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Chevron, Shell win blocks in Egypt's maiden Red Sea licensing round

Highlights

Three blocks awarded in northern Red Sea

No other bids announced for remaining acreage

Seismic work indicates natural gas potential

London — Chevron and Shell have been awarded oil and gas exploration concessions in Egypt's first ever Red Sea licensing round, the country's petroleum ministry said Sunday.

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Chevron was awarded Block 1 and Shell Block 2, while Block 4 was awarded jointly to Shell and the UAE's Mubadala Petroleum, the ministry said.

The three blocks cover a total exploration area of around 10,000 sq km and carry combined minimum investment commitments of $326 million, the petroleum ministry said, adding that potential investment would rise to "several billion dollars" if discoveries were made.

Egypt was offering 10 blocks in its maiden Red Sea licensing round covering more than half of its Red Sea maritime shelf which borders with Saudi Arabia. The Chevron and Shell blocks are in the northern sector of the Red Sea and no other bid winners were announced for the remaining seven blocks.

The ministry remained upbeat over future Red Sea exploration, however, saying the interest of western oil majors "constitutes a positive and important indication of the attractive investment climate in Egypt."

"The necessary investments for exploration and development...and the lack of production facilities, indicates the eagerness of Chevron," the ministry said. "In addition to Shell, it is a good indicator...that confirms the continued expansion of the size of investments in the petroleum sector and contributes to increasing the chances of success."

DISPUTED WATERS

In February, a 2D seismic survey in the Red Sea led by Schlumberger concluded there was a 70% chance of natural gas discoveries in the area, according to local media reports. In September, Schlumberger and TGS reimaged 3,600 sq km of legacy seismic data on the Egyptian Red Sea to support interest in the licensing round.

"The underexplored offshore Egyptian Red Sea area is made up of large, untested structures that offer exceptional growth opportunities for oil companies," TGS CEO Kristian Johansen said at the time.

Egypt's plans to explore for oil and gas in the Red Sea received a fillip in 2017 when it ratified a maritime demarcation agreement with Saudi Arabia, which saw the North African country cede sovereignty over two uninhabited Red Sea islands to Saudi Arabia.

A long-running dispute with Sudan over control over the so-called Halayeb Triangle to the south, however, continues to hang over Egypt's latest exploration drive.

In March, Sudan's oil minister Saad el-Deen el-Bushra called the Red Sea licensing round an "illegal operation" and threatened legal consequences for companies involved in the round. The Halayeb triangle, which is controlled by Egypt, has been claimed by Sudan since the 1950s.

The blocks awarded to Chevron and Shell are well outside the disputed maritime waters.

--Robert Perkins, robert.perkins@spglobal.com

--Edited by Jonathan Loades-Carter, jonathan.carter@spglobal.com