OPINION: Shell’s decision to exit onshore assets in Egypt highlights a trend by major producers to abandon ageing fields that need intensive efforts to keep them producing without the expected reward.
By contrast, heavyweight international oil companies are turning their focus offshore in the Mediterranean Sea, which offers significant exploration upside.
The departure of major players from the Western Desert and the shallow waters of the Gulf of Suez is not necessarily bad news for Egypt, as smaller rivals are keen to devote more time and money.
Despite a dearth of major finds, the mature areas’ attractions lie in existing infrastructure offering both low transportation cost and excess processing plant capacity.
They also turn up a steady stream of small finds that can be monetised quickly.
While the likes of Shell and BP may not be happy with their low returns, smaller operators are content to take their place.
Dubai-owned Dragon Oil, which agreed in June to buy BP’s Gulf of Suez assets, has just announced a major rehabilitation plan to sustain production and prolong the life of its ageing fields.
Dragon plans to increase output at the 11 Gulf of Suez concessions from 60,000 barrels per day currently to above 75,000 bpd and maintain those levels for 10 years by further drilling and investing $1 billion over the next five years.
Shell has just begun marketing its onshore assets, which are certain to attract intense interest from small and mid-tier companies that see Egypt as a long-term and attractive destination.
(This is an Upstream opinion article.)