Drilling success in Egypt’s Western DesertJanuary 17, 2022
Samir Abdelmoaty, country manager of United Oil and Gas (UOG), talks to The Energy Year about the company’s strategy in Egypt and what the public sector is doing to boost the nation’s hydrocarbons industry. United Oil and Gas is an E&P company with upstream assets all over the world, including in Egypt.
How significant is Egypt in UOG’s international portfolio?
We are considered a newcomer in Egypt. We came onboard about a year ago by buying into the Abu Sennan concession in the Western Desert. Since we bought these assets, we have increased production from 4,000 bpd to 14,000 bpd [gross] Our drilling campaign was very successful; our success rate was nearly 100% since last year.
Egypt is a core area for United Oil and Gas and it holds assets that are producing value. We have a 22% working interest in these assets. We have high hopes; the assets are performing well. We will have drilled five wells by the end of 2021, two more than we originally budgeted for. We drilled the budgeted wells and added another exploration well, ASX-1X, which was a commercial discovery, and is now producing and a development well, AJ-13, which is due to spud in the coming weeks.
What is UOG’s current expansion strategy?
We recently began the process of seeking a partner or partners for our high-impact exploration asset in Jamaica. Given the current environment, the price of Brent crude and the success of our assets, we are looking for more acquisitions, especially in Egypt. We want to expand into the Western Desert and onshore assets. We are also looking at offshore assets, but our preference remains onshore.
In Egypt, we are looking for mid-sized companies that we can partner with. Major oil companies do not need small companies, but mid-sized companies are often looking for partners to share the risk or add additional money to expand their operations.
What are the advantages of working on onshore concessions in Egypt?
The beauty of operations in the Western Desert is that we are not far from our existing assets. Once we get a permit lease from the government, we can start production immediately. We are trucking oil, so we are not waiting on infrastructure like pipelines. We prepare the logistics work while waiting for the permit lease.
Acquiring approvals from the government is very easy. They work with you to get production going as soon as possible. They even help you use the facilities of companies around you; all operators in Egypt work together to maximise the usage of facilities.
Does United Oil and Gas plan on becoming an operator in Egypt?
Kuwait Energy is the operator of Abu Sennan. Operating requires a lot of components. When we are ready and feel we have enough assets to build our operational capabilities, we will go for it. However, we will not hire 20-30 people, find out that the asset does not work and be forced to let them go. It is better to start small and grow slowly.
How would you assess the ease of doing business in Egypt’s upstream sector?
Egypt is a great place to do business. When you understand the environment here, it is easy to get from the planning stages to a concession agreement. The government and companies are transparent, and all the right processes are present. The country has been doing business in this area for more than a hundred years; they know what is needed.
Additionally, it is beneficial to the country to increase production, and the government is very helpful. Energy is required for the government’s current growth strategy. When you understand Egypt’s strategy and why they need you, you can work very well with them. The public sector will help you get early agreements for evaluation, exploration, production and all additional phases.
How is the Egyptian public sector supporting the hydrocarbons sector?
In the last couple of years, the government has become much more flexible in their negotiations. In the production-sharing agreement, many terms have been redefined to accommodate the requirements of investors. However, there are a few terms that could be tweaked or amended to help both sides. Investors are not looking to produce oil and gas; they are interested in making profits. Cycle time is a huge factor in earning these profits and the government has reduced this aspect significantly. We can start production in the Western Desert in less than a month rather than wait two to seven years.
The government is working very hard with the IOCs to increase production by 20% within two or three years, especially through brownfield projects. They are not doing this in their own space; they are doing this in co-operation with IOCs. There are many related committees, meetings and events.
Zohr is a global case study in the co-operation between the government and IOCs. The public sector decided that gas was needed as soon as possible and what they accomplished is a record. It is an amazing project where the highest levels of the country were onboard to make sure the process went smoothly, and production was achieved ahead of time.
Another pillar for the government is attracting new investments – and they have succeeded. We now have newcomers in Egypt, especially in the Red Sea and the Mediterranean. The state is doing everything it can to work on its seven pillars of modernisation, from resource development and increasing production to the restructuring of the sector.
In terms of digitalisation, the Egypt Upstream Gateway has been quite successful in giving investors access to data. You no longer need to travel to Egypt to look at paper printouts; you can now have access to this data from your own office, which saves companies time and money. Digital copies have more data, which also reduces cycle times. The digital database is a fantastic milestone; it is one of the pillars holding everything else up.