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Egypt debts weigh on Dana Gas upstream investment plans

Dubai — Sharjah-based Dana Gas has continued to invest in drilling at its Egyptian gas licenses, but further investment is being delayed because the company is owed money by state-owned Egyptian Petroleum Corp.

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Dana Gas also said Tuesday its first-half output was an average 63,600 b/d of oil equivalent, down 6% year on year.

Production in Egypt alone was down 6% to 35,600 boe/d, mainly to natural field declines and reduced investment in drilling, CEO Patrick Allman-Ward said.

"We have plans, but [the debt] weighs heavily on the our investment decisions," Allman-Ward said.

Most of Dana Gas's Egyptian production of gas and liquids are consumed locally, but it has also made a number of condensates exports since last year. It also operates in the UAE and Kurdistan region in northern Iraq.

Dana Gas received $40 million from Egypt in May, on top of $50 earlier in the first half. Egypt has said it was aiming to pay all debts to international oil companies by the end of 2019.

"The bottom line is we have $202 million in receivables, including $120 million which is overdue. We...want to see this paid in full," CEO Patrick Allman-Ward said.

Egyptian Petroleum Corp. owes more than $2 billion to oil companies. It received a $750 million loan earlier this year to help settle the debts. Clearing the dues by the end of next year was a realistic target, Allman-Ward said.

Dana Gas, which has been operating in Egypt since 2007, has 14 development leases, three exploration concessions and two processing plants.

The company made a first-half net profit of $24 million.

Dana Gas said the latest payment from Egypt allowed it to push ahead with the $10 million Balsam-8 well in the onshore Nile Delta license.

Incremental production from the well, drilled last Saturday, was expected to fill the company's production facilities with a capacity of 40,000 barrels of oil equivalent.

KURDISTAN GAS PLANS

Dana Gas is a key partner in the Pearl Petroleum consortium, which is developing two gas fields -- Khor Mor and Chemchemal -- in the Kurdistan Region of Iraq. Combined, the two fields have been estimated to hold more than 15 Tcf of gas and 310 million barrels of condensate reserves on a 2P proven and probable basis.

Pearl is already working to debottleneck its two 150 MMcf/d gas processing plants at Khor Mor to add 85 MMcf/d of gas production by October, taking total production to around 385 MMcf/d. It also plans to increase production of condensate to 20,000 b/d from 13,300 b/d.

Further ahead, six new wells will be drilled and at Khor Mor and Chemchemal, along with two new 250 MMcf/d gas processing plants, boosting total output to 900 MMcf/d by 2021.

"Conceptual studies have been done, and field development plans submitted to the Kurdistan Regional Government's ministry of natural resources," Allman-Ward said.

While all Khor Mor production is currently used for power generation in the Kurdistan region, much of the additional gas will be available for export under a 10-year sales agreement signed in January. That will be along with gas from the long-delayed development of the Chemchemal gas field.

--Adal Mirza, adal.mirza@spglobal.com

--Edited by Daniel Lalor, daniel.lalor@spglobal.com