On Wednesday, December 17, Egypt’s Ministry of Petroleum announced that Egypt’s state oil company (EGPC), Houston based Apache Corp. (ticker: APA) and Shell Egypt (ticker: RDSA) have entered into an agreement for the production of unconventional gas using hydraulic fracturing in the Northeast Abuel Garadeek region of Egypt’s Western Desert, about 200km (124.27 miles) west of Cairo.
According to the ministry’s release, the deal is for three horizontal wells using multi-stage fracing. The project investments are expected to be $30-40 million. A source at the petroleum ministry told Reuters that the wells are expected to operate at depths of 14,000 feet.
One part of Egypt’s plan to end an energy crisis
News of fracing in Egypt come as the country tries to find ways to end its worst energy crisis in decades. Egypt has struggled with maintaining high subsidies that it provides on fuel for its population. The subsidies, along with fast growing demand, have turned Egypt from a net energy exporter into a net importer over the course of a few years.
In order to combat the growing energy crisis, Egypt has signed supply contracts for liquefied natural gas (LNG) to help meet its energy needs.
In November, Egypt finalized a deal with Norway’s Hoegh LNG for a floating storage and regasification unit that will allow the country to begin importing LNG, reports Reuters. The unit is expected to launch in March 2015 – in time to receive at least 48 tendered LNG cargoes through the end of 2016.
The contract with Hoegh, which was signed November 3, 2014, is for a period of five years and expected to generate an average annual EBITDA of around $40 million, according to the company.According to the Energy Information Administration, the venture with Hoegh will take some weight off of the country’s rapidly declining gas exports. Total LNG exports in 2013 nearly halved on a year over year basis as the resource has been diverted to supply domestic energy needs.
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