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Egypt optimistic about Red Sea exploration prospects

(Cairo) Egypt is expecting major international interest in oil and gas exploration along its Red Sea coast, shortly after the country invited international companies to apply for concessions in the area.

The Ministry of Petroleum said on March 10 that it would accept bids by international oil and gas companies for exploration in ten spots along the Red Sea coast.

The announcement came hard on the heels of the completion and processing of seismic data about the Red Sea coast.

American company Schlumberger and the British company Tgs have invested $720 million on seismic studies along Egypt’s Red Sea coast. The two companies started operating in an area covering of 10,000 kilometers in July 2017. The results of the study were released in April 2018 and showed that potential investments by international oil and gas companies would be more than worthwhile.

In November last year, the Ministry of Petroleum described the natural gas prospects in the Red Sea as “promising”. Estimates put reserves along Egypt’s Red Sea coast at 6 billion barrels of crude oil and 23 billion barrels of oil equivalent of natural gas.

Oil and gas experts expect exploration in the Red Sea to open the door for an oil and natural gas bonanza for in Egypt. This optimistic forecast is compounded with positive developments in the Egyptian oil and gas sector following the discovery of what is to date the largest ever natural gas finding along Egypt’s Mediterranean coast.

In August 2015, Italian state-owned company Eni discovered a huge gas field off the coast of the Suez Canal city of Port Said. With close to 30 trillion cubic feet of reserves. Zohr field as it is called, was described by the Italian company as a “game changer” for international gas markets.

In addition to the effect on gas markets, the discovery turned out to be a game changer for the Egyptian economy as well. Egypt, which turned into a net importer of natural gas following the 2011 uprising against longstanding president Hosni Mubarak, had been an exporter before the uprising, spending hundreds of millions of dollars importing gas from other countries each year.

With production from Zohr having reached 2 billion cubic feet every day now, the expectations are that production will reach 2.7 billion cubic feet per day before the end of this year, with Egypt expecting to raise its daily production of gas to 8 billion cubic feet a day in 2019/2020, from the current rate of 6 billion cubic feet.

This populous Arab state consumes around 6 billion cubic feet of gas every day, which means that it will have enough gas to send to international markets in the coming months.

“The oil and gas sector has very promising prospects,” said Mohamed Saad Eddine, the head of the Lpg Bottling Plants Investors’ Association. “These prospects will be driven by the increase in production and also by expected new discoveries.” These will bring Egypt closer to implementing its plan of becoming a regional energy hub. Cairo has taken several measures to fulfill its goal by reaching several import, processing and export deals, including with Israel and Cyprus.

With its sprawling liquefaction and refining facilities and the necessary infrastructure, experts agree Egypt is more than prepared to be an energy hub. “Our country can easily become an outlet for the processing and then export of output from natural gas producing countries in the eastern Mediterranean,” said Medhat Youssef, the former deputy head of the Petroleum Authority, the executive body for the Ministry of Petroleum. “International companies are spending billions of dollars on new discoveries in our country.”

Youssef and like-minded experts expect international oil and gas companies to have similar enthusiasm for exploration along Egypt’s Red Sea coast. It is believed that this coast has the potential to become Egypt’s next oil and gas production hub.