Dana Gas said it encountered a 50-foot natural gas column while drilling in its Begonia-1 well in the West el-Manzala concession in the Nile Delta.
The company said its initial testing of the well yielded 9.4 million cubic feet of natural gas and the low estimate of the reserve potential was 7 billion cubic feet.
Dana said it notified the Egyptian government of the commercial development and is preparing to follow up later with development plans for the discovery.
Patrick Allman-Ward, regional general manager for Dana, said Sunday the company plans to drill two more appraisal wells in the discovery area before the end of the year.
Dana Gas and Italian energy company Eni won an Egyptian auction in April for the North el-Arish reserve area in about 3,200 feet of water offshore from the Nile Delta.
Egypt has struggled to revitalize its energy sector following the 2011 revolution. Energy woes have contributed to growing frustration with Egyptian President Mohamed Morsi.