Back to the complete issue
Thursday, 19 May 2022

Shell subsidiary acquires ExxonMobil’s offshore Mediterranean block

Shell subsidiary BG International is acquiring 100% of ExxonMobil’s North East El Amriya offshore gas block under a farm-out agreement, according to a press release (pdf) from Shell. BG will become the sole operator of the block once the transaction — which is pending government and regulatory approvals — is complete. It plans to begin drilling the first well during the first half of next year. Shell Egypt declined to disclose the value of the transaction or the block’s expected production capacity when we asked yesterday.

SOUND SMART- A farm-out agreement is when a company that owns the right explore for (or produce) oil or natural gas lets another party do the actual work. Think of it this way: You have the right to bake and sell Brand X muffins in Egypt — but you don’t have the money or interest in doing so. Under a farm-out agreement, you would assign the rights to a second company that would be allowed to bake and sell Brand X muffins. You (the “farmor”) would typically get an up-front payment from the “farmee” — and you’d get a royalty, cut of sales or percentage of profits. The farmee would also have to meet specific targets or spending requirements. Farm-out agreements are common in the oil, gas and mining industries.

Exxon owned the block for less than 2.5 years: The US oil company acquired the block at the end of 2019 and had planned to invest some USD 220 mn to drill four wells in the area.

What they said: “The proximity of this block to our existing assets and other exploration blocks Shell holds in the area will help us accelerate our offshore ambitions,” Chairman and Managing Director of Shell Egypt Khaled Kacem said. “This agreement strengthens our portfolio and is a significant milestone along the delivery of our strategy to build a solid gas position in the country.”

Shell has upped its presence in the Med over the last three years: Shell and Malaysia’s Petronas were granted two other concessions close to Amriya — North Sidi Gaber and Al Fanar — in 2020. Shell also last year offloaded its onshore oil and gas assets in the Western Desert, shifting its focus to projects including its West Delta Deep Marine offshore gas concession in partnership with Petronas — which is also right next door to the newly acquired block.

Enterprise is a daily publication of Enterprise Ventures LLC, an Egyptian limited liability company (commercial register 83594), and a subsidiary of Inktank Communications. Summaries are intended for guidance only and are provided on an as-is basis; kindly refer to the source article in its original language prior to undertaking any action. Neither Enterprise Ventures nor its staff assume any responsibility or liability for the accuracy of the information contained in this publication, whether in the form of summaries or analysis. © 2022 Enterprise Ventures LLC.

Enterprise is available without charge thanks to the generous support of HSBC Egypt (tax ID: 204-901-715), the leading corporate and retail lender in Egypt; EFG Hermes (tax ID: 200-178-385), the leading financial services corporation in frontier emerging markets; SODIC (tax ID: 212-168-002), a leading Egyptian real estate developer; SomaBay (tax ID: 204-903-300), our Red Sea holiday partner; Infinity (tax ID: 474-939-359), the ultimate way to power cities, industries, and homes directly from nature right here in Egypt; CIRA (tax ID: 200-069-608), the leading providers of K-12 and higher level education in Egypt; Orascom Construction (tax ID: 229-988-806), the leading construction and engineering company building infrastructure in Egypt and abroad; Moharram & Partners (tax ID: 616-112-459), the leading public policy and government affairs partner; Palm Hills Developments (tax ID: 432-737-014), a leading developer of commercial and residential properties; Mashreq (tax ID: 204-898-862), the MENA region’s leading homegrown personal and digital bank; Industrial Development Group (IDG) (tax ID:266-965-253), the leading builder of industrial parks in Egypt; Hassan Allam Properties (tax ID:  553-096-567), one of Egypt’s most prominent and leading builders; and Saleh, Barsoum & Abdel Aziz (tax ID: 220-002-827), the leading audit, tax and accounting firm in Egypt.