Italy's Eni has announced the discovery offshore Egypt of what it believes is the largest gas field ever found in the Mediterranean Sea, a region already renowned for its massive deep gas deposits.
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In a statement Sunday, Eni said it had made a "world class supergiant gas discovery" at its Zohr prospect in deep water offshore Egypt.
"According to the well and seismic information available, the discovery could hold a potential of 30 Tcf (5.5 billion barrels of oil equivalent) covering an area of about 100 sq km," the company said.
"Zohr is the largest gas discovery ever made in Egypt and in the Mediterranean Sea and could become one of the world's largest natural-gas finds.
This exploration success will give a major contribution in satisfying Egypt's natural gas demand for decades," it continued.
Eni said it would immediately appraise the field with the aim of accelerating development.
GAME-CHANGER FOR EGYPT
Company CEO Claudio Descalzi on Saturday traveled to Egypt to discuss the discovery with Egypt's president, prime minister and petroleum minister.
"This historic discovery will be able to transform the energy scenario of Egypt in which we have been welcomed for over 60 years," Descalzi said in Eni's statement.
Egyptian news sources quoted him as saying the discovery would bring "a pivotal shift in the energy scenario in Egypt," which has been struggling with chronic fuel and power shortages since its January 2011 revolution.
They also quoted Eni officials as predicting that Zohr's development could make a significant contribution to Egypt's domestic gas supply within about four years.
Egyptian petroleum ministry spokesman Hambdi Abel-Aziz said Monday that it would normally take 30-36 months to bring a new discovery well to full potential, but the ministry was in talks with Eni on how this timeframe could be shortened.
Egypt's production-sharing agreements allocate a percentage of early output to cover producers' development expenses.
In this case, Eni and its partners would get 35% of the gas produced while state-owned Egyptian Natural Gas Holding Co., or EGAS, would receive the remaining 64%, the spokesman added.
DISCOVERY WELL FINDS OVER 400 METERS OF NET PAY
The discovery well, Zohr 1X NFW, was drilled to a total depth of 4,131 meters, on the way penetrating a 630-meter column of hydrocarbon-bearing carbonate rock of Miocene age with excellent reservoir characteristics, Eni reported.
The reservoir formation included more than 400 meters of net pay, it added.
A deeper Cretaceous formation that would be targeted later with a dedicated well held additional gas potential, the company said.
Descalzi said the Zohr discovery showed that Egypt, which has attracted oil and gas exploration for more than half a century, still held great potential for significant new discoveries.
Egypt was strategic for Eni, meaning that important synergies with existing infrastructure could be exploited to allow a fast production start-up from Zohr, he added.
Eni, through its IEOC Production subsidiary, operates the Shorouk Block, on which the Zohr discovery is located, with a 100% working interest.
The Shorouk Block, also called Block 9, is a very large exploration concession located in Egypt's Eastern Mediterranean waters.
It covers a total area of 3,765 square km with water depths ranging from 1,400 to 1,800 meters.
The block was awarded to Eni in April 2013 as a result of state-owned Egyptian Natural Gas Holding Co.'s (EGAS') 2012 international bidding round.
The Shorouk Block's location puts it within the larger Eastern Mediterranean Basin area which has previously yielded other massive deep gas discoveries.
Those have included the Leviathan field offshore Israel, which until Zohr's discovery was the largest Mediterranean gas field with estimated resources of up to 16.5 Tcf, and the nearby Tamar field with reserves of about 7 Tcf.
The two Israeli gas finds in 2009-10 were considered so significant that some analysts predicted they would change Israel's foreign relations with gas-hungry Muslim neighbors Turkey and Egypt, giving Israel an opportunity to become a major Middle East energy player.
In the event, however, local and regional politics intervened to ensure that Tamar's gas would be tapped predominantly for Israel's domestic market while delaying Leviathan's development.
RESTART OF EGYPT LNG EXPORTS POSSIBLE
Zohr's discovery now holds out to Egypt not only the hope of domestic self-sufficiency in gas, which is the major fuel for the country's expanding power and industrial sectors, but also the possibility that it could again become a net gas exporter.
Both are achievable medium-term goals as the country has ample existing energy infrastructure, including facilities designed to serve the export market.
Egypt has two LNG production plants, at Damietta and outside Alexandria on the Mediterranean coast.
The Damietta plant, operated by Union Fenosa Gas, was mothballed in 2013 due to government-ordered diversion of gas to the domestic market.
The second plant, run by BG Group, for the same reason declared force majeure in January 2014, ending Egypt's LNG exports.
To close the still growing gap between domestic gas supply and demand, Egypt since has arranged to import scores of LNG cargoes at two hastily developed floating terminals.
It has also signed contracts worth tens of billions of dollars for gas exploration in the hope of ending gas imports by 2020.
BP, RWE, Dana Gas, Edison and Total are among the companies that won offshore and onshore licenses this year.
In March, BP and RWE finalized a $12 billion deal to develop 5 Tcf of gas and 55 million barrels of condensate resources discovered in deep water in Egypt's West Nile Delta region.
In the same month, BP announced a further 5 Tcf deep gas discovery in the North Damietta Block in the East Nile Delta.
However, discussions between Cairo and international oil companies over development of huge but technically challenging deep offshore gas projects have been protracted, hinging largely on the price that Egypt's cash-strapped government was prepared to pay for domestic gas from such costly projects and on the government's plans to settle arrears owed to contractors for past oil and gas production.
Under Egypt's current president, Abdel-Fattah el-Sisi, EGAS has increasingly rationed gas supplies to domestic industry, which has hampered the country's economic recovery.
Nonetheless, Egypt in July raised the price it pays Eni for gas supplied to the domestic market.
That followed a framework agreement struck in March for Eni to invest about $5 billion in oil and gas development in the country over the next four years, directed towards the development of 200 million barrels of oil and 1.3 Tcf of gas.
In June, Eni signed an additional $2 billion deal with Egypt for exploration concessions in Sinai, the Gulf of Suez and Mediterranean areas in the Nile Delta.
The Italian company, 30% controlled by the Italian state, has operated in Egypt since 1954 and currently ranks as Africa's biggest international oil and gas producer with significant additional holdings in Libya and Mozambique.
Last year it produced 206,000 boe/d of oil and gas from Egypt, accounting for 13% of the country's total hydrocarbon output.
However, that was down from about 234,000 b/d in early 2013.