billion to drill 351 wells.

Mulla's remarks focused on the need to raise the efficiency of operations and activities, optimize the use of infrastructure and implement cost reduction programs at a time when the global petroleum industry has been facing major global challenges as a result of the coronavirus crisis.

He stressed the need to focus on exploration activities and to expedite their completion to compensate for the natural decrease in production.

Egypt had previously announced having achieved self-sufficiency in locally produced natural gas by the end of September 2018 thanks to increased domestic production as a result of the completion of numerous gas field development projects, most notably four major fields in the Mediterranean.

This has allowed Egypt to halt the import of liquefied natural gas for the first time in more than three years, lifting a burden from the nation's general budget.

Abdel Khaleq Faruq, director of the Nile Center for Economic and Strategic Studies, praised Egypt's interest in oil exploration and investment, especially in the Western Desert, which officials had neglected in recent years.

In a phone call with Al-Monitor, Faruq said Egyptian governments had not been interested in exploring for oil and gas in the Western Desert in particular due to the exorbitant financial cost, among other several factors. “Many factors hindered gas and oil exploration in the Western Desert region, most notably the fact that the region is full of mines left behind after World War I and World War II. This made the exploration process difficult and costly. Mines must be cleared in some areas" before drilling can take place, he said.

Faruq said he believes Egypt has the capabilities and resources to be a pivotal hub for producing and exporting energy to the European market.

Ibrahim Zahran, who formerly headed the Apache Egypt Companies oil business, told Al-Monitor, “The Western Desert has undiscovered areas that exceed manyfold those currently discovered. These can cover the needs of all of Egypt.”

He said the Ministry of Petroleum’s signing new petroleum and natural gas exploration agreements stem from the vital importance of this sector for Egypt. He added, “Exploration in the Western Desert is a good step that increases the opportunities for discoveries in the region. … Similar agreements should be promoted to attract investments by companies that possess the technology suitable for exploration in a region such as the Western Desert.”

In November 2016, President Abdel Fattah al-Sisi called for turning Egypt into a regional oil and gas hub. He urged greater efforts to expedite gas discoveries in the eastern Mediterranean. Sisi also emphasized the importance of continuous development of the oil and gas production sector as a key pillar for the national economy and to lure foreign investment and provide new job opportunities.

In May 2017, an investment law was issued to attract more investment. A manual on investment opportunities and incentives in all fields was also drafted in cooperation with various ministries.

Of note, more than 100 international companies operate in the oil and gas sector in Egypt. The country also is an important route for oil and gas transport through the Suez Canal and the Suez pipelines. 

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