Chevron Exits Egypt's Red Sea Blocks, Eyes Mediterranean Prospects
Chevron Corporation CVX, along with several other multinational energy firms, has exited its oil concession blocks in Egypt's Red Sea region after failing to discover commercial oil or gas reserves.
Despite making substantial investments over and above their commitment, one company, which reportedly spent $34 million against an initial commitment of 10 million, did not find any viable resources. As a result, Chevron renounced 45% of its stake in Red Sea Block 1, located in the northern Red Sea. The block is jointly held by Chevron and Australia-based oil giant Woodside Energy Group Ltd WDS.
Egypt initially awarded the oil and gas exploration concessions in the Red Sea in 2019 to Chevron, Shell plc SHEL and Mubadala following an international bidding round. The concession was part of Egypt's broader strategy to become a regional energy hub. Chevron was awarded the first block, Shell, the second, and the third block was jointly awarded to Shell and Mubadala. The total area covered by these concessions spans approximately 10,000 square kilometers (3,860 square miles), with a minimum investment commitment of $326 million.
However, the lack of success in these explorations has prompted a strategic pivot. While Shell declined to comment and other partners remained silent, the Egyptian Petroleum Ministry maintains that the Red Sea region still holds potential.
The petroleum ministry of Egypt did not mention the names of other companies that renounced their Red Sea blocks. At the same time, the big energy giants like SHEL and WDS, which hold the blocks in the Red Sea, also refused to make any comment.
Chevron, currently carrying a Zacks Rank #3 (Hold), is not moving back from Egypt completely but rather redirecting its focus. The company has expressed interest in three new exploration blocks, including two in the Mediterranean, where it will operate alongside partners such as Shell and Woodside Energy. Shell and Chevron have applied for new concessions in the region, reaffirming their long-term commitment to Egypt's energy landscape. You can see the complete list of today's Zacks #1 Rank (Strong Buy) stocks here.
Egypt's energy output has faced recent challenges, with natural gas production declining from 4.6 to 3.6 billion cubic meters year over year (January 2024 to January 2025). The government is taking stern actions to stabilize the supply ahead of the high-demand summer months by securing natural gas shipments and deploying three to four floating storage units. With lessons learned from last year's power shortages, Egypt is also putting emergency plans in place to address sudden demand surges.
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