Naftogaz Makes Another Step Towards E&D In Egypt

According to company officials,  the Management Board of state-owned Naftogaz of Ukraine has approved a working program for the exploration and development of the Alam El Shawish East bloc in Egypt. Approval of the working program is another step towards the company starting hydrocarbon extraction abroad. In December, Naftogaz signed a concession agreement with the Egyptian General Petroleum Corporation (EGPC). Yesterday’s press release contains some details of the project:

• Oil resources: 73.5 mln mt (536.5 MMbbl) – category C-3 reserves according to Russian classification*, according to the survey conducted by Naftogaz’s subsidiary Naukanaftogaz.
• Term of the Concession: 27 years (1st stage – 3 years)
• Estimated pay-off period: 5.5 years
• Investment planned: [at least] USD 20.2 mln, total over 3 years

* can be approximated by “prospective resources” according to WPC/SPE/AAPG classifications, or G3 resources by UNFCP.

Vladimir Nesterenko: The oil resources look quite modest, but nevertheless the project is important for both Naftogaz and Ukraine. First, it may bring 2-3 mln mt (15-22 MMbbl) of oil annually to Ukraine via swap agreements with Russian oil & gas producers, thereby increasing the country’s own production by up to 75% and reducing its dependence on imports. Second, higher oil & gas extraction volumes could add nearly 0.9-1.3 bln to the company’s revenues, which would be a material improvement. Finally, if Naftogaz succeeds, it will improve its ability to win similar tenders outside Ukraine.