Representatives of the investment community visited Egypt from March 31 to April 3, 2004 to lean more about LUKOIL activities in North Africa and the Middle East.
The Company lends great importance to this region, which has unique hydrocarbon reserves and is highly promising for development of oil and gas business.
Egypt's Oil & Gas Sector
Egypt is not among the world's oil and gas leaders in terms of prospected and proven reserves and production of hydrocarbons. Nevertheless, revenues from oil and gas sales are of primary importance to the country's economy: oil exports were 65 percent of Egypt's total national export volume in 2001-2002.
Egyptian proved reserves at the end of 2002 were 3.7 bln bbl of oil (508.2 mln tons) and 58,500 bcf of natural gas (1,660 bсm). The country's primary fields are located in the Suez Gulf region (about 60% of total reserves), the Libyan Desert, the Eastern Desert and Sinai. Oil production in 2002 was 37 mln tons
Over 20 multinational companies are already working in Egypt, including Royal Dutch/Shell, British Petroleum, ENI-Agip, ChevronTexaco, ExxonMobil, TotalFinaElf, British Gas, Norsk Hydro, Marathon, Apache, Deminex, Dover Petroleum, Dublin Oil, Novus, Repsol, LUKOIL and others.
LUKOIL in Egypt
The main LUKOIL project in Egypt is West Esch El Mallaha (WEEM, Red Sea coast).
A concession agreement on the WEEM block was reached in 1993 and commercial launch was announced in January 1998. LUKOIL currently holds a 50 percent stake in the concession. Other parties to the concession agreement are the Egyptian state petroleum company EGPC and the Government of Egypt.
Total WEEM oil production increased by 404% in 2002 to 363.8 thousand tons (compared with 72.1 thousand tons in 2001). Oil production forecast for 2003 is 535.3 thousand tons. The project has generated positive cash flow since May 2002, and income last year totaled $14 mln. Proved reserves at WEEM are 4.4 mln tons.
The second LUKOIL project in Egypt is the Meleiha field development in the Libyan Desert, carried out jointly with Italian ENI-Agip. Residual field reserves are about 3 mln tons. Field production in 2002 was 731 thousand tons. Oil production forecast for 2003 is 656 thousand tons. The LUKOIL share in the concession is currently 12%.
In July 2003 the Egyptian Ministry of Petroleum and LUKOIL signed a concession agreement on exploration of the Northeast Geisum and West Geisum off-shore blocks in the Suez Gulf.
Seven promising structures have been discovered with total area of more than 175 square km. An exploration program is planned over 4 years, including 3D seismic work and drilling of 8 exploratory wells. The minimal initial investment program for exploration is $27.8 mln.
Exploration work on these new blocks will facilitate integration of infrastructures with nearby WEEM, giving a synergy effect.
LUKOIL management appreciates that the company's efforts to develop international upstream projects and increase highly liquid assets must be transparent and comprehensible for the Company's shareholders and investors, as well as for professionals on international financial and stock markets.
More than 50 people took part in the trip, including LUKOIL top managers, business and oil & gas journalists, and representatives of leading Russian and international investment companies, such as: Clariden Bank, Brunswick UBS, J.P. Morgan, Lehman Brothers, Raiffeisenbank, Аton, Metropol, UFG, Renaissance Capital, Troika Dialog and others.
The trip included meetings with top officials of the Arab Republic of Egypt. Counselor of the Embassy of the Russian Federation in Arab Republic of Egypt Andrey Zakharov, welcomed the visitors and opened a presentation of the Egyptian oil and gas sector, which was sponsored by the Egyptian Oil Minister, Samekh Fakhmi. Speakers included Chairmen of the National Oil Company, the Egyptian oil holding, South Valley, the Egyptian gas holding, EGAS, the Egyptian petrochemical holding, EPHC, and the Egyptian oil company, Tharwa.
LUKOIL Overseas President Andrey Kuzyaev offered a presentation «LUKOIL in North Africa and Middle East: from Financial Investor to International Operator» rounding up LUKOIL international upstream projects.
LUKOIL Overseas Regional Director for Egypt, Sergey Nikiforov, gave an overview of the Egyptian energy sector and LUKOIL's current and prospective activities in Egypt in his presentation, «LUKOIL in Egypt».
The visitors were given a tour of WEEM production facilities and a boat trip in the Gulf of Suez close to the Geisum blocks.
- ATON: «Egypt experience demonstrates company's ability to respond rapidly to promising international projects»
- Brunswick UBS: «Investor Visit to Egypt»
- J.P. Morgan: «Notes from the Field: LUKOIL Investor Trip to Egypt»
- Renaissance Capital: «LUKOIL Egypt Trip»
- UFG: LUKOIL: «Investor Visit to Egypt»
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* The above research reports could be received directly from the investment houses. LUKOIL does not vouch for the accuracy of the information or endorse the opinions contained in the analysts' reports.
