Egypt - Eastern Desert Operations.

Oil producers in the Eastern Desert include Egyptian Petroleum Development Co. (Epedeco), a JV of EGPC and Teikoku Oil of Japan.

Epedeco's output from the onshore West Bakr field averages about 4,500 b/d, down from 5,500 b/d in early 2004.

General Petroleum Co. (GPC), an operating arm of EGPC, was created in 1956 by the state to take over from the then sole concessionaire, Anglo-Egyptian (Shell/BP), whose onshore assets were nationalised in 1964. GPC's fields are onshore on the west coast of the GoS and some are deep within the Eastern Desert. Nearly all were found by Anglo-Egyptian. They include Ras Gharib (the oldest field in Egypt, found in 1938), Sudr (1946), Asal (1947), Matarma (1948), Karim (1958), Bakr (1978) and Ras al-Bihar (1983). They produce 22,000 b/d of 25[degrees] oil, down from 33,000 b/d in late 2003 and 27,000 b/d in late 1995.

GPC has contracted Scimitar of Canada to develop Issaran, a group of fields containing 500m bls of 10.5-18[degrees] API oils found in 1981 some 4 km west of the GoS and 140 km south of Suez. Issaran lies in the GoS Rift Basin in three fractured carbonate layers of the Miocene, the deepest being 760 metres. Many wells have been drilled and the field is said to have the potential to eventually produce 20,000 b/d. Scimitar's role eventually was taken up by Calgary-based Rally Energy Corp of Canada, which in September 2007 was bought by Citadel Capital of Egypt for C$877m (US$868m). Rally Energy is producing 6,500 b/d of heavy crude oil from the Issaran fields.

Citadel Capital, a private equity firm with investments in energy and cement in Egypt and elsewhere, is having US$2.4 bn oil refinery built just north of Cairo with a capacity of 5m t/y of fuels (see down2EgyptRefJan7-08). Citadel controls National Petroleum Co. (NPC), set up in mid-2006 with a capital of US$300m, and has six oil concessions in Egypt producing around 3,000 b/d.

`Rally Energy in April 2007 found a dual zone of heavy oil on a separate structure with the drilling of its West Issaran-1 exploratory well, about 3 km from the existing main Issaran field. Petrophysical analysis of the Upper Dolomite Fm indicated the presence of another reservoir which can be developed by thermal recovery methods. The Lower Dolomite Fm was significantly fractured providing the potential for this zone to produce conventionally. The Lower Dolomite was completed and tested and Rally put it on stream in late April 2007 at 150 b/d.

Rally continued to develop the find through a drilling programme of offset Lower Dolomite development wells, combined with two delineation wells to evaluate the aerial extent of the Upper and Lower Dolomite accumulations and the ultimate reserves potential from thermal and conventional methods. In May Rally gave a two-year contract for a second rig to the Egyptian Drilling Co. starting in October. This was dedicated to drilling thermal CSS wells. It then planned 12 additional wells for a total of 16 CSS wells in 2007. Proposals for the rig, to be available in February 2008, have been received from two drilling firms.

The wells began with cold production at an average of 30 b/d each. These were encouraging results as Rally planned a major increase in production after completion of the first steam injection cycle in the four wells. The contract for six steam generators was given to a US manufacturer, with delivery of the first two in December 2007 and January 2008 and one additional generator thereafter in each quarter of 2008. Construction began for a second 2,500 b/d Central Processing Facility (CPF) in the southern portion of the Issaran fields to accommodate production from CSS wells.

Rally expected the CPF and expanded production facilities to be operational in late 2007. However, Rally's increasing use of gas in its operations is raising its costs as Egas has doubled its price of gas supplied to some industries including the petroleum sector (see down1EyptEnrBaseJan1-08).

Wadi el-Sahl Petroleum Co., a JV of EGPC and US firms Seagull Energy Corp. and Apache Corp, produces oil in the onshore South Hurghada block, where output has averaged 20,000 b/d since 2006. Its first find, Wadi el-Sahl, was put on stream in June 1997 at 1,500 b/d.

