Pay Up or Dry Up - Egyptian Gas at a Crossroads
LONDON, Sept 27 (Reuters) – An offshore gas find in the Nile Delta is strong new evidence that Egypt has the resources to end power cuts and get export income flowing again. Its challenge is to persuade wary international oil companies to develop them.
In the deepest well ever drilled in the delta, some 7 km under the sea bed and in 649 metres of water, BP has found a 50 km-long structure with a hydrocarbon column over 180 metres deep, the British oil multinational announced on Sept. 9.
With an estimated 1.2 trillion cubic feet or more, the well, named Salamat, will not by itself make a significant dent in Egypt's chronic energy shortage or revive its flagging exports.
But as one of only a handful drilled into Oligocene Nile Delta rocks to date, it is suggestive of some very productive geology at these extreme depths.
"What's significant about this discovery is that it was really expensive at about $380 million to drill. Despite the high cost, BP clearly believes in the potential of some of the deeper plays," said analyst Martijn Murphy of Wood Mackenzie.
Deep offshore gas finds cost a lot to develop, and unlike oil, they do not get developed without an assured market and an agreed price. Political and economic turmoil in Egypt over the past two years has damaged its capacity to offer a good price as well as investor confidence that it can pay.
In addition, energy sector investors are less tolerant of politically risky oil and gas spending than they were, even setting aside the political upheaval that began in Egypt over two years ago.
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