2016 looks good for the offshore oil and gas sector in the Eastern Mediterranean
After a year riddled with difficult market conditions, dry wells and regulatory hurdles, the offshore oil and gas sector in the Eastern Mediterranean finally has good reasons to look forward to 2016.
In Egypt, the August 2015 discovery of the so-called “supergiant” Zohr offshore natural gas field could not have come at a better time. While the exact size of the field will only be clear after appraisal drilling, Zohr is hoped to bring Egypt some balance between supply and demand, and extricate the country from its energy crisis. That said, and based on what we currently know, more gas is needed to restart exports. All the more reason to ensure a favorable climate for investors, and encourage exploration and production. Although tempting, it would be unwise for Egypt to halt reforms at this stage. Pricing reforms, plans to phase out subsidies and paying down debt owed to international companies (now standing at $3 billion, down from $6.5 billion) have all contributed to restoring confidence in the sector. There is still more to be done, yet policymakers are already backpedalling on earlier promises. On December 14, Prime Minister Sherif Ismail cancelled the previous government’s decision to fully eliminate subsidies within five years; now we are talking about a much less ambitious 30 percent reduction.
PROGRESS IN 2015
Cyprus, too, received a boost from Zohr after several disappointments in the first half of 2015. France’s Total relinquished its rights to one piece of the country’s offshore acreage (Block 10) in February 2015, one month prior to Italy’s Eni having drilled a second well that failed to find exploitable hydrocarbons. After Zohr, however,
ZOHR [OFFSHORE NATURAL GAS FIELD] IS HOPED TO EXTRICATE [EGYPT] FROM ITS
Italian energy company Eni was involved in the discovery of large gas reserves off the Egyptian coast.