GlobalData: Successful Development of Zohr in Egypt to Catalyze Further East Mediterranean Projects
Eni is progressing plans to bring the giant Zohr gas field online by 2018. The company’s CEO, Claudio Descalzi, has already presented multi-billion dollar development plans to the president of Egypt Abdel Fattah Al-Sisi, who has agreed to remove any political obstacles to commercializing the field.
High profile political challenges have paralyzed other regional projects, such as West Delta Deep Marine in Egypt and Leviathan in neighboring Israel.
GlobalData analysis indicates that Zohr will yield an Internal Rate of Return (IRR) of 25% assuming a flat gas price of US$5.88 per thousand cubic feet (mcf) and recoverable reserves of to 22 trillion cubic feet (tcf), justifying a fast-track development.
Domestic gas pricing in Egypt was recently revised to US$5.88 per mcf for discoveries and additional development phases from 2015, resulting in favorable project economics for Zohr. This is in contrast to WDDM which is subject to a lower domestic gas price of US$3.95 per mcf. The joint venture between BG and the Egyptian government is currently struggling to justify additional investment of US$4 billion for the expansion Phase 9b there.
Written by Lydia Pearson, GlobalData’s Upstream Oil & Gas Analyst