In its Beni Suef block, south of Cairo, Seagull later found the Beni Suef field and in early 1998 brought it on stream at 7,000 b/d of 42[degrees] oil from a single well. Another Beni Suef find in April 1998 flowed at 9,200 b/d of light oil.

Upper Egypt Operations: An increasing number of E&P blocks in Upper Egypt, since the 1990s a virgin area for petroleum explorers, have been awarded by the state-owned Ganoub al-Wadi Holding Petroleum Co. (Ganope).

Dana Gas, based in Sharjah which is the Middle East's first privately-owned and integrated gas firm, has recently made two oil finds in the Kom-Ombo block in the Aswan region. Al-Baraka well has produced the first oil ever deep in Upper Egypt. Four months from discovery, the first crude shipment was delivered on Dec. 27, 2007, to Asyut refinery, 320 km away. The crude can be transported by rail or Nile river barges.

Testing of the Early Cretaceous Abu Ballas Fm produced 150 b/d of 37[degrees] API oil - with a wax content similar to the crude produced and exported in large quantities in Sudan - from a 39 ft perforated interval. The well, drilled to 8,712 ft, penetrated several oil-bearing zones. It tested different volumes of oil from three additional intervals in the deeper Early Cretaceous section. The find held speed up economic development in Upper Egypt, which is outside of the country's traditional producing areas. Now the field produces 6,000 b/d. The bigger find was hailed by Petroleum Minister Fahmi who visited the site and named the field al-Baraka. He was accompanied by Aswan Gov. Gen. Samir Yousif, Ganope Chairman Hassan Aql, and Dana Gas Egypt Country Director Dr Hany el-Sharqawi. Dana Gas has operations in the GoS (see OMT 2), Upper Egypt, the Nile Delta and other parts of Egypt. This is a rapidly expanding company, having bought Centurion Energy of Canada in early 2007 for about $1 bn, including its assets in Egypt (see below).

Dana Gas in April 2007 signed a 50% farm out deal with Kuwait Int'l Oil & Environment Co. (KIOEC), a unit of Taqat Holding and Gulf Oil Investments in the 23,000 sq km Kom-Ombo block, about 800 km south of Cairo. Dana Gas remains the operator. Technical evaluation of the concession by then included interpretation of geological/geophysical data and acquisition of 516 km of 2-D seismic, resulting in location of drillable prospects and four addition leads.

The Kom-Ombo Basin is a lightly explored frontier area with only three wells drilled by then. However, drilling results had proven a working hydrocarbon system with significant exploration potential. Dana Gas' acquisition of Centurion Energy made it one of the major producers of oil and gas in Egypt.

West Esh el-Mallala (WEEM) Block (1,328 sq km) is operated by Aminex Egypt. This and its partner in the area, Groundstar of Canada, in late 2007 contracted a new drilling rig for 18 months on a call-out basis to drill from in mid-January 2008. Two seismically defined prospects in the southern part of the block are to be drilled.

The nearby West Kom-Ombo (WKO) Block (42,291 sq km) is operated by Groundstar. Technical work completed by then included the re-processing of 835 km of 2D seismic acquired by Repsol in 1997. A preliminary interpretation of this data shows the presence of several very large Cretaceous structures. A new 2D seismic programme was laid out over five high potential structures and field work was to begin in early 2008. Significant oil shows were reported at the Repsol KO-1 well from a sandstone reservoir below 8,000 ft. WKO Block is in the under-explored Nubian Desert in Upper Egypt, and consists of the entire remaining acreage from the Kom Ombo-Kharit Basin.

Qarun Petroleum Co. is a JV of EGPC (50%), operator Apache (37.5% bought in 1996 from Phoenix) and Seagull Energy (12.5% bought from Global Natural Resources). The JV, set up in August 1995, has developed the Qarun field in Upper Egypt to a capacity of more than 60,000 b/d of light oil. But its output has since the late 1990s fallen to 30,000 b/d.

