QatarEnergy has signed a farm-in agreement with ExxonMobil to acquire a 40% participating interest in two exploration blocks offshore Egypt. Under the terms of the agreement, which is subject to customary approvals by the government of Egypt, QatarEnergy will acquire a 40% working interest in each of the “Cairo” and “Masry” offshore concession agreements, while ExxonMobil (the operator) will retain the remaining 60% working interest.

Cairo Masry Offshore Blocks

The Cairo and Masry offshore exploration blocks were awarded to ExxonMobil in January 2023 and cover an area of approximately 11,400 square kilometers in water depths of 2,000 to 3,000 meters. QatarEnergy is looking forward to working with ExxonMobil, as well as with the Egyptian Natural Gas Holding Company (EGAS) and the Egyptian Ministry of Petroleum and Mineral Resources, to implement oil and gas projects in Egypt.

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Commenting on the signing of this agreement, His Excellency Mr. Saad Sherida Al-Kaabi, the President and CEO of QatarEnergy, said, “I am pleased with our entry into the Cairo and Masry offshore exploration blocks as they expand QatarEnergy’s presence in the Arab Republic of Egypt and extend our ambitious exploration program in-country.” 

His Excellency Minister Al-Kaabi added, “We look forward to working with our valued long-term strategic partner ExxonMobil, as well as with the Egyptian Natural Gas Holding Company (EGAS) and the Egyptian Ministry of Petroleum and Mineral Resources, in this promising and prospective region. I would like to take this opportunity to thank the Egyptian authorities and our partners for their valuable support and cooperation.”

What is a Farm-In Agreement?

A Farm-In Agreement is a contractual arrangement commonly used in the oil and gas industry. This agreement involves two parties: the original owner of the interest in a piece of land (the “farmor”) and the party that agrees to pay for the costs associated with extracting the resources from the land (the “farmee”).

The farmor, who owns the rights to a piece of land where oil or gas has been discovered, enters into this agreement to offset the costs associated with drilling, developing, or otherwise extracting the resources from the land. These costs can be substantial, and the farmor may not have the necessary capital or may not want to bear the risk associated with these operations.

On the other side of the agreement is the farmee. The farmee agrees to pay all or a share of the drilling, completion, or other expenses of an exploratory or development well. This agreement may be subject to a maximum payment obligation, after which expenses are shared in accordance with the working or participation interest therein or in accordance with the agreement of the parties.

In exchange for bearing these costs, the farmee receives an ownership interest in the oil or gas property. This ownership interest can be very valuable, especially if the well produces a significant amount of oil or gas over its lifetime.

The farmee benefits from this arrangement by gaining access to a proven source of oil or natural gas without having to discover it themselves. This can save the farmee a significant amount of time and money, as the process of discovering new sources of oil or gas can be costly and time-consuming.

Objectives of QatarEnergy's Acquisition

The objectives of QatarEnergy's acquisition of the two new offshore exploration blocks, namely "Cairo" and "Masry,"  in Egypt are as follows:

Exploration Opportunities

The blocks cover an area of approximately 11,400 square kilometers in water depths of 2,000 to 3,000 meters, offering promising exploration opportunities.

Leveraging Egypt's Gas Reserves

Egypt holds the largest gas reserves in the Eastern Mediterranean region, estimated at around 2.65 trillion cubic feet (Tcf) as of FY 2022/2023. The acquisition allows QatarEnergy to leverage these reserves and execute oil and gas projects in Egypt.

Capitalizing on LNG Export

The country has become an important exporter of liquefied natural gas (LNG), with two LNG terminals operational in Egypt and plans for further expansion. The acquisition positions QatarEnergy to capitalize on this growing gas production.

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