British major, BP Plc (BP - Free Report) expects to spend a substantial $11 billion in a natural gas project in Egypt’s Mediterranean Sea. With this BP strengthens its increasing foothold in the region to meet the future growth of the gas business in Egypt.
BP remains focused on unlocking natural gas reserves from a deepwater deposit in Egypt's Mediterranean basin. The company is now busy digging at a depth of 7,700 meters in the Mediterranean Sea and is unearthing 1 billion square feet of natural gas per day. According to information from the country's State Information Service (“SIS”), this is equivalent to approximately 20% of the North African country's energy production.
The project − which will likely take four to five years to complete − will deliver 40% of Egypt's natural gas output. Egypt holds the third largest position in Africa in terms of gas reserves and is entitled to receive the extracted gas for 40% of its prices. BP has already initiated its digging operation on August 18 and expects to begin the exploration campaign next year.
BP’s effort in expanding its footprint in Egypt was evident from its recent gas discoveries. Its Egyptian affiliate − BP Egypt – confirmed the availability of gas in the Taurt North and Seth South discoveries in the shallow waters off the coast of Egypt. These mark the fourth and fifth discoveries made by BP in the concession following Satis-1 and Satis-3 Oligocene deep discoveries and Salmon-1 shallow Pleistocene discovery.
The Taurt North and Seth South discoveries were spud using the Scarabeo IV rig in water depths of 110 meters and 78 meters, respectively. Eni SpA’s (E - Free Report) subsidiary, International Egyptian Oil Company (“IEOC”), carried out the drilling operations on behalf of BP, the concession partner. BP was awarded the North El Burg Offshore Concession in June 2005. The company operates the concession with a 50% interest while IEOC holds the remaining 50%.
Again, BP recently announced that it expects to resume deep-sea drilling work off the coast of Libya next year. The exploration program worth $2 billion was halted by the company in February 2011 following the rebel uprising that led to the defeat of Col. Moammar Gadhafi's regime. Management’s renewed drilling program in Libya will see BP drilling 25 exploration wells in 2013, which is expected to increase cash flow and returns to shareholders.
BP retains a Zacks #3 Rank, which is equivalent to a short-term Hold rating.