PICO RBL

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The project proposes to support PICO, the largest Egyptian private sector oil and gas company, in financing the development, refinancing, and acquisition program for two of its offshore licenses which have low pressure reservoirs located in shallow waters (25 to 50 m deep) in the Gulf of Suez: Zaafarana and Amal. PICO is part of the family owned PICO Group that is engaged in different industry sectors (e.g. agriculture, food, energy, services, and real estate). In Egypt, PICO, directly or through one of its affiliates, owns interests in six offshore oil and gas assets (Zaafarana, Amal, Gemsa, Geisum and Tawila West, West Tawila Marine and South Ramadan Marine). In addition, PICO owns interests in five onshore fields (Silistea, Cosminele, Oporelu, Cosesti, and Shislaz), formerly producing oil and gas fields in Romania, and an exploration, development and production service agreement in the Altamira area, Northern Mexico. Due to local legislation, interests in any oil and gas license are held by joint ventures (JVs) between the state-owned Egyptian General Petroleum Corporation (EGPC), holding 50% of the shares, and a private company holding the remaining 50%. In the JVs where PICO is involved, the company, and/or one of its subsidiaries, detains the majority of the private shares allocated to the contractor members. IFC is proposing a senior loan of up to US$75 million, part of a reserve based loan of US$250 million together with EBRD and HSBC, aimed at supporting the company’s continuing operations in Egypt, which will allow PICO to: i) make additional development investments to delay the production decline of its mature fields in Amal and Zaafarana; (ii) refinance and repay existing debt; and iii) fund administrative expenses, exploration expenditures on the company’s existing licenses (minimal) and potential acquisitions, if approved by IFC. The Amal field is located in the southern province of the Gulf of Suez, approximately 55 km from the city of Ras Gharib, 15 km southwest from Morgan Oil field, and about 15 km offshore from the western shoreline. The license, covering 26.8 km2, was originally issued in 1981 and fully acquired by PICO in 1998. The current concession agreement was awarded in 2005 for a 15-year period and later extended to an additional 10 years. The license is managed by the Amal Petroleum Company JV (Amapetco), for which PICO and one of its subsidiaries own the entire private shares. Currently (i.e. after the completion of Amal Field Development Phase I in January 2014), the field’s main facilities include two unmanned offshore platforms (Amal A and B) 1.3 km apart with a total of 11 free flowing wells and associated flow lines. These platforms are connected via 3 interconnecting pipelines 1.3 km long (one 8” and two 4.5” coil tubing). The production of platform B wells is transferred to platform A, where is commingled with Platform A production and transferred to an onshore oil and gas separation plant (GOSP) via a 16 km, 24” production pipeline. The plant receives the production under natural flow and has a current capacity of 11,000 bbls/day and 70 to 85 mmscf/day. The GOSP will be upgraded to accept the anticipated increase in production, bringing the total to 25,000 bbls/day, with the addition of a new platform (Amal C), located adjacent to platform B and connected to platform A via a 1.3 km 10” pipeline. The upgrade will also include the installation of gas lift modules to maintain 15 mmscfd to be injected in 6 offshore wells. The GOSP includes a processing facility to separate the crude from formation water (water cut is approximately 43%), four above ground storage tanks, and two 8” & 16” gas and one 6” oil export pipelines. Both oil and gas are sold to third party companies at the GOSP gates. Capital expenditures include adding the new platform (C), refurbishing existing infrastructure and modifications to platforms-A and B. In addition, the project includes work-over of 3 existing wells (Amal-9, 13 and 16), drilling of new wells (Amal-7, 8, and 17-west), as well as upgrading other elements like safety, fire and medical equipment. The Zaafarana field is located in the north central Gulf of Suez, about 6.5 km from the shoreline. The license, covering 22.0 Km2, was originally issued in 1989 and since 1993 is managed by the Zaafarana Oil Company JV, for which PICO subsidiaries own 80% of the private shares. The license agreement is expiring in 2017 and PICO is currently applying for a 15 year extension. The field’s main facilities include one, 15- well slots platform with 8 producing wells (approximately 3,000 bbls/day) and associated flow lines. A subsea flow line connects the platform to a FPSO vessel. The FPSO has a capacity of 800,000 bbls and includes a processing unit to separate crude from formation water (water cut is approximately 90%). The crude is then loaded to third party tanker vessels once per month while produced water is first treated by the on-board water treatment plant to meet effluent standards and then discharged to sea. Gas content is only 5% and is vented at the FPSO. Capital expenditures include strengthening the current FPSO and/or replacing it as soon as the field concession extension is signed by EGPC. The Capex program also includes 3 work-overs of existing wells. Additional drilling to meet 2P reserve will also be part of the development program. Provided the concession extension is approved for 15 additional years, a new FPSO will be purchased to replace the existing one.