Egypt’s General Petroleum Corporation (EGPC) and Natural Gas Holding Company (EGAS) announced on Monday an international auction for 22 concessions for oil and gas exploration in accordance with production-sharing agreements.
The concessions are for areas in the Suez Canal, Egypt’s western desert, the Mediterranean sea and the Nile Delta, the state-owned firms said in an advertisement placed under the banner of the Oil Ministry in state-run newspapers.
Exploration companies have been hesitant to develop untapped gas finds in Egyptian waters partly because the amount the government pays them barely covers their investment costs.
Egypt pays offshore gas producers on average around $2-$3 per million British thermal units, according to industry estimates. Comparable payments for gas in Britain are currently above $10 and for Asian supply above $17.
Egyptian officials have suggested pricing arrangements should be changed to reflect the high costs of offshore exploration in deep water, arguing that such reform would spur new investments. The auction will end on May 19, Monday’s announcement said.
An Oil Ministry spokesman said the time was sufficient for companies to prepare their offers but gave no further details. Egypt has been struggling with soaring energy bills caused by the high subsidies it provides on fuel for its population of 85 million.
The subsidies have turned the country from a net energy exporter into a net importer over the last few years. Egypt has started repaying some of its debt to foreign oil companies, which had reached more than $6 billion this year. Egyptian Oil Minister Sherif Ismail signed two new gas and oil exploration agreements with Dana Petroleum on Monday for investment of at least $24 million in Egypt’s western desert, a statement from the ministry said.
Dana Petroleum, a subsidiary of state-run Korea National Oil Corporation, has a portfolio of 17 development leases in Egypt producing about 12,000 barrels of oil per day, according to the company’s website. Earlier in the month, Egypt’s cabinet approved seven new oil and gas exploration agreements designed to bring investment of at least $1.2 billion to the sector. The deals are with firms including BP, Dana Gas Emirati and Petroceltic International.