East Mediterranean natural gas prospects, projects hit pay dirt

May 20, 2002
It has been only 5-6 years that oil and gas companies have sought in earnest for natural gas in the east Mediterranean area to fulfill growing indigenous demand.

It has been only 5-6 years that oil and gas companies have sought in earnest for natural gas in the east Mediterranean area to fulfill growing indigenous demand. But in that time, gas development projects-including those underpinning exports of LNG-have marked progress, gaining industry's full attention.

A number of companies, integrated and independents alike, have come to the forefront of this effort, becoming firmly entrenched in the exploration, production, development, and marketing of gas in the area, making it one of the hottest-and most closely watched-plays in the world.

In particular, exploration and development activities off Egypt and Israel have emerged as core focus areas for units of BG Group PLC, BP PLC, Royal Dutch/Shell Group, and Houston-based independents Apache Corp. and Noble Energy Inc. (see map and related article). Partnering with other companies, these firms have tapped into a natural gas resource base that will likely serve markets worldwide for years to come.

BG's Egyptian program

BG Egypt, a unit of BG Group, has worked in and around Egypt since the 1980s. Working with its partners, the unit's aggressive exploration program has yielded enough natural gas to warrant the construction of a second train to the company's Egyptian LNG project, which will be tied to production from the West Delta Deep Marine Concession (WDDMC) off the Nile Delta (OGJ, Feb. 11, 2002, p. 9). Presently, BG and its partners-through joint venture Burullus Gas Co.-are developing WDDMC's Scarab and Saffron gas fields to serve the domestic market. The project includes a 56-mile subsea tie-back being engineered by a consortium of Bechtel Group and INTEC Engineering.

At the same time, BG's group is banking on discoveries in the associated Simian, Sapphire, Sienna, and Serpent fields to support at least two LNG trains. Most recently, the group's Sienna-2 appraisal well, drilled to 2,597 m in 991 m of water 77 km offshore in the north central area of WDDMC, confirmed the northern extension of the Sienna gas reservoir, although the well is yet to be tested.

Egyptian LNG plans to build a $900 million LNG export plant at Idku, east of Alexandria. Egyptian LNG partners (and members of the first-train group) are BG Egypt, with 35.5%, Edison International SPA 35.5%, Egyptian General Petroleum Corp. 12%, Egyptian Natural Gas Holding Co. 12%, and Gaz de France 5%. In January, Egypt signed an $8 billion, 20-year agreement to supply GdF with 3.6 million tonnes/year of LNG.

So far this year, BG and its partners have drilled four exploration and appraisal wells in Egypt, said Stuart Fysh, BG Egypt vice-president, adding that the company does not plan to drill more wells this year. In addition, BG is set to complete eight wells on its Scarab-Saffron fields, Fysh noted. In terms of future drilling plans on WDDMC, BG is obligated to drill two more wells before 2006, Fysh said.

In June BG plans to shoot a 1,200 sq km 3D seismic survey over the eastern portion of WDDMC, which will identify remaining prospects on the block, Fysh said, adding "There are some deeper-water sections of the block where we haven't done any exploration drilling yet, but we are now looking mainly to the east side of the block for prospectivity."

Just south of WDDMC lies the firm's Rosetta concession, from which EGPC received first gas early last year under a 25-year agreement to supply the Egyptian market (OGJ Online, Feb. 15, 2001). BG has "quite heavily" explored the concession, Fysh noted, and said that there is deeper prospectivity on both WDDMC and Rosetta in the Miocene.

Burullus Gas Co.-a joint venture of Egyptian General Petroleum Corp., BG International Ltd., and Edison International SPA-contracted Atwood Oceanics Inc.'s Atwood Hunter semisubmersible for its 2002 drilling program in the West Delta Deep Concession off the Nile Delta. Photo courtesy of BG.
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BG operates Rosetta with 40%, a unit of Royal Dutch/Shell holds 40%, and Edison International SPA holds 20%.

"Clearly we feel we've found a lot of the gas on both blocks," Fysh said, "but we would anticipate a couple more years of exploration on [WDDMC] before relinquishment."

Most of what BG has found in terms of gas has been dry, Fysh noted.

"None of our gas is particularly wet," he said, adding, "Basically, processing consists of knocking out the water and just drying it to [Egypt's specifications.]"

Challenges for operating in the area, Fysh noted, include the high instance of overpressuring. BG and others looking at the Miocene are trying to decide if the rigs that they are using, typically with 10,000 psi blowout preventers, are suitable. "I think that's the question at the moment: everybody is trying to see what they can do with 10,000 [psi] just to avoid the cost of mobilizing 15,000 psi [rigs.]," Fysh said.

Other specific challenges include getting people to work in the area, particularly US workers following the Sept. 11, 2001, terrorist attacks on the US, he noted.

