Egypt Oil Production

Egypt produced an average of about 594,000 barrels per day (bbl/d) of crude oil in 2004, down sharply from its peak of 922,000 bbl/d in 1996, but only modestly below the 618,000 bbl/d produced in 2003. Demand for petroleum products has been relatively flat since 1999, after rapid growth between 1995 and 1998 Oil from the Gulf of Suez basin is produced mainly by Gupco (Gulf of Suez Petroleum Company) under a Production Sharing Agreement (PSA) between BP and the Egyptian General Petroleum Corporation (EGPC). Egypt's second largest oil producer is Petrobel, which is a joint venture between EGPC and Agip of Italy. Other major companies in the Egyptian oil industry include Badr el-Din Petroleum Company (EGPC and Shell); Suez Oil Company (EGPC and Deminex); and El Zaafarana Oil Company (EGPC and British Gas -- BGThe Saqqara field, located offshore adjacent to the existing El-Morgan field, is expected to reach peak production of around 40,000 to 50,000 bbl/d, and begin commercial production in late 2005 or early 2006. Saqqara represents the largest new crude oil discovery in Egypt since 1989.

Egypt's overall oil production has been declining more slowly than in the Gulf of Suez fields, due to new output from independent producers like Apache. Khalda Petroleum, a joint venture between Apache and EGPC, produces around 50,000 bbl/d in the Western Desert in the Khalda and East Bahariyya areas. Agiba, a joint venture between EGPC and Agip also is producing about 40,000 bbl/d from an area in the Qattara Depression in the Western Desert, in the Meleiha, Zarif and West Razzaq blocks.

Offshore oil production possibilities in the Mediterranean are beginning to be explored. The largest concession awarded went to Shell, in February 1999, for a large deepwater area off Egypt's Mediterranean coast. BP and TotalFinaElf also were awarded a large offshore block from the same bidding round. A smaller offshore concession was awarded to Italy's ENI-Agip. While most discoveries offshore from the Nile Delta have been natural gas, it is believed that there may also be significant quantities of oil in the area. Shell reportedly is optimistic about the prospects for its North East Mediterranean Deepwater (NEMED) concession, but drilling so far has yielded natural gas rather than significant quantities of oil.

EGPC awarded five exploration contracts in July 2004 to a newly-formed state-owned upstream oil firm, Tharwa Oil. Four of the five concessions cover unexplored areas of the Western Desert, with the fifth covering an offshore block in the Mediterranean. Burren Energy of the UK also was awarded two blocks in the Gulf of Suez under the 2004 licensing round, which closed in January 2005. Other awards under the 2004 licensing round are still pending.

NATURAL GAS

Due to major recent discoveries, natural gas is likely to be the primary growth engine of Egypt's energy sector for the foreseeable future. Beginning in the early 1990s, foreign oil companies began more active exploration for natural gas in Egypt, and very quickly found a series of significant natural gas deposits -- in the Nile Delta, offshore from the Nile Delta, and in the Western Desert. Today, Egypt's natural gas sector is expanding rapidly, with production having more than doubled between 1999 and 2003. Natural gas production in Egypt averaged about 3.6 billion cubic feet per day (bcf/d) in 2004. Production is expected to rise to around 5.0 bcf/d by 2007, with much of the increased volume being exported as LNG. Major foreign companies involved in natural gas exploration and production in Egypt include BG, BP, ENI-Agip, RWE Dea and Shell. Apache also produces gas from its concessions in the Western Desert. The Egyptian government formed a new state-owned entity in August 2001 to manage the natural gas sector, Egyptian Natural Gas Holding Company (EGAS), separating those assets out from EGPC.

Egypt's government estimates the country's proven natural gas reserves at 66 trillion cubic feet (Tcf), based on several new finds. Probable reserves are believed to be 120 Tcf or more. Most of this increase has come about as a result of new natural gas discoveries offshore from the Nile Delta, and some finds in the Western Desert. In the Nile Delta, which has emerged as a world-class natural gas basin, recent offshore field developments include Port Fuad, South Temsah, and Wakah. In the Western Desert, the Obeiyed Field is an important natural gas area currently under development.

The International Egyptian Oil Company (IEOC), a subsidiary of Italy's ENI-Agip group, is Egypt's leading natural gas producer, operating in the Gulf of Suez, the Nile Delta, and the Western Desert regions. In cooperation with BP Amoco, IEOC has been concentrating its natural gas exploration and development efforts in the Nile Delta region. On November 4, 1997, BP (along with its partners EGPC and IEOC) announced plans to develop the giant Ha'py gas field in the Ras el-Barr concession of the Nile Delta region at an estimated cost of $248 million. The field came onstream in February 2000, and has reached an output of 280 million cubic feet per day (Mmcf/d). In September 1997, IEOC tested the Temsah gas field (located offshore from the Nile Delta) at 11.6 Mmcf/d. In October 1998, BP (25 percent owner) and ENI-Agip signed a natural gas sales agreement with EGPC (50 percent owner) and IEOC (25 percent owner) for Temsah. Temsah's gas reserves are estimated at 3.9 Tcf, and the field reached peak production of 480 Mmcf/d in 2003. IEOC also operates several other smaller natural gas fields.

Two areas in the Western Desert -- Obeiyed and Khalda -- have shown great potential for increasing Egypt's natural gas production in the near future. Obeiyed is producing 300 Mmcf/d, after the completion of a pipeline linking it to Alexandria. Production in the Khalda concession is currently around 275 Mmcf/d. Apache reported two new natural gas discoveries in Khalda in 2003, the Qasr field, and signed an agreement with EGAS in 2004 for development and sales of the output. By the end of 2005, this is expected to bring Apache's output to 650 Mmcf/d. Output from Obeiyed and Khalda is transported to Alexandria by a 180-mile pipeline. Apache also has one offshore concession, the West Mediterranean block, where it has been conducting exploratory drilling since 2002. All of the offshore wells completed thus far have shown commercial quantities of natural gas, with reserves in the Western Mediterranean block estimated at around 3 Tcf.

Sapesco serve all petroleum companies working in Egypt. Companies could be upstream (Exploration or Joint venture), Midstream & Downstream. The categories of different petroleum companies are demonstrated.

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