ENI Eni Spa

MILAN—Eni SpA said Sunday that it made a massive natural-gas discovery off the coast of Egypt, in what the Italian oil-and-gas company is calling the largest-ever find in the Mediterranean Sea.

The gas, estimated at about 30 trillion cubic feet or 5.5 billion barrels of oil equivalent, is in a field about 80 miles off the Egyptian coast, and is enough to supply the North African country for decades.

Most of the gas will be used by Egypt, with any excess exported, perhaps using a liquefied natural gas plant that Eni has not far from the field.

If the discovery proves to be as big as thought, it will likely lead to Eni boosting its production targets for the coming years. The company had been forecasting that it would find 2 billion barrels of oil equivalent over the next four years, and in the seven years to 2014 had found 10 billion barrels, less than double the Egyptian discovery.

Eni has been prospecting for oil and gas in Egypt for over 60 years and is the biggest Western producer in both the country and all of Africa. The company will use existing facilities, including offshore platforms, near the new find to keep the development costs relatively low, Eni Chief Executive Claudio Descalzi said in an interview. A subsea well also will be used to limit costs.

"This is a confirmation of our strategy of developing conventional assets in mature areas where we have strong geological knowledge and where we have synergies," said Mr. Descalzi. "We have done that very successfully in the past 3 to 4 years."

It will take several months to sort out the development and production leases, and drilling is expected to begin early next year, said Mr. Descalzi, who wouldn't say when production might begin. If drilling starts in early 2016, production would likely kick off about a year later, based on similar projects.

"We will fast track this project and production will begin as soon as possible," Mr. Descalzi said. "This discovery is transformational for Eni and especially for Egypt."

The Leviathan natural gas field off the coast of Israel was the largest discovery in the Mediterranean before the just-announced Egyptian find.

While Eni in recent years has generally sold stakes in its big finds to share the development costs, that is unlikely to happen with the new Egyptian field because of the relatively low development costs, said Mr. Descalzi.

Though natural gas is trading near a 2½ -year low, he said that would have no effect on the decision on when to start pumping the gas from the Egyptian field.

Eni, through an Egyptian subsidiary, has complete control of the exploration and will have a 50% stake in the production, with the rest held by the Egyptian state oil and gas company.

The Egyptian find is one of Eni's largest-ever, though it is smaller than a natural gas field being developed off the coast of Mozambique.

After years of turmoil following former President Hosni Mubarak's ouster, Egypt, which was once a gas exporter to markets from Asia to South America, was pushed to become an importer over the past few years after failing to keep pace with its domestic demand growth.

Such a large gas find could help Egypt, which is dealing with its worst energy crisis in decades, meet most of its gas demand for years. It may also have implications for neighboring Israel, which is looking to export its own deposits to Egypt and Jordan.

"The field is said by ENI to be capable of producing 2.5 to 3 billion cubic feet per day, which would cover most, though not all, of Egypt's energy gap," said Robin Mills, a nonresident fellow for energy at the Brookings Doha Center.

"This find probably rules out Israeli gas exports to Egypt, but won't restore Egypt as a significant exporter unless more is discovered," he said.

Noble Energy Inc. and Delek Group Ltd., which are developing two sizable fields in Israeli waters, have been negotiating long-term contracts to sell gas to companies in Egypt, but the deals have been delayed by bureaucratic and regulatory hurdles in Israel.

Egypt, one of a handful of Arab countries with normalized relations with Israel, initially rejected the idea of importing gas from the country, in fear of protests and violence. But Oil Minister Sherif told The Wall Street Journal in March that the country is open to approving the two pending deals to receive gas from Israel if the price were right and if one of the gas companies involved dropped legal action against the Egyptian government.

Israel Energy Minister Minister Yuval Steinitz said Sunday in a statement that the gas find in Egypt "is a painful reminder that while Israel sleepwalks and dallies with the final approval for the gas road map, and delays further prospecting, the world is changing in front of us, including ramifications for export options."

Summer Said contributed to this article.

Write to Eric Sylvers at eric.sylvers@wsj.com

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(END) Dow Jones Newswires

August 30, 2015 20:55 ET (00:55 GMT)

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