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New Market Research Report: Egypt Oil & Gas Report Q2 2014

New Energy research report from Business Monitor International is now available from Fast Market Research

 
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Boston, MA -- (SBWIRE) -- 06/03/2014 -- Political risk in Egypt has peaked, and we expect a slight moderation over the coming months. The interim government has brought a semblance of stability to Egypt's political scene and a degree of policy continuity that has not been present in Egypt for much of 2013. Nevertheless, we believe that operational risk and lack of policy certainty will affect the country's oil and gas output for the coming months and possibly years. That said, we stress that the country's below-ground potential remains extensive, as exemplified by a series of recent discoveries in onshore and offshore concessions. This leads us to believe that Egypt still holds large upside potential, but this will only be monetised over the long term as current woes are alleviated.

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We highlight the following trends and developments in Egypt's oil and gas sector:

- A series of recent discoveries by Beach Energy and Apache in their Western Desert concessions and BP Egypt in the deepwater East Nile Delta highlight that below-ground potential remains promising. A number of new exploration contracts could lead to significant revisions to reserves data in the near future.
- We see serious downside risk to our production forecasts for 2014, as companies are likely to reduce their exposure to operational risks. Both BG and BP have already announced reductions in their activities. Apache also divested 33% stake in its Egyptian business to Sinopec for US$3.1bn, reducing its exposure to the country, which - before the divestment - accounted for 20% of total production.
- In addition, U$6bn in unpaid debts to companies by the Egyptian Natural Gas Holding Company and Egyptian General Petroleum Corporation (EGPC) highlight the financial strains of the state-owned energy companies. While a repayment schedule has been agreed to, it highlights the additional operational and financial risk operating in the country.
- While political risk is pertinent and certainly the main concern in the short term (at least until 2014 elections, but most likely after that as well), we see the domestic fuel-pricing environment as a long-term, persistent worry for foreign operators. With the country failing to reach an agreement with the IMF and not implementing a rationalisation of its downstream market, producers face growing risk that output may be redirected to meet domestic demand rather than their contracted export obligations.
- To alleviate fears over political instability, the government has reportedly introduced a number of incentives for E&P activities. The government promised to repay US$3.5bn of its US$6.0bn owed to foreign oil and gas companies, opened up the opportunity to discuss gas pricing structures in new developments and allowed gas produced from new concessions to be sold in deals made directly with commercial producers.

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