Apache Inks 25-Year Deal to Sell Egyptian Gas

Apache Corporation has signed a Memorandum of Understanding for a Gas Sales Agreement, Field Development Plan and Deepwater Development Lease for a minimum of 2.7 trillion cubic feet (Tcf) of natural gas over 25 years from the deepwater portion of its Egyptian West Mediterranean Concession. Total revenue to all parties under the agreement, net of estimated development and infrastructure costs, is approximately $6 billion. Production is expected to commence in 2007.

"Principal terms include supplying approximately 400 million cubic feet of gas (MMcf) per day to the Egyptian market over the first five years and 375 MMcf per day for the remainder of the term," said Apache Chief Executive Officer and President G. Steven Farris. "Upon finalization of the agreements, we will have effectively contracted for all of the gas we have found to date in the deep water."

Farris said Apache will begin appraisal drilling on the concession and start infrastructure construction soon after the final agreements are executed. In addition, he said, "We have another five Pliocene-age gas exploratory prospects and eight Miocene-age prospects in the area."

The MOU was signed with the Egyptian General Petroleum Corporation and the Egyptian Gas Holding Company.

In its first deepwater foray, Apache discovered gas in the deepwater portion of the concession in May 2002 with its Abu Sir-1X well. Three consecutive discoveries and a successful appraisal well followed. Apache operates the deepwater portion of the concession with a 55 percent contractor interest. RWE-DEA has a 35 percent interest and BP holds the remaining 10 percent.

"We're extremely pleased at the sense of urgency with which this Memorandum of Understanding was reached, and thank Egyptian Petroleum Minister Sameh Fahmy for his invaluable assistance in moving this project forward," Farris said.

The West Mediterranean Concession is completely separate from Apache's Khalda Concession, where the company has announced two major discoveries, Qasr-1X and Qasr-2X, and believes it has found 1 Tcf to 3 Tcf of gas reserves and 20 million to 70 million barrels of condensate reserves.