BP signed a significant agreement with Egypt last Monday to develop two offshore gas fields in the largest deal for the beleaguered energy giant since its drilling rig disaster in the Gulf of Mexico.
Egypt's petroleum ministry said in a statement that the deal with Egyptian General Petroleum Corporation would develop five trillion cubic meters of gas from the North Alexandria Deepwater block and the Western Mediterranean block.
The fields will produce 900 million cubic meters of gas a day starting from 2014, the ministry said. BP said in a statement that the concessions will produce up to one billion cubic meters a day.
BP and its German partner RWE will raise the nine billion dollars in investment for the project according to their stakes. BP holds 60 percent of the North Alexandria block and 80 percent of the West Mediterranean block.
BP said the agreement "amends the commercial terms for the two concessions located in the West Nile Delta, enabling BP and its partner RWE Dea to proceed with development".
The Petroleum Ministry statement quoted Minister Sameh Fahmy as saying the amendments "included conditions that guarantee Egypt great advantages".
Ministry official Hamdi Abdelaziz indicated that the amended agreement was "balanced for both sides".
The amendments impose production deadlines on BP and do not require Egypt to contribute to the nine-billion-dollar investment, while BP and its partner will sell each cubic meter starting from three dollars, up from 2.65 dollars.
BP spokesman Robert Wine said the negotiations for the agreement "had been a long process".
"Under the previous terms it was not commercially viable for us. The government now has a deal it finds acceptable", he said.
Wine said the Egyptian deal was the "biggest development we put our signature to since" the Deepwater Horizon explosion, which killed 11 workers.
BP is the largest foreign investor in Egypt and provides with its partners about 35 percent of the country's gas.
Wine said the agreement showed the company could operate "viable projects."
"BP's day-to-day operations are continuing after the spill. There are a lot of very steady good operations around the rest of the world," he said.
© Monday Morning 2010
