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Saudi Cash to Egypt as a Double Edged Sword
Financial support can easily become a double edged sword, for individuals desperate for help, and for states alike. Egypt is also experiencing the tricks. Cash inflow from the Gulf countries made the Egyptian government feel victorious. But the taste of it may slowly become bitter.
MODELS FOR EGYPT: SEISMIC DATA AS A PUBLIC GOOD
In February of 2015 we posed the question on the Egypt Oil & Gas website whether Data Packages for new bid rounds should be free, with these answer categories – Disagree, Agree, and Strongly Agree. The results have come in: 64, 109, 74. The majority agreed with our proposal while those who disagree were still outnumbered by those who strongly agree!
PUBLIC INFORMATION: THE CASE FOR A MEDIA STRATEGY IN EGYPT’S PETROLEUM SECTOR
When asked about the issue of “petroleum awareness,” a friendly shopkeeper laughed out loud. “Where is this petroleum for there to even be an awareness of it?” he asked? He went on to advise against discussing these matters in public, fearing that both the interviewer and interviewee would end up in the police station. Finally, he explained that people’s awareness of fuel related affairs consisted of the knee jerk reaction of hoarding fuel whenever a shortage occurred, only making the whole fuel situation worse.
MERGER MANIA: A RECIPE FOR RIDING THE DOWNSTREAM WAVE
Not a day goes by without a headline about a major merger or acquisition in the global oil and gas sector—recently Halliburton swallowed up Baker Hughes for $35b and, bigger still, Royal Dutch Shell bought out BG Group for $70b. But how can this be happening with oil prices being so painfully low? The oil sector everywhere is supposed to be cash strapped, so where are companies—especially independents like Halliburton—getting the money to make such purchases? Why make such a risky move to begin with in such a volatile price environment?
DISCOVERY OF THE DECADE: ENI’S NEW DEEPWATER FIND BIGGEST EVER IN EGYPT.
“This Historic Discovery Will Transform the Energy Industry in Egypt”
Statements like this often course through the oil and gas industry in Egypt, but this time it may actually not be hyperbole.
In a company statement in late August, Eni announced a massive natural gas discovery off the Egyptian coast, the biggest gas discovery ever made in Egypt—or even the Mediterranean. The Zohr field within the deepwater El-Shorouk block has been found to hold an estimated 30 tcf of natural gas. The massive reserves are spread out over roughly 100 kilometers, and push the field’s classification into “supergiant” territory, an increasingly rare type as fossil fuels are drained globally.
Incentives and Solutions: Egypt’s Oil Recovery Prospects in a Low Price Environment
Oil recovery is a necessity, not a luxury, for an energy-importing nation like Egypt that has a limited number of oil producing wells, most of which are already mature. With a rapidly rising population and a slow pace of exploration there simply is no substitute for Improved and Enhanced Oil Recovery (IOR/EOR). It has been estimated that as much as 60% of a well’s original supply stays locked in a reservoir at the end of its 30 to 40 year life-cycle. IOR sets the scene so to speak; beginning at the primary and secondary stages and targeting mobile oil, while EOR comes at the hardest tertiary (third-stage) and involves immobile oil. Cairo University’s Mining Studies and Research Center estimates that as much as 3.2Bn barrels of oil remain to be extracted at this final stage.
Finding Common Ground on PSA’s and Their Length
Production Sharing Agreements (PSAs) in Egypt govern the relationship between the government and international oil companies (IOCs) for the exploration and field development of oil and gas. The agreements seek to strike a balance between Egypt maintaining sovereignty of its natural resources and the IOCs interests to maximize profit.
Cost Recovery: Tedious or Necessary?
Cost recovery is considered a cornerstone of Production Sharing Agreements (PSAs); as operators of the concession or international oil companies (IOCs) bear all operation and capital expenditures in a new concession as well as the risks, cost recovery has become a main mechanism through which the contractors are to recover their costs and generate profits.
Production Sharing Agreements: Overview
Production Sharing Agreements (PSAs) are one of the most common structures used to regulate exploration and production of oil and gas reserves. PSAs are often used across the developing world as they strike a balance between full nationalization of a country’s oil industry and other structures where royalties are assessed and taxes paid. In this issue of Egypt Oil & Gas, we will explore the subject in depth, giving particular attention to contracts’ length and benefits and limitations of cost recovery.
Pricing Data Packages for Concessions: BENEFICIAL OR INEFFECTIVE?
A complaint raised recently by energy industry insiders in Egypt concerns the way bidding rounds take place for new concessions; namely that the bidders are required to buy the preliminary data packages needed for oil and gas exploration upon bidding for a concession.