Cheiron’s investment programme in Egypt

Egypt

David Thomas, CEO of Cheiron, talks to The Energy Year about the key role of independent E&P companies in Egypt and Cheiron’s plans for developing its assets. Cheiron is an independent E&P company that focuses on maximising the economic recovery of reserves from mature oil and gasfields.

Could you give us an update on the state of the company?
The company is in good health and is currently producing around 130,000 boepd of gross operated production, making us the fourth-largest E&P company in Egypt. We have a broad, well-diversified portfolio of oil and gas assets located in three of the main hydrocarbon basins in the country.
Historically, our core production area has been the Gulf of Suez, where we operate the Geisum, Amal, Zaafarana, Gemsa and South Ramadan concessions. More recently, we have now established a significant production base in the Western Desert with the BED, Obaiyed, AESW, NEAG and North Bahariya area fields. Our third focus area is the Nile Delta, where we operate the West El Burullus offshore gasfield development in the shallow waters of the Mediterranean Sea and hold some onshore exploration acreage.

What have been Cheiron’s major acquisitions in recent years?
Cheiron has a long history of successful acquisitions and, most recently, the past few years have seen the company make a series of counter-cyclical asset purchases, both in Egypt and overseas.
In 2017, we completed the purchase of a 50% interest in the North Bahariya fields and then increased our equity position there to 80% with a further acquisition early this year [2021]. Also, in 2017 we purchased our 100% interest in the West El Burullus [WEB] concession from Engie and, in 2018, completed a transaction to enter into the Cardenas Mora mature oilfields in Mexico.
Our most notable new acquisition was completed in September [2021] when, along with our strategic partner Capricorn Energy, we bought Shell’s extensive asset portfolio in the Western Desert.

What are the company’s prospects for growth?
Our plan is to return the production from the ex-Shell Western Desert fields to around 120,000 boepd over the next year or so and, with exploration and appraisal success, even higher rates are being targeted. To achieve this we will be implementing an ambitious investment programme and, with the support of the government, the Bapetco JV company and our partners, will increase the number of active drilling rigs in the fields from two to five. We will also be embarking on several facilities projects including the tie-back of existing undeveloped gas discoveries for production.
There are also some significant growth projects in Cheiron’s other concessions, including the WEB gasfield, which is entering into the development phase and will comprise the installation of two new platforms tied back to the existing WDDN onshore gas plant. In the Gulf of Suez, we are drilling appraisal and development wells on the GNN oilfield, which Cheiron discovered in 2019, and we should be installing early production facilities there during 2022. Elsewhere, we are continuing with various drilling and facilities projects on our other concessions.
Overall, the development portfolio has the potential to increase Cheiron’s gross production levels to in excess of 180,000 boepd over the next few years.

How do you assess the role of independent E&P companies in the brown and mature Egyptian fields?
I have no doubt they will play a significant role. The trend for the majors to divest their older assets in Egypt has already been established by BP’s Gulf of Suez and Shell’s Western Desert divestments and we expect this process to continue as the bigger companies rebalance their energy portfolios towards renewables. This will present further opportunities for the independent sector.
It is also important for Egypt that the independents are encouraged to invest in the country since they tend to have lower cost bases than the majors, simpler decision making processes and certainly a different view on materiality. As a consequence, they are often more motivated to fund the smaller incremental projects which are required to maximise reserves in mature field developments.

What are your current priorities?
Our immediate priority is delivering incremental production from the Western Desert and successfully executing our other field development projects. We also acquired four new exploration blocks as part of the Shell acquisition and these new concessions, along with our East Damanhur concession in the onshore Nile Delta, provide an attractive suite of exploration opportunities for the company to pursue.

What is your strategy to deliver the goals the government has for your company?
This is a multi-layered question and, if I can attempt to summarise, we need to increase the pace of our investment activity across all our concessions at the same time as developing our people, reducing costs across the board and ensuring that we are deploying the very best technologies – and all this whilst staying relentlessly focused on safety and the sustainability agenda.
We have been operating in Egypt for over three decades and look forward to continuing our contribution to the industry here for many more years to come.

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