Fysh is pleased with BG's exploration success ratios, which he attributes to the firm's large data sets. "With something like 24 wells drilled on the residual and Scarab-Saffron blocks with about a 90% success ratio, we've got a good handle on what we're doing," he said.

The near future looks bright for activity in the area, Fysh said, and he expects no "drop-off in intensity."

BP in Egypt

The most recent exploration action for BP PLC occurred in May 2001, when BP Egypt made a second natural gas discovery, Fayoum (L-1x), drilled in 400 m of water in the Nile Delta area 35 km off Egypt's northern coast in the North Alexandria concession. The first discovery, made in late 2000, was Taurus-1, the company said.

On test, Fayoum (L-1x) flowed 21 MMcfd of gas from the main target zone and 6 MMcfd from a secondary zone with more silt (OGJ, June 11, 2001, p. 9). The well proved reserves of 600 bcf of gas, BP said. BP operates the concession with 60% interest, and RWE-DEA AG owns 40%.

Apache's Egyptian program

In the last few years, Apache has stepped up its budget for exploration and production for onshore and off Egypt, allocating $145 million for 2002. This is an increase over the $140 million spent in 2001. Higher spending years were 1997 and 1998 due to facilities installations in Qarun and construction of the Western Desert gas pipelines at Khalda, said David Allard, Apache Egypt exploration manager.

Houston-based Apache Corp. has found both oil and natural gas on its Khalda concession in Egypt's Western Desert. The company's 2002 drilling program will include 5 exploration and appraisal wells and 23 development wells in Khalda. Photo courtesy of Apache.
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Regarding gas yet to be found in Egypt both onshore and offshore, Allard said that from current known prospect and lead inventory, Apache envisions hundreds of billion cu ft of gas left to be discovered in the Khalda Jurassic play and multitrillions of cubic feet of gas potential in Egypt's deepwater West Mediterranean, where, generally speaking, gas is dry.

"Apache is aggressively exploring in all of its concessions," Allard said. "Apache Egypt now has nearly 10,000 sq km of 3D seismic data, 70% of which has been shot in recent years." Allard added that Apache expects these data to generate prospects into 2004 and beyond in some areas. "We have 3D over the most prospective areas of proven trends, and we plan to drill key wildcats to verify other play concepts that were developed from concession and regional studies," Allard noted.

Based on those studies conducted in the country over the past 6 years, Allard said that exploration success ratios are improving overall. Increased seismic data inventory and the overall technical expertise of the Apache Egypt employees has also attributed to this increase, Allard noted. Apache had an exploration success ratio of 38% during 2000, which increased to an average of 55% in 2001.

The number of wells that Apache has drilled in Egypt has remained steady as well, Allard said, with operating companies drilling an average 40 wildcat wells/year over the past 10 years in that country.

Apache continues to add to its natural gas production, although some finds have come in association with oil discoveries. Last month, Apache started oil and natural gas production from its Ras Kanayes lease, which was brought on production at the rate of 2,130 b/d of crude and condensate and 17.8 MMcfd of gas from the Jurassic Khatatba formation (OGJ, Apr. 8, 2002, p. 8).

And earlier this month, Apache reported reaching TD on its first deep- water well, Abu Sir-1X, or Blue prospect, off Egypt in its West Mediterranean concession area. The company plans to "test several potentially productive pay sands over the next several weeks," it said.

"We are encouraged by the wireline logs but will have no further comment until we have completed testing," said Apache Pres. and CEO G. Steven Farris.

Apache's offshore plans call for the drilling of a second well to test the equivalent of the Abu Sir-1X zones, it said, as well as deeper Miocene objectives.

Operator Apache holds 55% interest in the concession, with RWE-DEA holding 28.333%, and BP 16.667%.

"We have been measured in our evolution to the deep water," Farris said. "Our Mediterranean block, which undoubtedly has the greatest exploration potential in the company's history, was selected over the Gulf of Mexico because its significantly lower drilling and production infrastructure costs better match our portfolioellipse," he added.

Action off Israel

Earlier this month, Noble Energy Inc., Houston (formerly Noble Affiliates Inc.), said it was granted a license from the Israeli government to build an offshore pipeline from the company's Mari-B field to Ashdod. The direct route to Ashdod (see map, OGJ, May 14, 2001, p. 9), Noble said, would allow the company and its partners to supply gas to the Israel Electric Corp. (IEC) power station at Ashdod in the beginning of the fourth quarter of 2003-earlier than previously expected. Initially, the IEC supply contract is for 630 bcf of natural gas over an 11-year period.

Meanwhile, Mari-B field development, Noble reported, is "progressing on schedule." Decks and production facilities are 59% complete and the jacket is 39% complete. This winter, the jacket and decks will be shipped to the site for installation in early 2003. By third quarter of 2003, field development and the connecting pipeline are slated for completion. Once brought on line, the facilities and pipeline will be capable of carrying 600 MMcfd of gas.

