Re­newed dy­namism

2016 looks good for the off­shore oil and gas sec­tor in the East­ern Mediter­ranean

Executive Magazine - - Economics & Policy -

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

EN­ERGY CRI­SIS

Ital­ian en­ergy com­pany Eni was in­volved in the dis­cov­ery of large gas re­serves off the Egyp­tian coast.

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