Qarun field, found in 1994, and its extensions lie in Central Egypt on the edge of the Western Desert near a point where the Sumed crude oil pipeline passes towards the Mediterranean terminal of Sidi Kerir. Seagull, operator in the East Beni Suef block just south of Qarun, has found a field there (see OMT).

The Western Desert Oil Fields & Operators: The Western Desert (WD), a gas-rich area of about 450,000 sq km, has become the second biggest oil producing part of Egypt next to the GoS. WD's crude oil and condensate output in 2003 rose to about 281,500 b/d, from 210,000 b/d in early 2000 and 117,500 b/d in late 1995.

Liquids production has since fallen to 160,000 b/d. But this will rise to 200,000 b/d in 2008. The WD's proven gas reserves account for 24% of Egypt's 72.3 TCF total. The main gas operators in the WD are Shell (Bapetco), Apache (Khalda Petroleum Co, which is the largest oil producer in the WD) and BP (GUPCO).

Khalda Petroleum Co. (KPC), a JV of EGPC (50%) and Apache Corp. of Texas (50%), produces 50,000 b/d of 35-46[degrees]API oils (up from 30,000 b/d in early 1998) and 18,000 b/d of condensates as well as more than 350 MCF/d of gas (up from 200 MCF/d in early 2004). KPC's fields were expanded in early 2000 under a plan which included drilling of 36 wells and completion of 30 others. Its fields include Khalda (found in 1982 at 2,570 ft), Salam (1984, with extensions found in 1994/95), Hayat, Safir and Tut (1986), West Tut (1988), Yasser, Aoun and Tareq (1987/88), Kahraman (1991), Shuruq and Shuruq East. Apache, which bought the 20% of Phoenix of the US and raised its KPC equity in February 2001 when it bought almost all of Repsol/YPF's Egypt assets including its 25% in Khalda, has several other fields found by Repsol. They are all tied to the Salam production system linked to the Meleiha-el-Hamra export pipeline. Apache also operates the Umbaraka and South Umbaraka fields, among other assets in the WD (see Wepco below).

Qasr, Apache's biggest oil and gas find, lies in the Khalda region in the north-west of the WD, where the US firm made a number of gas discoveries. Most of the gas/condensate finds have flowed from Ras Qattara and Khatatba Fms. Khalda - including the 8 TCF Qasr - has important oilfields which, together with fields in other blocks, have made Apache the biggest oil producer in the WD (see Egypt's geological profile in gmt1EgyptGeoJan1-08). Apache's oil and condensate output in the KPC area and elsewhere in Egypt this year is to exceed 95,000 b/d. Its output of natural gas in Egypt has risen to 550 MCF/d. These are thanks many oil and gas finds it has made in the past two years, following a pattern established since the 1990s (see its E&P background in gmt2EgyptFieldsJan9-06).

Apache is building two additional trains at KPC's Salam gas processing centre to raise capacity by 200 MCF/d of gas and 48,000 b/d of condensate. The expansion will bring the centre's total capacity to 750 MCF/d of gas and 66,000 b/d of condensate by end-2008.

Apache in March 2007 found gas on the Matruh block in the WD, where Jade-1X well tested 25.6 MCF/d from the Jurassic Upper Safa member of the Khatatba Fm. Jade-1X extended the productive limits of the Jurassic gas fairway "almost 12 miles south-west of existing Jurassic production". It pointed to a big reserve potential in "multiple Alam el-Bueib (AEB) reservoir objectives". Apache later drilled five Jurassic and two AEB wells on the block, where it holds a 100% contractor interest. Jade-1X logged 66 ft of net Safa pay. It also logged 217 ft of pay in the AEB 3D, 3G and 6 sands. The AEB is a prolific producer throughout the 3.8m-acre Greater Khalda complex, which includes Matruh.

