Saipem, a unit of the Italian oil company Eni, said it has won €1.5 billion (Dh6bn) of contracts, including work on Egypt’s giant Zohr gasfield, the company said.
The oil services company won an engineering, procurement, construction and installation contract for Egypt’s offshore Zohr, which was discovered last year by Eni. Work on the gasfield is expected to start next month and should be finished by end of next year.
“We are very pleased to have been selected for the important objective of delivering first gas from Zohr before the end of 2017,” said Stefano Cao, the chief executive at Saipem. “We will mobilise a fleet of vessels with last-generation capabilities and leverage on our proven expertise and consolidated presence in the area in order to ensure our clients achieve their targets.”
Eni plans to drill another three wells on the discovery this year, after completing its production test in March on the first appraisal well.
Zohr, the biggest gas find in the Mediterranean with about 850 billion cubic metres or 500,000 barrels of oil equivalent per day, will help narrow Egypt’s gas deficit. In addition to this, the Italian oil major announced a new discovery in Egypt last month – also offshore – in the Nile Delta.
Eni, which swung to a loss of US$800 million (Dh2.9bn) in the first quarter, will battle to meet its 2017 deadline for Zohr because of the weak energy market.
“The Egyptian government and Eni are both pushing ahead with development of Zohr,” said Richard Mallinson, a geopolitical analyst for the UK consultancy Energy Aspects. “But the 2017 start-up target looks ambitious and I expect first gas will probably come later than that. The Zohr project still represents a major opportunity for the government, given the size of the reserves, so it will prioritise capex for its development.”
Mr Mallinson pointed to the lower European refining margins in the first quarter of the year compared to a year-earlier period and the oil price collapse as reasons for lower revenues of majors such as Eni.
Costs for extracting hydrocarbon resources in deepwater run high with many choosing to decrease offshore activity. Yet Eni continues to place its bets on Egypt with the hopes of producing gas from the Zohr discovery in commercial quantities.
However, Eni’s chief executive, Claudio Descalzi, said at the end of April that the company would reduce spending by 20 per cent to make profits if the price of oil is $50 per barrel or higher.
The company has cut jobs in its upstream division in Egypt, sources told The National in April. Eni declined to comment at the time.
Mr Descalzi said that despite the weak commodity market, the company would continue to position itself to have more production flow through greater exploration activities. “I am confident that, even in terms of reserves yet to mature, our portfolio is one of the most valuable in the industry, thanks to its exposure to conventional assets and Eni’s continued exploration success,” he said.
lgraves@thenational.ae
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