BP Sanctions Fast-track Deepwater Project Offshore Egypt

Just more than a year after BP Plc (NYSE: BP) discovered natural gas in the Atoll Field in Egypt’s Mediterranean Sea, the company and partner Egyptian Natural Gas Holding Co. (EGAS) have sanctioned phase one of deepwater development with first gas expected in 2018.

Up to 300 million cubic feet a day of gas from the field will feed Egypt’s hungry domestic gas market, which began importing LNG in 2015 to meet rising domestic demand. Located in the North Damietta Offshore concession in East Nile Delta, Atoll is estimated to contain about a 1.5 trillion cubic feet (Tcf) of gas and 31 million barrels (MMbbl) of condensates, according to BP.

“Our confidence in the prospectivity of the area along with our ongoing commitment to Egypt and our successful history of partnership with the Ministry of Petroleum, EGPC [Egyptian General Petroleum Corp.] and EGAS is allowing us to fast track Atoll from discovery to production in less than three years which is a significant achievement,” Hesham Mekawi, regional president for BP North Africa, said in a statement.

BP’s decision to approve investment in the gas field comes as the oil and gas industry endures one of the worst downturns in history. As the global supply-demand imbalance pushed commodity prices down, oil and gas companies—which saw profits plummet—delayed major investments. A recent released report by energy research firm Wood Mackenzie showed that deepwater fields have been hit the hardest, as spending on deepwater and ultra-deepwater projects have been cut by nearly 40% for 2016-2017.

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But commodity prices are slowly rebounding and demand is rising, including in Egypt where developers are moving forward with projects.

The Atoll discovery, made in 2015 when the exploration well hit about 50 m of gas pay at 6,400 m depth, follows BP’s Salamat discovery two years earlier and builds on the company’s growing success record in high quality Oligocene sandstones.

The project, for which development costs were not disclosed by BP, will consist of two phases. In addition to recompleting the existing exploration as a producing well, the first phase includes drilling two development wells tied back to existing Pharaonic Petroleum Co. (BP, 25% interest, operator; Eni, 25%; and EGPC, 50%) infrastructure—Ras El Barr facilities.

“The Atoll wells will be drilled by the DS-6 rig which arrived in Egypt last month and is expected to start drilling in August for roughly the next 24 months,” BP said. “Success of the Atoll Phase One EPS could lead to further investment in the Atoll Phase Two full field development.”

Timing of the second phase final investment decision will depend on the results of the first phase.

“Production from Atoll will be carried by the Taurt pipeline which is part of the Ras El Barr concession (BP, 50%, operator; and Eni, 50%) and arrive onshore at the PhPC West Harbour gas processing facilities,” BP told Hart Energy in a statement.

Atoll is one of several major projects developing offshore Egypt. Another high-profile gas development is Zohr, also on the fast track. Located in the Shorouk Block in the Mediterranean Sea, the Eni-operated development was sanctioned by Egyptian authorities in February. If all goes as planned, production startup is expected by year-end 2017.

Eni is also busy making plans for another recent discovery.

Earlier this month, Eni said it hit gas in the Baltim South West exploration prospect in the Nile Delta, offshore Egypt north of the Nooros Field. The Baltim South West 1X well encountered about 120 m of gross gas column and 62 m of net pay sandstones of Messinian age with excellent reservoir properties, the company said, noting it is also considering developing this find as a fast track development.

In addition, BP sanctioned the $12 billion West Nile Delta project in 2015. The company said production is anticipated to reach up to 1.2 Bcf/d, roughly the equivalent of about 25% of Egypt’s gas production. Production is set to begin next year. The project entails developing 5 Tcf of gas and 55 MMbbl of condensate from the North Alexandria and West Mediterranean Deepwater concessions.

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Velda Addison can be reached at vaddison@hartenergy.com.