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Eni Looks Past Uncertainty in Egypt
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| by Christopher Coats |
As Cairo continues its push towards reviving Egypt’s energy sector and moving towards some much needed sector security, a few international firms are looking past the country’s uncertainty and expanding their footprint in the region. This past week, Italy’s Eni announced that they would be joining the country’s production push with news that they were the successful bidder on three exploration licenses.
According to a Rigzone report, the licenses are located in the country’s Western desert, near the Melehia Development Lease and will cover about 794 square miles. The Italian giant will also become the operator of offshore blocks, which run up against the Cypriot maritime border. The licenses expand the company’s presence in Egypt, making it one of the largest foreign operators in the country.
“I am very pleased with the acquisition of these new exploration permits which further strengthens our presence in Egypt, a historically and strategically important country for Eni,” said Claudio Descalzi, Eni’s CEO, according to Rigzone.
The progress comes at a time when some foreign firms have begun to reassess their position in the country due to a host of political and financial issues. In May, Egypt’s state-backed oil company announced that the country’s debt to foreign energy firms stood at$5.9 billion, just shy of the $6 billion it owed a year before despite paying out $1.5 billion to creditors in December 2013.
Two of the country’s largest industry partners, BG and BP, have expressed concern about their continuing participation in the region due to a series of issues, most notably the substantial outstanding debt owed to both firms by the Egyptian government for exports. In January the UK’s BG Group announced that they would be forced to break production contracts with customers and lenders and would enforce force majeure in Egypt due to a reduction in output in the company’s largest area of activity. The reduction, about 15 percent over the last year for the UK’s second largest producer behind BP, was the result of Cairo’s demand that gas output be shifted to meet domestic demand rather than allowing exports.
Despite these challenges, Eni is not alone in expressing interest in a broader Egypt a in presence. On September 19, Reuters reported that Egypt’s government had moved on an earlier pledge to auction concessions, announcing the signing of $187 million in exploration agreements with a number of Western firms, as well as a Tunisian company. In December, the Egyptian government announced plans to auction 22 oil and gas concessions through this month. Promoted by Egypt’s General Petroleum Corporation and Natural Gas Holding Company, the concessions are spread across the country, including opportunities in the “Suez Canal, Egypt’s western desert, the Mediterranean sea and the Nile Delta”.
This interest, if sustained, could help Cairo present a favorably calm investment environment, ideal for the kind of new sector growth and capacity they appear intent on pursuing. This week Reuters reported that Egypt is planning on $14.5 billion in petrochemical and refinery investment as a part of an expansive campaign to increase the country’s ability to meet increasing demand.
Link to source: http://www.forbes.com/sites/christophercoats/2014/09/28/eni-looks-past-uncertainty-in-egypt/
