UAE's Dana Gas wins gas exploration deals in Egypt

United Arab Emirates energy firm Dana Gas said on Monday that it had been awarded exploration deals for two onshore gas blocks in Egypt.

The company will operate the North El Salhiya onshore concession area, known as Block 1 and will partner with British company BP to explore El Matariya, Block 3, on a 50:50 ownership basis, it said in a statement.

“Under the terms of the agreement, BP will fund all of the cost, including Dana Gas’s share, of one exploration well up to an agreed maximum limit,” Dana said.

If the well proves commercial, BP will have the option to buy up to 50 percent stakes in Dana Gas’ adjacent development leases, it said.

Block 1 is an extension of Dana Gas’ existing conventional gas production business in Egypt, the company said. The new deals are part of the 2014 EGAS bidding round held late last year in Egypt.

Dana Gas, which relies on Egypt for over half of its output, said in August it expected to recover the vast majority of overdue payments which the Egyptian government owes it by 2018.

Dana has had problems recovering payments from exploration and production assets in Egypt and Iraqi Kurdistan because of political turmoil in those places.

At the end of June, the company was owed $297 million in Egypt and $650 million in Kurdistan, it said.

UAE-based companies such as Dana Gas have been capitalising on good relations between the UAE and Egypt’s army-backed government, which is trying to attract foreign investment.

Political turmoil and violence since a 2011 revolt which ousted Egyptian leader Hosni Mubarak has hit the economy hard. The government has struggled to pay foreign companies for gas and work on some major new gas projects has ground to a halt at a time when generous state subsidies are stoking growing demand.

BP, one of the largest foreign investors in Egypt, said last year it had found offshore gas in Salamat, the deepest well ever drilled in the Nile Delta. BP has said it remains committed to Egypt and to its major investment in the existing West North Delta project despite delays.