VZCZCXYZ0000
RR RUEHWEB

DE RUEHEG #2846/01 2631322
ZNR UUUUU ZZH
R 201322Z SEP 07
FM AMEMBASSY CAIRO
TO RUEHC/SECSTATE WASHDC 6967
INFO RUEHAD/AMEMBASSY ABU DHABI 0503
RUCPDOC/DEPT OF COMMERCE WASHDC
RHEBAAA/DEPT OF ENERGY WASHINGTON DC

UNCLAS CAIRO 002846 
 
SIPDIS 
 
SENSITIVE 
SIPDIS 
 
STATE FOR NEA/ELA(NAFZIGER), EEB/ECS 
 
E.O. 12958: N/A 
TAGS: EPET ENRG ECON PINR EG
SUBJECT: OIL DISCOVERY IN UPPER EGYPT 
 
Sensitive but Unclassified.  Please protect accordingly. 
 
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Summary 
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¶1. (SBU) Egypt's Petroleum Minister is hailing a crude oil 
discovery in Upper Egypt as a potential economic savior for 
the region, but some industry experts, citing questions over 
recoverable reserves, quality, and local refining capability, 
have their doubts.  Their skepticism meshes with broader 
questions about the veracity of Ministry of Petroleum 
estimates of Egypt's crude oil reserves. That said, even 
modest production from the well will benefit the economy of 
Upper Egypt.  End summary. 
 
---------------------------- 
Oil Discovery in Upper Egypt 
---------------------------- 
 
¶2. (SBU) Minister of Petroleum Sameh Fahmy proudly announced 
on September 3 that the upstream division of UAE-based Dana 
Gas, Centurion Petroleum, had discovered commercial volumes 
of oil in its Komombo concession near Aswan in Upper Egypt. 
Fahmy, flanked by Governor of Aswan General Samir Yousef, 
hailed the find as the first of its kind in the region, and 
opined that it would boost the economic development of Upper 
Egypt as a whole.  Emphasizing the well's potential economic 
impact, Fahmy officially renamed the well "Al Baraka" ("The 
Blessing"). 
 
¶3. (SBU) The Komombo concession lies about 80 km north of 
Aswan, 700 km south of Cairo, and 320 km from the nearest 
refinery in the Nile Valley city of Assiut, well outside 
Egypt's traditional oil-producing regions in the Gulf of 
Suez, Mediterranean offshore, and Western Desert.  Centurion 
drilled the well to a total depth of 8,712 feet, and reported 
penetrating several oil-bearing zones.  Early tests produced 
150 barrels per day from a thirty-nine foot perforated 
interval.  The company is currently evaluating the recovery 
testing results and has not yet released a final estimate of 
reserves, although some press reports have estimated 
recoverable reserves at 8 million barrels. Dana Gas General 
Manager Rashid Saif Al-Jarwan said they were working with 
their GOE-owned partner Ganoub el Wadi Petroleum Company to 
determine the recoverable reserves and productivity of the 
find.  The producer plans to bring the field into production 
as soon as possible and transport the oil via rail or Nile 
River barges to the Assiut refinery. 
 
--------------------------------- 
Some Question the Impact, However 
--------------------------------- 
 
¶4. (SBU) Some industry sources have told us, however, that 
the apparent poor quality of the oil, uncertainty over the 
quantity of recoverable reserves, and the distance to the 
nearest refinery could impinge upon the impact of the 
discovery on the Aswan region.  The region is in great need 
of economic development and job creation, and the ruling 
National Democratic Party (NDP) has declared it a focus of 
its national economic development strategy.  The Ministry of 
Petroleum reports the oil tested with a specific gravity of 
37 degrees API and a wax content similar to that of Sudanese 
export crude.  Industry executives here tell us, though, that 
the Al Baraka oil is waxy to the point of making 
transportation tough and refining more costly.  Other experts 
question the MOP's fanfare surrounding the discovery given 
the uncertainty over recoverable reserves and the fact that 
three wells drilled by Spanish firm Repsol in the concession 
in 1995-96 produced meager results.  Centurion officials, 
though, claim that the find is from a different 
formation/layer than the Repsol wells.  The skepticism from 
within the industry meshes with a broader uncertainty over 
Egypt's reported crude oil reserves. 
 
------------------------- 
Reserve Numbers Reliable? 
------------------------- 
 
¶5. (SBU) In contrast to Egypt's expanding natural gas 
reserves and production, expatriate industry sources tell us 
that the Ministry of Petroleum's statements regarding the 
growth in proven crude oil reserves over the past five years 
do not hold up against the reality of flat or declining 
production.  The MoP reports an increase in proven reserves 
from less than 3 billion barrels in 2001 to over 3.7 billion 
barrels by late 2005 due to increased exploration activity 
and better recovery technology.  Crude oil production, 
however, has declined from over 920,000 barrels per day (BPD) 
in 1995 to an average of 640,000 BPD in 2006. 
 
¶6. (SBU) Some analysts here complain that no clear picture of 
Egypt's reserves exists because Egypt does not require its 
state-owned petroleum companies to perform certified reserve 
audits, unlike publicly traded companies in the U.S. and 
elsewhere that must perform annual reserve audits.  One 
expatriate oil executive told us that they have suggested to 
the MoP on numerous occasions that they hire a reputable 
international firm to conduct a reserve audit so that Egypt's 
leadership can make informed decisions about the role 
petroleum will play in the country's economic development. 
The MoP has yet to heed the advice. 
 
¶7. (SBU) Some opposition parliamentarians are questioning the 
Ministry's estimates, including Muslim Brotherhood (MB) MP 
Ibrahim al-Ja'fari. Al-Ja'fari recently tabled a formal 
question for the Prime Minister and Minister of Petroleum 
accusing the MoP of misrepresenting reserve amounts, and, 
according the MB's website, demanded an investigation into 
Egypt's petroleum sector "free from misleading (information) 
and maneuvering." 
RICCIARDONE