Will Shell Prove Up NEMED In Egypt

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Will Shell Prove Up NEMED In Egypt? : By Mohammed Jetutu, Cairo, February 2007 www.africaoilgas.com

SHELL FINALLY COMMENCED ITS long awaited exploration and appraisal drilling campaign in deepwater Egypt. In an estimated four month period, the drilliship Transocean Expedition will drill three wells plus another optional hole back-to-back, including one appraisal and three wildcats for gas purpose. “Our ambitions for the gas we discover will be to develop a Liquefied Natural Gas [LNG] facility to export the gas to Europe and North America”, says Zainul Rahim, Chairman of Shell Companies in Egypt and Managing Director of Shell Egypt. He was quoted in a Shell in-house magazine Shell In Egypt. The first two wells are located farthest offshore, in the southwestern part of the company’s North East Mediterranean Deepwater [NEMED] block and the third well will be drilled in the east where water depths are a shallower 1,500 to 1,800 m. The planned total depths are between 4,000 m and 4,500 m. The water depths in the southwest, where Shell is most optimistic, ranges between 2,400 and 2,750 m, setting new deep-water depths for offshore Egypt. The first well will take one month to drill, and will, hopefully be followed by a production test phase. The second well is expected to take 45 days. The third well will take at least two or three months. A global shortage of deepwater drilling rigs has meant the slow down for Shell exploration of its deepwater frontier areas in Egypt. “The last drilling campaign in concession in 2004 resulted in two significant gas discoveries and Shell hopes that the upcoming campaign will enable it to declare commerciality of the concession.

That last drilling campaign encouraged Shell’s Global Exploration Director Matthias Bichsel to say that “this ultra-deepwater area is rich hydrocarbon province.”

The appraisal well will be drilled on the La-52 structure at a location close to the discovery well. The wells will have Tertiary pre-salt and possibly Jurassic objectives.

La-52 is one of two hydrocarbon discoveries made in the 2003/4 campaign. Between

0.8 Tcf and I Tcf of gas have been estimated in the block, according to the company. Shell would need about 3 Tcf to supply its own LNG train. La 52- 1 was completed as a gas discovery, after having reached tota’ depth at 4,565 m in the Tortonian (Miocene). The well is located about 16km north-

northeast of well Kg 49-1, abandoned as a dry hole, in a water depth of 2,485 m. The semisubmersible rig, Stena Tay was used for the last three-well programme. Shell’s first exploration programme in NEMED, activated in 2000/2001, resulted in two dry holes: Shorouk 1 in 2000 and Leil 1 in 2001. To improve its understanding of the block, the company acquired a 6,619 km 2D seismic and 2,370 sq km 3D seismic data The cost of each well in the current drilling effort is estimated at about $50 million. In the event of commercial discoveries, first production is expected for 2012. Shell is also studying various scenarios for development in water depths between 2,000 and 3,000 m. “This will entail sub-sea well heads and a sub-sea pipeline, of around 200 kilometres, from the offshore discoveries tied back to an onshore gas production facility which would hopefully be for LNG, if our discussions with the Egyptian Government are fruitful”, says Rahim.

“I expect that success in our NEMED exploration activities will confirm Shell’s global leadership in deepwater drilling and will also encourage the company to look into more ambitious opportunities in the future to make the best use of discovered hydrocarbons. Shell has recently completed a 5,166 km 2D and 300 sq km 3D seismic programme in the block. Shell holds a 84% interest, with Petronas Carigali Overseas Sdn Bhd having the remaining 16%; state entity EGAS is a co-venturer.

The NEMED block is adjacent to WDDM block where British Gas has obtained a string of successive gas discoveries with a strong success ratio, and Shell argued that the same geology extends into the NEMED block. In 2000-200 1, Shell abandoned its first two wells in the block, one is a dry hole and the second encountered gas shows. The seismic interpretation had given very promising figures and expectations from that area were great. Based on results from 3D seismic surveys conducted in early 2000, the NEMED block had earlier been announced as promising a huge potential, with figures of up to “4 billion of barrels of oil and several Tcf of gas” announced by Shell. However, the company has even revised potential reserves of the block at 15 Tcf gas and 1 billion barrels of oil. Large structures have already been identified in the past by 2D seismic and had later been confirmed by 3D seismic. Shell is committed to spend around US$ 140 million during the initial exploration period of five years.

“When these exploration operations are completed we hope to have significantly grown our resource base and increased our reserves in the country. This will consolidate our position as a main player in Egypt’s energy industry and underline the partnership which Shell is building with the Government to enable Egypt to access many of the yet untapped potential reserves in the hydrocarbon-rich provinces of the Nile Delta and Western Desert.

“Egypt is a very attractive country for many international oil companies and the competition is quite intense. But this competitive environment is in itself a driver for better performance and we seek to improve on our position as a main player in the industry.

“Our main objective, however, is to consolidate our partnership with the Government and ensure Shell’s status as a partner of first choice,” concludes Zainul.