Production at Egypt’s Zohr offshore project with Rosneft’s participation has fallen by 14% since the beginning of the year.

The largest foreign production project with the participation of Rosneft, the Zohr gas field on the Egyptian shelf, may reduce production this year to a three-year minimum. Based on the results of January-October, Zohr, according to Kommersant estimates, produced about 19 billion cubic meters of gas, which is 14% less than the same period last year. Production at the project has been falling for the second year – after a maximum in 2021, it began to decline, presumably due to seawater seeping into wells. The project operator is Eni. The drop in production at Zohr increases gas shortages in Egypt, which has seen supply cuts from Israel in recent weeks.

Production at the Zohr field on the Egyptian shelf of the Mediterranean Sea fell by 14% in ten months of 2023, to about 19.17 billion cubic meters, according to Kommersant’s calculations and these sources. The participants in the project are the Italian Eni (operator, 50%), Rosneft (30%), BP and the Emirati Mubadala (10% each). Rosneft’s share in production amounted to 3.37 billion cubic meters. In October, Zohr produced 1.86 billion cubic meters, production increased by 3% compared to September.

Zohr is Egypt’s largest offshore gas field, as well as Rosneft’s largest gas production project abroad. Zohr’s reserves were estimated at 850 billion cubic meters of gas. Within ten years from the start of production, project participants account for 58.6% of the production, the rest belongs to the Egyptian government. Thus, Rosneft’s share in production is about 17.6%.

Eni discovered Zohr in 2015 in the Mediterranean Sea at a depth of up to 1.7 km, and production began at the field in 2017. In the same year, Rosneft entered the project, paying about $1.125 billion for its share, as well as compensating the costs incurred by Eni. In addition, according to the reports of the Russian oil company, capex for the project in 2017–2021 amounted to 136 billion rubles.

Maximum production at the project was achieved at the end of 2021 – more than 28 billion cubic meters. The Russian oil company accounted for more than 5 billion cubic meters (about 4.7 billion cubic meters in 2022). In 2023, a sharp decline in production began, presumably due to water infiltration into wells.

At current monthly production levels, Zohr’s production this year will reach its lowest level since 2020.

The drop in production at Zohr is creating a gas shortage in Egypt, which uses it mainly to supply power plants. The situation with gas imports has also worsened due to the Palestinian-Israeli conflict (see “Kommersant” dated October 29), since Israel stopped exporting gas to Egypt.

Despite the significant decline in production at Zohr, major foreign investors are counting on new major discoveries offshore Egypt. Thus, Eni announced a new significant discovery in the Nargis gas block in January, and Shell last week reported the successful drilling of an exploration well in the North East El-Amriya block.

The decline in production at Zohr is primarily caused by the geological properties of the field, recalls Victor Katona from Kpler.

Maintaining peak production rates did not last for a relatively long time; in fact, production at the field began to fall after five years from commissioning, and this is unlikely to be dealt with by drilling additional wells, which the Egyptian authorities are talking about, the analyst believes. Most likely, he suggests, well productivity will continue to decline, which will affect the overall production profile of the field.

Dmitry Kozlov