TransGlobe Energy has initiated discussions with Egyptian General Petroleum Corporation (EGPC) to reduce operating expenditure in Egypt’s Eastern Desert region and is considering ceasing all production from its Western Desert concession, according to results published by the company for the first three months of the year.

The move comes amid low global oil prices and after a development well drilled at West Bakr failed to fulfil some of its objectives.

In its statement, TransGlobe said: “Constructive negotiations with EGPC to amend, extend and consolidate the company’s Eastern Desert concession agreements have continued through the period, with both parties recognising the attractiveness of a revised agreement to stabilise and ultimately improve investment in production, following a return to a more sustainable commodity price environment.”

During the first quarter of the year, TransGlobe drilled the HW-2A development well to a total depth of 1,639 metres at West Bakr.

Due to a stuck pipe, only the Yusr-B reservoir was fully logged and evaluated with an internally estimated 0.3 metres of net oil pay on this reservoir.

TransGlobe said in its results: “The other Yusr reservoirs and the upper Bakr reservoir, though all exhibiting good oil shows, were not logged at this time.

“HW-2A was completed in April 2020 as a producer on 5.4 metres of oil bearing Yusr-C reservoir observed on the mud logs.

“The SHAMS-2 rig was demobilised following the completion of HW-2A.”

TransGlobe’s production averaged at 12,343 barrels a day (b/d) during the quarter, a decrease of 4% from the previous quarter.

The company said the decrease was primarily due to natural declines.

TransGlobe said that production averaged 201 b/d from its South Ghazalat concession, in Egypt’s Western Desert region.

The company said March production was impacted by severe weather in Egypt.

TransGlobe is currently only producing from a single well in the concession, which is known as SGZ-6X.

The SGZ-6X well is currently producing from the Upper Bahariya reservoir at a rate restricted to around 250-300 b/d.

Production has been restricted in order to evaluate the well, manage the reservoir and optimise the separation of oil, gas and water.

In its statement, TransGlobe said: “With the continued postponement of both appraisal and exploration drilling at South Ghazalat in 2020, production from SGZ-6X alone at current and near-term oil prices is insufficient to cover its operating costs.

“The company is working with EGPC to further cut Western Desert operating costs to generate positive cash flow from SGZ-6X operations; however, if this is not possible, the company is considering suspending South Ghazalat operations until either oil prices improve or production off the lease can be increased through new wells or a recompletion of SGZ-6X.”

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