Apache later moved the rig about 3.6 km north of Jade-1X to appraise the AEB at Jade-4, which in late November tested 23.8 MCF/d of gas and 2,107 b/d of condensate from the AEB Fm. Jade-4 logged 234 ft of net pay. Apache CEO G. Steven Farris on Dec. 3 was quoted as saying: "After drilling three wells in the Jade field along the Matruh Ridge, Apache has successful tests in four discrete reservoir intervals. We are planning appraisal and development drilling, and we expect to drill additional exploration prospects along the Jade trend during 2008".

Jade-2X was producing gas and condensate after testing over 20 MCF/d of gas from each of two AEB sands, and the Jade-4 was being completed as a gas and condensate producer. In addition, oil pay was identified in another AEB sand behind casing in the Jade-1X and Jade-4. Farris said: "The Jade discovery was one of several higher-risk, higher-reward exploration prospects we have developed across the 37 million acres we have assembled in our core growth regions of Australia, Canada and Egypt. This field and other recent discoveries will enable Apache to deliver strong growth through the end of the decade".

In April 2007, Apache's Zaina-2 well tested 1,067 b/d of oil from 12 ft of oil pay in the Abu Roash G-10 sand. This is in the East Bahariya block, which Apache operates with a 100% contractor interest. The field discovery well, Zaina-1, tested 1,165 b/d of oil in July 2005 from 55 ft of oil pay in the Upper Bahariya sand. The Abu Roash G-10 sand is a new producing zone in the field. The Abu Roash G-10 and G-20 sands, with 39 ft of oil pay, were behind-pipe recompletion targets for Zaina-1, which then was producing 560 b/d. Apache acquired a 50% contractor interest in East Bahariya in 1997, and became operator with 100% in 2001. Earlier that year, Apache and Repsol made the first find on the block, the Karama-1X. The block by April 2007 had produced 21m barrels of oil since Apache began operations, with output flowing at 18,500 b/d. Apache was to drill 39 development wells there before end-2007.

Agiba Petroleum Co. (Agypetco), a JV of EGPC (50%), Agip's IEOC (28%), LUKoil (12%) and the World Bank's IFC (10%), produces about 30,000 b/d of crude oils from its Meleiha and West Razzaq blocks, compared to 50,000 b/d in late 2003, 49,200 b/d from mid-1998 to mid-1999, and 30,000 b/d in late 1995. (See IEOC's Petrobel operations in OMT). Output comes from its Meleiha fields (found in 1972 with 31.6[degrees] API oil), Ighar (1987), Falak (1988), West Razzaq (1994) and others.

Agiba's exploration well on the Meleiha Block in September 2007 tested 1,000 b/d of crude oil from the Gawaher Fm. Developed immediately, the field came on stream by late September at 1,500 b/d. The EPSA on Meleiha block came into force in August 1978. Its extension to 2024 was ratified by the Cairo parliament and came into effect in April 2007. By then over 17m tons of oil had been produced on the block (see background of this JV in gmt2EgyptFieldsJan9-06).

GUPCO (EGPC/BP), the main oil producer in the GoS (see OMT), has four fields in the WD: Abu al-Gharadiq (1982), Razzaq (1972), WD-33-15 (1972) and WD-99 (1975). They produce about 12,000 b/d of 35-55[degrees] oils, down from 20,000 b/d in late 2003, and more than 22,000 b/d in late 1995.

In 1986 Amoco (acquired by BP in 1999) completed development of its small North and North-East Abu al-Gharadiq structures, including a gas production stream, which later helped maintain total oil output at 20,000 b/d. But reservoir pressure fell in the subsequent years. The crude is sent in a two-phase stream to the Abu al-Gharadiq oil processing plant.

Abu al-Gharadiq of GUPCO, found onshore in 1972 by Amoco, is a large gas producing field in the WD. It also produces oil. The field has two gas processing plants with a total capacity of 7.2 MCM/d. GUPCO says the Abu al-Gharadiq Basin might contain 45 TCF of gas, including 25 TCF in the Cretaceous. Another GUPCO study suggests that the Matruh, Alamein and Faghur regions, north of Abu al-Gharadiq, could have potential reserves of 90 TCF.

