Egypt

Cheiron, Cairn, Pharos advance in deal for Shell Egypt onshore assets

Published on : 2020-04-15

Cheiron consortium moves to second round of bidding for Shell Egypt onshore assets: A consortium of Cheiron, Pharos Energy and Cairn Energy has moved to a second round of bidding to acquire Shell’s onshore assets in Egypt, Bloomberg reports, citing unnamed sources. Egypt’s East Gas has also been invited to the next round of bidding, according to the sources, who said that other companies can still come forward and bid.

Oil price war throws uncertainty into proceedings: Shell is moving forward with the sale for now, but recent oil price volatility could impact what buyers are willing to pay, the business information service says. The Dutch oil giant had been expecting to net as much as USD 1 bn for the assets, a target that now could be under threat due to the lowest price of oil, the sources said, emphasizing that discussions will not necessarily lead to a sale.

Background: Shell announced last year its intention to exit its onshore upstream assets in the Western Desert and focus on expanding its Egyptian offshore gas exploration efforts, appointing Citigroup to manage the estimated USD 1 bn sale. Cheiron and Pharos Energy submitted bids for the assets in February, as did Egypt’s Apex Energy, US oil and gas producer Apache, and other undisclosed Asian and Middle Eastern companies. Shell’s portfolio in the Western Desert includes stakes in 19 oil and gas assets including the Badr El Din and Obaiyed area, as well as the North East Abu El Gharadig, West Sitra, Bed 1 gas, and West Alam El Shawish concessions.

A consortium of Cairn Energy Plc, Pharos Energy Plc and Egypt’s Cheiron Petroleum has proceeded to a second round of bidding for Royal Dutch Shell Plc’s onshore assets in the African country, in a deal that could value the business at as much as $1 billion, people familiar with the matter said.

Shell is proceeding with the planned sale for now despite the coronavirus crisis hampering deal-making globally, the people said, asking not to be identified as the matter is private. Egypt’s East Gas Co. is also among suitors that have been invited to the next round of bidding, the people said.

Other bidders could still emerge for the assets, and there’s no certainty the discussions will result in a deal, according to the people. The recent rout in oil prices could affect the amount buyers are willing to pay, and Shell may not be able to achieve its initial price expectations, the people said.

Representatives for Shell, Cairn and Pharos declined to comment. Calls to Cheiron and East Gas offices in Cairo weren’t answered. Pharos said last month that it was participating in Shell’s sale as part of a consortium.

Shell is targeting the end of this year for finalizing the sale of its oil and gas production assets in the Western Desert, after it started the process in early 2020, the company’s deputy chairman for Egypt said in February. It has hired Citigroup Inc. to manage the sale.

The Anglo-Dutch oil major will focus on offshore exploration and the gas business in the country, it said last year.

(Sources: Enterprise.press & Bloomberg)

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