Samedan Mediterranean Sea, a unit of Noble Energy, and its partners made the natural gas discovery with Mari B-1 well, drilled in 795 ft of water 15 miles offshore (OGJ, Mar. 20, 2000, p. 32). Mari field, along with Noble's Noa gas field discovered in 1999, contain reserves of more than 1.2 tcf of gas, Noble said.

Noble, through its subsidiary, serves as operator holding 47% interest in the concession, which covers 11 licenses, permits, or leases covering more that 1 million gross undeveloped acres.

BG also plays a significant role in Israel's gas industry. Nir-1, a natural gas discovery drilled on the Med Ashdod license, produced at rates of as much as 15 MMscfd of gas, the company reported.

Meanwhile, deepwater permits for Gal A, B, and C expired Dec. 2, 2000. BG and its partners opted to convert "the most prospective parts of these permits into six new exploration licenses," it said.

Of BG's other licenses off Israel:

  • A development lease was granted for the Or-1 and Or South-1 exploration wells in Med Yavne licence. During 2000, South-1 was successfully appraised by Samedan Mediterranean Sea's Noa South-1 on the neighboring Noa lease.
  • The Med Ashdod license was extended for 2 years from June 15, 2000, following the Nir-1 discovery well.
  • Three licenses-Med Hedera, Med Hasharon, and Med Tel Aviv-were allowed to expire.

For Israel, however, exploiting the full potential of its offshore natural gas will take more than discoveries; it will require the appropriate infrastructure as well, according to Shmuel Even in a strategic assessment written in late 2001 for the Jaffe Center for Strategic Studies, Tel Aviv. "Although Israel's proven gas reserves are presently limited in volume, they are believed to suffice for at least a decade, and both the discoveries to date and geological surveys support the belief that additional Israeli gas depositsellipseawait discovery," Even said.

"Accordingly, it is advisable that Israel develop its existing gas fields, accelerate the establishment of domestic gas-distribution infrastructure to utilize the gas that has been found, and encourage further exploration," Even concluded.

Pipeline schemes

Presently, BG's Fysh noted, there is a need for further development of gas transmission systems in Egypt. "The [Egyptian] government is expanding the national transmission system all the time," Fysh said, adding that debottlenecking work was recently completed just north of Cairo on the pipeline entering Port Said, which "has made a difference," he noted.

The next major natural gas pipeline project, Fysh noted, is planned to extend from the Scarab-Saffron fields to an LNG plant to be built at Damietta, Egypt. The line will have to cross the Nile River at two points, Fysh said, extending across the top of the Nile Delta.

"The existing systems are more or less at capacityellipse," Fysh concluded.

Locally, a unit of Royal Dutch/Shell has grappled with supplying domestic markets with natural gas. EGPC early last year awarded Fayum Gas Co., a unit of Shell Gas BV, a 20-year gas franchise to deliver natural gas to the Fayum Governate, an agricultural region 120 km southwest of Cairo (OGJ Online, Mar. 19, 2001).

Fayum Gas, 96% owned by Shell, will study, design, finance, build, and operate a pipeline and distribution network and will market gas to industrial and residential customers on behalf of EGPC, the company said.

"Fayum Gas is to draw its supplies of natural gas from Egypt's national gas grid at Dhashour, from where the company has built a 16-in. pipeline through the desert to deliver the gas to industrial clients in Kom Ashim, 40 km away in the Fayum Governorate," Shell reported. From Kom Ashim, a second, 12-in. pipeline was planned to extend to Fayum City.

LNG, GTL developments

To date, onshore natural gas facilities in Egypt are handling the country's domestic market, Apache's Allard noted. Given that the reserves discovered off the Nile Delta now total close to 40 tcf of gas, however, Allard said that export plans are now required.

"There are two LNG plants that are planned that are real," Fysh stated. The first, to be built by a unit of Spanish utility Union Fenosa, will be a $1 billion, single-train LNG complex with capacity of 5 million tonnes/year at Damietta in Egypt. Union Fenosa awarded an engineering, procurement, and construction contract for the plant to a joint venture led by Halliburton Co. unit KBR late last year (OGJ Online, Dec. 19, 2001). The plant is "well on the way to being built and is due to come on [stream] in the fourth quarter of 2004," Fysh said. Most of the gas will be used at Union Fenosa power plants in Spain, with additional volumes to be marketed elsewhere in Spain and Europe.

The second LNG plant, due to come on stream in mid-2005, will be built by the BG group. "Those two plants will happen-everything else is a bit of a myth at the moment," Fysh said.

Regarding gas-to-liquids initiatives, Ivanhoe Energy Inc., Bakersfield, Calif., reported continuing negotiations toward a definitive contract to produce GTL products in Egypt. "Ivanhoe has recently elected to review a new plant site location directly on the coast of the Mediterranean Sea, which appears to be in a more favorable location and would contribute to lower construction costs," the company said. The proposed capacity of the plant, Ivanhoe noted, has doubled to 90,000 b/d of GTL products since discussions began.