Dana Gas, BP conclude agreement for El Matariya drilling

Dana Gas and BP PLC have completed an agreement for drilling an exploration well in the 960-sq-km El Matariya onshore concession area, awarded to the companies in the EGAS 2014 International Bid Round, in Egypt’s Nile Delta.

Under the agreement’s terms, BP as operator will carry Dana Gas for its 50% share of the cost of the well, subject to an agreed cap of $39 million.

In consideration for the carry, BP has the option, subject to government approval, to farm into parts of Dana Gas’s West El Manzala (WEM) concession area while retaining WEM operatorship and ownership of the existing and future shallow gas business with Dana Gas.

Again subject to government approval, BP also has the option to farm into other areas of Dana Gas’s WEM concession and into the recently awarded North El Salhiya concession area for 50% participating interest in each case, if it elects to drill a second exploration well and carry Dana Gas’s 50% share of the related well costs, again subject to a similar agreed cap.

As with the first farm-in option, operatorship and ownership of the existing and future shallow gas business of the farm-in areas will remain with Dana Gas.

The El Matariya onshore concession area is adjacent to Dana Gas’s existing West El Manzala and West El Qantara development leases and the recently acquired North El Salhiya concession area.

Drilling of the first exploration well at El Matariya is expected to start in first-half 2016 and will last 8 months. Options for evacuation of the gas through Dana Gas’ nearby infrastructure will be considered by the joint venture established for El Matariya.

“This play has long been identified as having a significant potential in our concession area and, in particular, the Mocha prospect, which is the target of the exploration well to be drilled by BP in the El Matariya concession area with Dana Gas’ carried interest,” explained Patrick Allman-Ward, Dana Gas chief executive officer.

“A successful well result could lead to substantial growth for the company in Egypt, open up the onshore Oligocene play in the Nile delta and could ultimately lead to a material increase in onshore gas production in Egypt,” said Allman-Ward. “We are particularly pleased to have the well drilled by BP, which has extensive and successful experience in drilling deep, high-pressure and temperature wells targeting the Oligocene in the offshore Nile delta area.”