Apache Corp. reported after markets closed Aug. 29 that it will form a global upstream partnership with Sinopec International Petroleum Exploration & Production Corp. to pursue oil and gas projects. As an initial part of the deal, China’s Sinopec will pay the Houston independent $3.1 billion cash in exchange for a 33% minority participation in Apache’s Egypt oil and gas business, which Apache will continue to operate, it said.
Apache currently controls 9.7 million gross acres in Egypt, of which only 18% has been developed. Net production from the company’s Egypt operations in 2012 averaged 100,000 b/d of oil and 354 MMcfd of natural gas, which comprised 27% of the company’s worldwide production revenue, 20% of its production, and 10% of its yearend 2012 proved reserves.
For Sinopec, the partnership marks the company’s first venture into Egypt’s upstream and will contribute an additional 130,000 boe/d of production, the company said.
Apache said it employs 9,000 Egyptians through direct employment through participation in Khalda Petroleum Co. and Qarun Petroleum Co. operating joint ventures with Egyptian General Petroleum Corp., and through employment with oil field service and construction contractors.
Apache stated that its Egyptian E&P operations lie in remote, unpopulated areas that are unaffected by political events in the region.
Apache recently made seven oil and gas discoveries in Egypt’s Western Desert—four in the Faghur basin and one each in the Shushan, Matruh, and Abu Gharadig basins (OGJ Online, Aug. 12, 2013).
G. Steven Farris, Apache chairman and chief executive officer of Apache, called Sinopec “an ideal partner” saying that the Chinese firm’s technical expertise would complement Apache’s 20 years of experience operating in Egypt’s Western Desert.
Apache’s operations in Egypt have been an important contributor to growth and cash flow for many years, Farris noted. “At the same time,” he said, “we are taking meaningful steps to rebalance our portfolio to better deliver the full potential of our deep North America onshore resource inventory.”
This latest deal is part of Apache’s previously announced plan to divest $4 billion in assets by yearend (OGJ Online, May 9, 2013). The company intends to pay down debt, buy back stock under a 30-million share-repurchase program, and fund future international projects.
The Egypt partnership is subject to customary governmental approvals and is expected to close during this year’s fourth quarter, with an effective date of Jan. 1, Apache said.