As Egypt has enjoyed the addition of significant gas reserves in the Nile Delta offshore, the long-underrated western desert has come alive with major discoveries of liquid and gaseous hydrocarbons on land.
Apache Corp., Houston, is the largest US investor in Egypt, operating in the vast western desert that stretches to the Libyan border.
The desert encompasses the World War II battlefield of El Alamein. In some areas, before operations can begin the company has to hire mine clearance crews to police unexploded ordnance before acquiring seismic surveys, preparing drill sites, and building roads.
Apache plans to have drilled 116 wells in Egypt during 2004, up from 103 a year ago. Current gross production is 102,000 b/d of oil and condensate and 310 MMcfd of gas.
The company is the largest producer of oil and condensate in the western desert and soon will become the desert's largest gas producer. Overall, more than 100 fields have been discovered in the western desert.
Exploration history
Apache has participated in Egypt since 1994, gaining a significant presence as an operator after a merger with the Phoenix Resource Cos. in 1996.
Major oil companies had for the most part given up on the western desert as having insufficient reserves to warrant exploration activity, but Apache thought the area had potential and soon began building a sizable acreage position. Through the Phoenix merger, Apache gained a contractor interest in the Khalda Concession on the desert's far western fringe. The company bought out Khalda's operator, Spain's Repsol, in 2001, increasing its contractor interest in the concession to 100%, and immediately began to accelerate the pace of operations.
The Qasr giant
Apache made the largest onshore gas discovery in its 50-year history in 2003 at Qasr on the greater Khalda Concession. The company estimates Qasr's reserves to be in excess of 2 tcf of gas and 40-50 million bbl of condensate.
Development of Qasr is under way to fulfill the terms of a 25-year, 300 MMcfd gas sales agreement signed in April 2004 with Egyptian General Petroleum Corp. Volumes presently under contract from Qasr total 2.1 tcf. Contract revenue to Apache and EGPC, net of development and infrastructure costs, will total $5.5 billion.
Early production from Qasr has commenced under the Qasr Gas Sales Agreement. Apache's western desert gas volumes are expected to double upon full development and completion of Qasr gathering and processing facilities. Apache should then be supplying 570 MMcfd of gas to the Egyptian market.
Significant Qasr wells drilled this year include the Qasr-3X, announced in March, which logged 448 ft of net pay in the Jurassic Lower Safa formation. Qasr-5, announced in July, test-flowed at the rate of 53.5 MMcfd of gas and 1,739 b/d of condensate from a 494-ft gross sand column with 484 ft of net pay and a similar gas-water contact seen in the prior three Qasr wells. Qasr-5 extended the field to the southwest.
Apache announced in September that its Qasr-6 well tested at the rate of 28.8 MMcfd of gas and 1,037 b/d of condensate from two zones in the Lower Safa. Qasr-6 is 4.4 miles west of the Qasr-1X discovery well.
Also in September, the company announced the Qasr-9 well logged 61 net ft of pay in the Early Cretaceous Alam El Bueib 3E sand with excellent sandstone quality and pressures. The well is currently producing at the rate of 3,000 b/d of oil.
Adjacent gas giant
While Qasr is Apache's hottest play onshore, in the deepwater portion of the company's West Mediterranean Concession the company is developing the largest offshore discovery in its history.
Apache made the discovery in May 2002 with its Abu Sir 1-X well. Three more consecutive discoveries and a successful appraisal well followed in what was Apache's first deepwater venture.
Reserves in that part of the concession are estimated to be 1-3 tcf of gas and 20-70 million bbl of condensate. Apache operates the concession and has a 55% contractor interest in the deepwater portion.
Apache signed a memorandum of understanding with EGPC and the Egyptian Gas Holding Co. in December 2003 for a gas sales agreement, field development plan, and deepwater development lease covering a minimum of 2.7 tcf of gas over 25 years. Total revenue to all parties under the agreement, net of estimated infrastructure and development costs, is $6 billion. Production is expected to start in 2007.
Once all agreements are in place, all of Apache's deepwater West Mediterranean gas will have been contracted. Terms call for supplying approximately 400 MMcfd to the Egyptian market for the first five years and 375 MMcfd for the rest of the term.
More desert growth
Apache won four more western desert blocks in the November 2003 EGPC bid round. These are North Tarek, West Kanayes, West Kalabasha, and Shushan A, B, and C, all exploration blocks in the general Khalda area.
Apache expects to start exploring the blocks in early 2005 after the Egyptian parliament holds its next session and approves the company as the operator. The company also farmed in Shell's interest in the Matruh Onshore/Offshore Concession and became operator. Exploration there is under way.
In all, Apache operates or has interests in 14 western desert concessions comprising almost 14.4 million gross acres excluding the four blocks awarded in late 2003. In late June, Apache announced a new field discovery on its greater Khalda Concession with the Ozoris-4 well. It tested at a rate of 29.4 MMcfd of gas and 1,775 b/d of condensate from two zones. The well encountered a 90-ft gross sand column with 67 net ft of pay in the Jurassic Upper Safa formation.
Ozoris encountered the first productive Upper Safa sand on the west side of the Khalda ridge. The well also found 171 net ft of oil and gas-condensate pay uphole in the Cretaceous Kharita and AEB sands. It also penetrated 100 ft of poorly developed Lower Safa reservoir, confirming the seismically defined northeastern limits of Qasr field.
Apache announced two more western desert discoveries in August. Mihos-1X, on the Matruh Concession, which Apache operates with a 100% contractor interest, logged 191 net ft of pay in the Cretaceous AEB 6 and Jurassic Upper and Lower Safa horizons. It tested at a rate of 41.8 MMcfd of gas and 1,419 b/d of condensate.
The Mihos discovery proved up a 1,500-acre trap in the Lower Safa reservoir with a gross hydrocarbon column height in excess of 250 ft. The well was tied into Apache's Matruh manifold, which runs directly to the company's Tarek gas plant 7.5 miles to the east. The well brings Tarek to its capacity of 100 MMcfd.
The Imhotep-1X discovery on the Khalda Offset Concession test-flowed 28.4 MMcfd of gas and 911 b/d of condensate after frac. The well tested two sands in the Jurassic-age Lower Safa and logged 76 ft of net pay. Another 22 ft of possible Upper and Lower Safa pay were calculated in the well.
All told, the Khalda complex has two dozen oil and gas fields producing from 58 sandstone reservoir units in seven formations at 5,300-15,900 ft.