Egypt's EGPC Improves E&P Terms in Bid Round

Strategic Insights -

Egypt's state-owned Egyptian General Petroleum Corporation (EGPC) has recently improved the terms for oil and gas exploration and production (E&P) in a bid round, aiming to attract more foreign investment and discover new non-associated gas fields. The bid round, which began in 1999, has been postponed several times, with the latest deadline set for February 28, 2002. The EGPC is offering a total of 32 blocks, covering the entire sedimentary basin of Egypt, with nine in the Gulf of Suez and nine in the Mediterranean.

Key Takeaways:

  • The EGPC has enlarged the size of individual blocks and extended the exploration period from seven to eight-ten years, with up to 12 years for large Mediterranean blocks.
  • The government has lowered signature bonuses by half, and there are over 250 E&P agreements and farm-in arrangements in place for oil and gas exploration in Egypt.
  • The Petroleum Ministry aims to maintain oil exports for as long as possible and optimize the search for new oil and gas reserves, with incentives for foreign investors under a dynamic upstream regime.
  • The E&P strategy is to concentrate operators in known fairways for oil and gas, reducing costs and making new blocks more attractive.
  • The proportion of crude oil allocated annually for cost recovery has been increased by 5-15%, from 20-30% to 30-40%, depending on the location.
  • Companies are offered the "seismic only" option in frontier areas, with no commitment to drill in the first phase if seismic results are negative.
  • The Ministry of Petroleum applies a new international technology for deep water exploration in the Mediterranean, with depths exceeding 3,000 meters.
  • The government has extended the offshore Mediterranean exploration zone to extra-territorial waters within the economic zone, at distances between 180-360 km from the Egyptian shore.
  • BP, with over $9 billion in investments in Egypt, has concluded an agreement with EGPC to convert its oil JV contract to a PSA, leading to improved terms for foreign investors.
  • The production sharing agreement (PSA) model has been adopted, with EGPC holding 50% and the operator or consortium holding the other 50%, with the possibility of extension and production bonuses.

Statistics:

  • 32 blocks are on offer in the bid round, covering the entire sedimentary basin of Egypt.
  • 9 blocks are located in the Gulf of Suez, where most of Egypt's oil is produced, and 9 blocks are in the Mediterranean.
  • Over 250 E&P agreements and farm-in arrangements are in place for oil and gas exploration in Egypt.
  • Signature bonuses have been lowered by half.
  • The exploration period has been extended to 8-10 years, with up to 12 years for large Mediterranean blocks.
  • The proportion of crude oil allocated annually for cost recovery has been increased by 5-15%.
  • $680 million is to be spent by BP, Agip, and Shell on deep water drilling in 6 blocks.
  • BP has invested over $9 billion in Egypt.

Sources:

  • EGPC bid round announcement (no date provided)
  • Ministry of Petroleum announcement (no date provided)
  • BP press release, 1999 (no date provided)
  • Shell press release, 1999 (no date provided)
  • Agip press release, 1999 (no date provided)