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Burg El Arab
The Burg El Arab PSC covers a gross area of 72 km
2
and is located in the Alamein Basin in the Western Desert. The
Group has a 75% working interest in the Burg El Arab licence, held through the PSC entered into with EGPC. A Group
company is the operator and its JV partner is Gharib Oil Fields, which holds a 25% working interest. Since 2010, Gharib
has been delinquent on payment of its cost interest share of the asset’s operating and other costs, as a result of which the
Group has been covering its costs, which may not be recoverable. See “
Risk factors—Risks relating to the oil and gas
industry—The Group could suffer unexpected costs or other losses, or fail to capitalise on new commercial
opportunities, if its JV partners and counterparties do not perform or comply with licence terms and applicable
regulations, or if the Group and its JV partners fail to co-operate.
” The Group’s working interest was acquired through
incremental purchases made between 2006 and 2009. The JV operates through Burapetco, a private company
incorporated in Egypt.
A 20-year development lease was granted over the oil field discovered in the PSC area in 1996. The development lease is
scheduled to expire at the end of December 2016, with an option to extend the lease for an additional five years subject
to approval by the Egyptian Ministry of Petroleum. The remaining exploration areas within the Burg El Arab PSC have
been relinquished by the JV partners and Burg El Arab therefore comprises the sole development area.
Commercial production at Burg El Arab began in 1997 following the discovery of the BEA 2 well in 1996. Since 2009,
when it started operating Burg El Arab, the Group has drilled seven development wells and four exploration wells, all of
which were producing wells. Currently, there are nine producing wells in the PSC area.
Burg El Arab produced 951 average bopd on a working interest basis during the first three months of 2014, representing
approximately 4.2% of the Group’s average daily working interest production, which was an increase of 13.6% on a
working interest basis compared to the 837 average bopd achieved during the first three months of 2013.
In 2011, the BEA 9, BEA 10 and BEA 11 wells were drilled, indicating an initial flow rate of 530 bopd, 100 bopd and
953 bopd, respectively. In 2012, BEA West-1 well was worked over and indicated an initial flow rate of 1,056 bopd. In
December 2013, the BEA 17 well was spudded, with an initial flow rate of 280 bopd. In 2014, BEA W2 was drilled,
producing 280 bopd. Currently, BEA 18 is being drilled.
Oil produced from the Burg El Arab wells is transported through flow lines to the Group’s nearby storage tanks for
initial treatment and draining of water. The storage tanks have a capacity of 15,050 bbl. The oil is then shipped via
pipeline to the Al-Hamra processing facility, located approximately 26 km from the site, to be processed to a state ready
for sale. From there it is delivered approximately 30 km via pipeline to Al-Hamra Terminal for sale by EGPC. Custody
of the oil transfers to EGPC at the receiving area of the Al-Hamra processing facility, and EGPC is then responsible for
processing, further transport and sale of the product.
The Group’s activities at the Burg El Arab PSC area are focused on upgrading the equipment and facilities at the site by
undertaking the following upgrades and additions to its infrastructure at Burg El Arab: a 26 km
2
-construction of a 15.24-
cm diameter flowline with a shipping pump, four 2,400 bbl tanks, a fire-fighting system, employee accommodation and
road repair. The facility upgrade is part of the Group’s efforts to maintain a healthy and safe environment. The Group
drilled two exploration and two development wells in the first half of 2014. The Directors expect these upgrades to
improve the efficiency of handling and processing operations for Burg El Arab’s production.
The Group expects to incur discretionary capital expenditures at the Burg El Arab PSC area in 2014 in the amount of
$10.2 million. Twelve new development wells are planned, comprising two in 2015, five in 2016 and five in 2017.
Abu Sennan
The Abu Sennan PSC covers an area of 733 km
2
and is located in the Abu Gharadig Basin in the Western Desert. The
Group has a 50% working interest in the Abu Sennan licence, held through the PSC entered into with EGPC. A Group
company is the operator and its JV partners are Dover Investments, which holds a 28% working interest, and Beach
Petroleum (Egypt) Pty Ltd which holds a 22% working interest. The Group carries Dover Investments’ costs related to
the PSC and in return is entitled to receive Dover’s share of the cost oil recovery entitlement plus 7.5% of Dover
Investments’ share of the profit oil attributed to the JV partner group. The Group’s current working interest was acquired
through incremental purchases made between 2007 and 2010. The JV operates through East Abu Sennan Petroleum
Company, a private joint venture company incorporated in Egypt.
Four development leases of 20-year durations were granted over each of the four producing oil fields discovered within
the Abu Sennan licence area: Al-Ahmadi, Abu Sennan-1, Abu Sennan-2 and Abu Sennan-3, covering a total area of
approximately 78 km
2
. Each development lease is scheduled to expire in 2032, except for Abu Sennan-3, which is