Badreddin Petroleum Co. (Bapetco), EGPC/Shell, produces 12,000 b/d of 38[degrees] oil (14,000 b/d in early 2000 & 22,000 b/d in 1995), from Badreddin (1982), BED-2 (1988) and other fields. Shell also produces 15,000 b/d of condensates from these fields.

Bapetco's gas production system is a 50-50 JV of Egas and Shell. Its first Badreddin field, BED-1 found onshore in 1982, is an oil producer. Two gas-rich fields, BED-2 and BED-3, were found in 1987/88. BED-3 went on stream in mid-1990 at the rate of 100 MCF/d and cost over $370m to develop - including a gas processing plant and a pipeline. Its output rose to more than 125 MCF/d and 12,000 b/d of condensate by end-1990, reaching a 165 MCF/d target in mid-1992. BED-2 went on stream in mid-1992. Shell developed Sitra (1987) and other Sitra units (1992/93) and brought them on stream in June 1993. The output from all these fields rose to 350 MCF/d. Bapetco's proven reserves in that area are more than 150m barrels of oil and 2 TCF of gas. The 660 BCF BED-2 lies in Upper Cenomanian sandstone at depths below 2,200 m. The 1 TCF BED-3 is 20 km east/SE of BED-2.

In 1988, Shell had a major gas discovery in the north between the Qattara Depression and Lake Qarun. Since then it has linked its gas to the national distribution grid. The gas is sold under a ToP contract with Egas. Most of the gas is pumped through a 270-km pipeline to the Ameriya petrochemicals complex west of Alexandria.

Obayed, one of Shell's giants found in 1992 on Bapetco's Obayed block, went on stream in 1999 with a capacity of 300 MCF/d and 40,000 b/d of condensates. Since then Shell's condensate production capacity has risen to 54,000 b/d. Obayed is 10 km west of Marsa Matruh and along the Mediterranean coast. Its recoverable reserve was put at 1.4 TCF. EGPC officials said it could be as large as 9 TCF, thanks to further finds in that area made by Shell since late 1992. The field lies in Jurassic Ras Qattara and Khatatba sands, gas-rich Fms which have aroused the interest of all WD operators.

The gas is supplied to the national grid, under a 25-year ToP contract signed in 1996, through a 34-inch, 315 km pipeline built to Ameriya, near Alexandria. This pipeline is shared by Khalda (KPC) but run by Shell. The system includes a 12-inch, 55-km condensates pipeline from Obayed to Meleiha, loading and reception terminals, and crude oil and condensate storage facilities and pumping stations at Meleiha. Shell has spent over $660m in developing Obayed. This included 21 wells, a gathering network and various facilities.

Work began in April 2005 at the UK office of Kellogg Brown & Root (KBR) of the US for the expansion of the Obayed gas plant. This has involved three main elements: modifications to the existing gas plant which raised gas and condensate recoveries - including a tie-in with Apache's Qasr field (see above; debottlenecking of the gas plant, which raised gas production to 420 MCF/d; and a gas pre-compression system sustaining production. The facilities were completed in 2007.

In Bapetco's Matruh block, adjacent to Obayed, Shell had found a large gas field in September 1991. The first well tested 22 MCF/d of gas and 2,200 b/d of condensate at a depth of 4,970m. Further finds there were relatively small but the whole area seemed promising to Shell. As a result, Shell has since got more blocks in the WD, including one close to Matruh and two further south, which are not far from its pipeline (see the background in gmt2EgyptFieldsJan9-06).

