BP will cover some drilling costs in exchange for rights to buy in to some Egyptian gas basins in a deal with Emirati energy company Dana Gas. Map courtesy of Dana Gas.
SHARJAH, United Arab Emirates, June 2 (UPI) -- Emirati energy company Dana Gas said Tuesday that BP has the option to move into Egyptian gas basins in exchange for covering some drilling costs.
Dana, the sixth largest gas producer in Egypt, will have BP cover as much as 50 percent of the drilling costs at onshore license areas held by the Emirati company. The agreement, capped at $39 million, gives BP the rights to buy into onshore and offshore license areas held by the company, though Dana maintains ownership.
Dana Chief Executive Officer Patrick Allman-Ward said the areas in question, near the Nile Delta, have long been considered to hold significant potential.
"A successful well result could lead to substantial growth for the company in Egypt," he said in a statement.
Political and economic instability in Egypt has left the government in debt to energy companies eager to tap the country's natural gas potential. Dana in early January said it received $60 million from the Egyptian government, which represents about a quarter of its outstanding debt.
BP last year committed to investing $240 million on developing two new exploration blocks near the Nile Delta and in the northwestern Egyptian waters of the Mediterranean Sea through a partnership with Dana Gas.
BP said it will spend at least six years on exploration and production in the area. BP at one time produced almost 40 percent of the oil in Egypt through its regional partnerships and nearly 30 percent of total natural gas production.
The Emirati company envisions a seven-year staged development in Egypt, Drilling in license areas under consideration with BP could begin later this year.