- Chevron and Shell exit Egypt’s Red Sea blocks, shifting focus to Mediterranean exploration.
- Egypt’s gas production drops sharply due to maturing fields and declining exploration investment.
- Supermajors form joint ventures and increase private equity interest in EastMed’s gas assets.
Oil giants Chevron and Shell have exited Egypt’s Red Sea exploration blocks after their drilling efforts failed to yield commercial finds. Both companies now focus their investments on more promising Mediterranean prospects.
Chevron confirmed in April that it relinquished its 45% operated stake in Red Sea Block 1, located in the northern Red Sea. Chevron partnered with Australia’s Woodside Energy and Egypt’s Tharwa Petroleum.
Chevron spokesperson Sally Jones told Reuters that the company remains committed to Egypt and will continue exploring the Mediterranean.
Shell was the first company to exit the Red Sea. The Middle East Economic Survey (MEES) reported Shell’s withdrawal from Blocks 3 and 4 earlier this year. Shell held 43% and 21% operator stakes in the blocks, respectively. Shell has yet to confirm the exit formally.
Shell’s partners in Block 3 included Woodside (30%) and QatarEnergy (17%). In Block 4, Mubadala held 27%, Woodside 25%, and QatarEnergy 17%.
Egypt awarded Red Sea exploration blocks in 2019, marking the country’s first international tender for the region. Chevron, Shell, and Mubadala won the concessions. The government hoped to boost Egypt’s gas production and support its LNG export plans.
However, exploration results have fallen short. At a press briefing in April, Petroleum Ministry spokesperson Moataz Atef confirmed that companies had met their commitments. Atef cited one firm that invested $34 million in a project initially budgeted at $10 million, only to find no commercial discoveries.
Atef did not name the company but stated that several multinational firms had returned their blocks. He explained that they redirected their investments to other Egyptian areas, primarily the Mediterranean.
Egypt’s domestic gas production has dropped significantly. According to energy consultancy Wood Mackenzie, output fell from 7 billion cubic feet per day (Bcf/d) in 2022 to around 4.5 Bcf/d.
The decline resulted from falling output at maturing fields such as Zohr and West Nile Delta. A slowdown in exploration investment has compounded the issue.
Chevron and Shell have applied for new blocks in the Mediterranean. The petroleum ministry confirmed the applications but did not provide further details. Chevron holds stakes in three other exploration blocks, including two operated blocks in the EastMed.
Supermajors are also forming joint ventures to share exploration risks. Arcius Energy, a joint venture between BP and ADNOC, operates in Egypt’s Shorouk, North Damietta, North El Tabya, Bellatrix-Seti East, and North El Fayrouzn blocks.
Shorouk hosts Zohr, EastMed’s largest gas field, which Eni operates. BP also operates the Atoll gas field in North Damietta.
Wood Mackenzie reports that Arcius may expand its operations offshore in Israel and Cyprus. The goal is to align with Egypt’s underused LNG facilities.
Private equity also plays a role. The Carlyle Group recently acquired Energean’s Egyptian assets. Harbour Energy is expected to retain its portfolio after merging with Wintershall Dea.
Wood Mackenzie estimates the EastMed’s remaining NPV for majors to be $19 billion. With Europe seeking new gas supplies, the region’s growth is set to continue into the late 2020s.