Shell got the North East Mediterranean Deep-Water (NEMED) block in water depths of up to 3,000 metres. Code-named "Project Wonder", this is the deepest area to be drilled in Egypt's offshore and the block - 41,500 sq km - is about half the size of the entire Gulf of Mexico deep-water. In 1999 Shell began an exploration programme on the block - with over $150m spent in the initial five years, $50m set for a four-year Phase 2, and $40m set for a three-year Phase 3 - for a total of 10 wells to be drilled. The target is the Cretaceous and Jurassic and Shell was said to expect NEMED to have recoverable reserves of 10-15 TCF of gas, and 1-4 bn bls of liquids. This will be the source of a GTL/LNG export venture which, together with field development costs, would require over $15 bn. In November 2000 Shell and EGPC (now Egas) signed a protocol for the venture, to produce 75,000 b/d of GTLs (gasoil, kerosine, jet fuel and naphtha) based on Shell's MDS process, and one LNG train. Shell has 63% in NEMED, with 25% held by ExxonMobil, and 12% held by Petronas which came into this venture in November 2001. In April 2007, it was reported that Shell held 84% in NEMED and Petronas had the remaining 16%, with ExxonMobil not mentioned.

On May 28, 2007, ONGC Videsh (OVL) was reported to be negotiating to join the NEMED venture for $160m and to bring the planned LNG India. An OVL executive was then quoted as saying: "We are not paying Shell for buying the [major's] stake [in NEMED] but have agreed to pay for its share of exploration cost in 2007 of $140m and a maximum of $40m for future cost beyond 2007". The executive said OVL was not to contribute towards the past costs of $300m incurred by Shell until Oct.1, 2006.

Western Desert Petroleum (WEPCO), EGPC/Apache (50% acquired in early 2001 from Repsol which had bought this equity from Phillips of the US in 1998), was the first in the region to find oil at Alamein in 1966 and gas at Abu Qir. WEPCO produces 44[degrees] oil from Alamein, Yidma (1972), Umbaraka (1976) and the latter's extensions. But its output has declined to less than 1,500 b/d, from 5,000 b/d in early 1998 and 6,000 b/d in 1995.

ND-related offshore fields at Abu Qir and Naf, near Alexandria, can produce 480 MCF/d of gas and over 315 t/d of LPG. Their capacity was expanded in 1998. Their proven reserves were then estimated at 1.1 TCF. Abu Qir block is held by WEPCO. Abu Qir was the first gas field to be discovered in Egypt in 1965. The field's output began to decline in 1993 from 170 MCF/d.

In 1989, Apache found the offshore West Abu Qir, off Alexandria. The well tested and 1,500 b/d of 41[degrees] oil, 300 b/d of condensate and 12.5 MCF/d of gas from an Abu Madi Fm. North Abu Qir was found in 1990. North Abu Qir went on stream in 1992 at 60 MCF/d, later rising to 140 MCF/d, and had a proven reserve of 800 BCF. West Abu Qir went on stream in March 1994. Naf was found in 1998. Further exploration and development work at the fields are underway, with small gas discoveries made in recent years developed and linked to the system.

KPC's gas production system is a JV held 50% by Egas and 50% by Apache. The Khalda block lies to the south of Obayed. KPC has important gas fields there which went on stream in September 1999. The main field, Qasr, is tied to the Obayed gas processing plant (see above). This and other gas fields will eventually enable KPC to produce 770 MCF/d.

The gas and associated gas produced from its oilfields - Khalda, Salam, Salam S-E, Tareq, Hayat, Safir, Tut, Yasser, Shuruq, Shuruq East and others, as well as Ras Kanayes, Umbaraka and South Umbaraka which are in three different blocks - were discovered in the past 14 years. They include one KPC field found in late 1994 in the Jurassic Ras Qattara sandstone and Khatatba sands similar to Shell's Obayed Fm to the north. Khalda is south of Marsa Matruh.

Like its predecessor Repsol, Apache has tested many Jurassic Fms. Since 1994, Repsol had made impressive finds. Most important were the ones found in 1996-1998. Their development had cost the Spanish major and its partners about $435m (gmt2EgyptFieldsJan9-06).