Dana Gas has won two blocks in the Nile Delta, part of Egypt’s latest oil and gas bidding round as the country looks to reverse a decline in the sector that has accompanied the political turmoil of recent years.
Sharjah-based Dana Gas confirmed yesterday that it had won the North El Salhiya block in the Nile Delta and will operate it solely, allowing the company to extend existing infrastructure from blocks it already operates nearby.
The company has well-established operations in Egypt, with 25 discoveries on more than a dozen development leases. In the three months to the end of June, Dana reported its gas production was up 25 per cent at 42,950 barrels of oil equivalent per day. Dana also won the El Matariya block, which it will explore in a 50/50 joint venture with BP, and has agreed to fund the cost of the first exploration well. BP can take a stake in Dana's Block 3 if drilling on Block 1 proves successful.
The concessions were part of Egypt’s 2014 bidding round this month, which resulted in several hundred million US dollars’ worth of concessions to companies including France’s Total; Eni and Edison of Italy; RWE of Germany; TransGlobe from Canada; and HBSI, a Tunisian company.
The bidding round is good news for Egypt, whose oil and gas sector has suffered since the Arab Spring toppled its former ruler, Hosni Mubarak, which led to several years of unrest.
In July alone, natural gas exports from Egypt declined by 73 per cent, according to local press reports, the result of increased summer domestic demand and continued production declines. Crude oil exports also have been falling as foreign companies have shied away from investing until stability returns. There have been signs this year that the deposal of the Muslim Brotherhood government and reinstatement of the old regime under the former general, Abdel Fattah El Sisi, is improving the economic and investment environment.
Nevertheless, the government still is lagging on payments to oil companies. At the end of June, Dana was owed $297 million by Egypt, which is estimated to still owe a total of $5.9bn, mostly to BP and BG.
Dana Gas has invested $1.8 billion in the past seven years, and it knows the sector well.
“The area is particularly well known to Dana Gas … We believe there is significant upside potential from continued exploration and development in these concessions,” said Patrick Allman-Ward, the chief executive of Dana.
The company has suffered this year, however, because of worries about its oil interests in the Kurdish region of Iraq, where operations have been disrupted by fighting.
A spokesman for the company said yesterday only that it was “business as usual” in Iraq.
Dana’s Abu Dhabi-listed shares were up Dh0.02 at Dh0.69, although down 34 per cent from their high earlier in the year at Dh1.04.
amcauley@thenational.ae
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