TAG Oil Ltd. received approval to enter into a petroleum services agreement (PSA) by the Egyptian National Petroleum for Exploration and Development Co. (ENPEDCO) for development of the unconventional Abu Roash F (ARF) reservoir within the Southeast Ras Qattara (SERQ) concession in Egypt’s Western Desert.
The SERQ concession spans about 2,000 sq km (512,000 acres) and benefits from extensive existing subsurface data, including full 3D seismic coverage and several existing wellbores. The area produces conventional oil from deeper formations that intersect the ARF reservoir. Conventional production will remain and continue to be developed by ENPEDCO. TAG Oil will have access to several shut-in wells within the concession offering low-cost re-entry opportunities to evaluate the ARF’s unconventional potential.
TAG Oil has completed detailed technical studies of the ARF reservoir, identifying it as a low-permeability carbonate formation with substantial development potential. The company believes the reservoir holds a high likelihood of commercial success using proven horizontal drilling and hydraulic fracturing technologies, methods that have already demonstrated positive results in TAG Oil’s Badr Oil Field (BED-1) concession in Egypt, as well as in comparable plays such as Canada’s Montney formation and the Eagle Ford shale in the US.
To further confirm its development strategy and quantify the ARF’s resource potential at the SERQ Concession, TAG Oil has completed an independent evaluation of the reservoir. Results are expected to be released next month.
TAG Oil’s proposed development of the ARF will advance in two phases. Phase 1 has a firm commitment evaluation period of 2 years and will include re-entry of one or more existing vertical wells to perform diagnostic fracture injection testing (DFIT) of the ARF and drilling a new vertical well or sidetracking an existing well (vertical or horizontal) followed by potential hydraulic fracture stimulation of the ARF.
Phase 2 is an optional development based upon production results and cost analysis of Phase 1. If successful, TAG Oil will have the option to proceed with full-scale commercial development of the ARF reservoir under acceptable economic terms to be agreed by both parties.
The PSA will become effective upon execution of the definitive agreement and the posting of a $100,000 performance letter of guarantee.
