CAIRO: The International Finance Corporation (IFC), the private sector arm of the World Bank Group, announced that it has signed a $25 million financing package for Rally Energy Corporation, a Calgary-based oil and gas firm, to support upstream oil and gas projects in Egypt and Pakistan to help strengthen energy production in order to meet increasing domestic demand.
The energy sector in Egypt is in its most aggressive period of growth to date. The mining and hydrocarbon sector plays a significant role in the country’s economy, generating around 15 percent of GDP, 37 percent of export earnings and the bulk of foreign investment. Currently, FDIs are being pumped into the industry at a furious pace, with foreign energy companies seeking to reap profits under the Egyptian gas umbrella.
Most recently, RWE Dea, one of the top petroleum companies in Germany, contracted two 2000 HP onshore drilling rigs from Croatian firm CROSCO Integrated Drilling Well Services for a two year period, in order to be able to continue the aggressive exploration program in the Disouq concession in the Nile Delta, where the contractor has a 100 percent participating interest in the concession that covers an area of 5,523 km. The first rig will commence drilling in September 2006 and the second one will start work in 2007.
Centurion Energy International Inc., an international oil company based in Canada, has also closed its land acquisition from CTIP Oil and Gas Limited of a 25 percent participating interest in the West El Manzala Concession and West El Qantara Concessions, located in the Nile Delta region of Egypt. Centurion now holds a 100 percent participating interest in each of these concessions.
Under the terms of the acquisition agreement, Centurion has paid $20 million and has issued a million common shares for the concession interests. Centurion has also agreed to pay additional future premiums that could total up to an additional $25 million if and when specific discovery volumes and development objectives are met.
However, while foreign companies scramble to include Egyptian oil and gas on their hit list, oil exports from Egypt have been under pressure as production at mature oil fields has decreased and domestic consumption increased.
Rally Energy, whose primary area of operations is in Egypt, mainly in the form of a 100 percent operating interest in the 20,000 acre Ras Issaran oil field, a significant heavy oil development opportunity with strong growth potential, will address the decline being witnessed by the industry through their agreement with the IFC.
Through a fully-owned subsidiary, Scimitar Production Egypt Ltd., where Rally has 100 percent working interest in a heavy oil development petroleum services agreement related to the Ras Issaran concession area on the western shore of the Gulf of Suez, the company is currently working on implementing a three year development program there that aims to step up oil recovery rates by employing a range of established enhanced oil recovery techniques.
“The IFC credit facility has been put in place to give Rally maximum flexibility to supplement expected cash flow from its planned 2006 and 2007 work programs, and to enable us to accelerate the thermal development project in the Issaran Field in Egypt, said Abby Badawi, president and chief executive officer of Rally Energy Corp. “In addition, this strategic long-term investment by the IFC, as lender and potential equity partner, will provide Rally with continued access to competitive and sustainable financing arrangements to fund planned and future growth opportunities both in Egypt and Pakistan, Badawi added.
In Pakistan, where the corporation holds a 22.5 percent working interest in the 200,000 acre Safed Koh Block in Punjab, central Pakistan, Rally Energy is participating in the development of large natural gas/condensate discoveries as part of the project with their partners there. Through this joint venture, Rally Energy will aim at strengthening domestic natural gas supplies in a market where increasing demand may lead to a shortfall in domestic supply and to potential gas imports. Rally and its partners will also explore prospects for additional gas reserves in the block, in order to increase fuel supplies to industrial and urban markets in the region.
“Companies like Rally are important participants in the hydrocarbon sectors of developing countries as they help develop domestic resources to satisfy growing demand. Importantly, they also bring revenues to governments and create employment as well as opportunities for local suppliers of goods and services, said Somit Varma, IFC’s associate director for oil and gas.
IFC’s financing consists of revolving credit facilities of $20 million in two tranches, and a $5 million term loan with attached equity share warrants. The IFC investment will support Rally Energy’s three-year capital expenditure plan and working capital needs for its projects in Egypt and Pakistan.
“We welcome Rally’s participation in the energy sectors of Egypt and Pakistan. It is IFC’s strategic priority to support vital economic sectors in the region and help address increasing energy demand, said Michael Essex, IFC’s director for the MENA region.
IFC’s worldwide committed portfolio as of fiscal year 2005 was $19.3 billion for its own account and $5.3 billion held for participants in loan syndications. From its founding in 1956 through fiscal year 2005, IFC has committed more than $49 billion of its own funds and arranged $24 billion in syndications for 3,319 companies in 140 developing countries.
