A critical milestone: BP overlooks geopolitical risk and announces $12 billion investment in Egypt

Published March 7th, 2015 - 10:43 GMT

British energy giant BP unveiled plans Friday to invest a record $12 billion in Egyptian gas fields with Russian partner DEA in a "vote of confidence" for the troubled nation.

The investment -- equivalent to 11 billion euros -- will be on the West Nile Delta (WND), the company said in a statement, and comes despite concern over a surge in deadly militancy in Egypt.

The London-listed group holds a 65-percent stake in the project, while DEA owns the remaining 35 percent.

BP is seeking to rebalance its capital expenditure (capex) programme to combat the impact of slumping oil prices, which have slashed its profits and revenues.

"The project underlines BP's commitment to the Egyptian market and is a vote of confidence in Egypt's investment climate and economic potential," BP said in a statement.

The aim is to develop five trillion cubic feet of gas resources and 55 million barrels of condensates, with production expected to begin in 2017, it added.

BP -- which has been in Egypt for 50 years with investments totalling more than $25 billion -- is the biggest foreign investor in the key African energy hub.

"The WND project investment is the largest foreign direct investment in Egypt," BP Chief Executive Bob Dudley said after final agreements were signed.

"WND production is key to Egypt's energy security," he said, with BP announcing that all the gas would be fed into the national grid and would eventually double BP's supply to the domestic market.

Gas will be produced by two BP-operated offshore blocks -- North Alexandria and West Mediterranean Deepwater -- with a potential for future exploration.

“This is a critical milestone in the Egyptian oil and gas history," said Hesham Mekawi, BP North Africa regional president.

However, BP's share price dipped 0.49 percent to 450.40 pence in Friday afternoon deals on the London stock market, as investors mulled the announcement.

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