Is Egypt a regional gas hub in the making?

Is Egypt a regional gas hub in the making?

The Zohr Field – a Game Changer

On 20 December 2017, first commercial gas was achieved from the super-giant Zohr Field, located in the Egyptian Mediterranean deepwater (WD ~1,500m). From drilling to production took just 28 months; a record time for a deepwater project. The discovery and subsequent fast-tracking of Zohr, which is located 190km offshore and over 100km away from the nearest gas pipeline, has been heralded as a game-changer for Egypt. Since the late-2000s, a lack of investment, coupled with a growing population (2% average annual growth since 2010) had swung domestic energy supply and demand into the red. The political upheavals between 2011-13 only added to the problem, with the gas supply/demand slipping into the red in 2014. A 7% growth in consumption was coupled with a 5.7% fall in production 2015. The Government finally admitted defeat and started LNG imports in 2015. All this came less than 10 years after the launch of the two LNG export terminals at Idku and Damietta in 2005.

Then the discovery of Zohr was made. On 1 September 2015, operator Eni announced that the Zohr 1X NFW (TD 4,131m) had encountered a 430m net gas pay, in what was subsequently revealed to be a Cretaceous-Miocene carbonate build-up. The play-opening 30 Tcf GIIP discovery set in motion a scrabble amongst petroleum geoscientists to re-assess current thinking about the evolution of the Eastern Mediterranean region, and to see whether any more “Zohr-like” discoveries could be found.

Figure 1: Zohr Field

Figure 1: Zohr Field

But is that the long and short of the story? Just a stroke of luck (and some very enterprising people from Eni), resolving Egypt’s gas crisis? No, of course not. When peak output is achieved (expected in 2019) Zohr is planned to produce 2.6 Bcfg/d. But it alone will not suffice to move Egypt into a significant gas surplus, with in-country demand continuing to increase. It is the push from the current Sisi-led administration to accelerate (alongside Zohr) other recent, old and stalled projects. Couple this with the investment might of the oil majors, the shortfall could be relieved, and in the process convert Egypt into a gas-exporting country. Some of these other major projects that are and could contribute, are detailed below.

Figure 2: Egypt gas balance 2006 - 2016

Figure 2: Egypt gas balance 2006 – 2016

Deepwater Nile Delta Clastic Plays Continue to Prove Their Worth
In the Mediterranean, BP and DEA are working on Phase two of their West Nile Delta (WND) project. Phase one was brought onstream in March 2017, eight months ahead of schedule and just two years after development approval. It is currently producing 700 MMcfg/d and 1,000 bc/d. When Phase two is completed (by 2019) peak output from WND is expected to reach 1.5 Bcfg/d. The project has 5 Tcfg and 55 MMbc of untapped resource. The project is a long time in the making however; the discoveries were made in the early-2000s.

In contrast, in February 2018, BP also completed Phase one of its fast-tracked Atoll development, seven months ahead of schedule. The field was discovered in May 2015. Over 350 MMcfg/d and 10,000 bc/d are currently being produced, with an estimated in-place resource of 1.5 Tcfg and 31 MMbc.

Eni’s Nearshore Discovery Coming in Under the Radar
Whilst the oil industry has been waxing lyrical about Zohr, another record-breaking field was tied-in by Eni (in partnership with BP). In September 2015, the same month the Zohr discovery was announced, the nearshore Nooros Field was brought onstream. Discovery to first gas had taken just two months. Nooros lies to the north of, and on trend with, the giant Abu Madi Field. It was discovered by the Nidoco North West 2 NFW (TD 4,106m) in the Messinian Abu Madi sandstones. The field is now producing over 1.1 Bcfg/d, with 14 deviated wells drilled from just two onshore locations. Estimated in-place resources are 2 Tcfg.

Mediterranean discoveries slow down in 2016-17
In mid-2016, a further Abu Madi wet gas discovery (Baltim South West) was made by the same Eni/BP partnership, this time outboard of Nooros. Baltim South West, together with the nearby undeveloped 1995 Baltim South discovery, is estimated to hold a combined 1 Tcfg in-place. Neither are developed to-date. Baltim South West was the only confirmed Mediterranean discovery of 2016. The same story continued in 2017, with BP’s Pliocene Qattameya Shallow 1 gas discovery (TD 1,961m) being the sole success, aside from Abu Qir Petroleum finding a new producing horizon on its Abu Qir North Field.

The Western Desert contributes
Like the Mediterranean, the Western Desert continues to surprise. In the Abu Gharadig Basin, Shell and Apache’s 2015-16 tight gas pilot project has proven up an under-explored play in the Eocene Apollonia carbonate. Estimated in-place resources have been cited at ~440 Bcfg. On the adjacent concession, Shell also made a ~500 Bcfg discovery in the Cretaceous Kharita Formation in 2016, with the deep (TD 5,966m) BTE 2 NFW. Further west, Apache and Eni could also be eyeing up exploration of the deeper Jurassic and Palaeozoic.

Gas hub at the ready?
At first glance, all evidence seems to point towards Egypt becoming a regional gas hub in the near-term future. The recent (February 2018) announcement of a gas sales contract between Noble Energy and private-firm Dolphinus Holdings Ltd, to export Israeli gas from the Leviathan (22 Tcf) and Tamar (7 Tcf) fields into Egypt, confirmed an agreement that had already been signed in early 2015. The proposed Eastern Mediterranean gas pipeline project is continuing to progress, with ongoing discussions and agreements between Egypt, Israel, Cyprus and Greece. The two moth-balled LNG export terminals on the Mediterranean coast (Damietta and Idku), could serve as a staging-post for Egyptian-Cypriot-Israeli gas exports to Europe. This scenario assumes that sufficient gas has been found, or will be found, to make the project viable. Egypt’s gas deficit is indeed decreasing, as more projects are brought onstream and ramped up. But the country’s demand for gas is also increasing.

In addition, EGAS has not held licensing rounds since 2015, which could result in a drop-off in the size and number, of significant gas discoveries in the near-future. Add in the political squabbling, particularly in relation to Turkey flexing its muscles over the status of the waters around Cyprus, then the simple “gas hub-export to Europe” plan doesn’t seem as clear-cut.

The energy geopolitics of the Eastern Mediterranean have heated up over the past few years, with the temperature set to continue to rise. Egypt’s dream of becoming a gas hub is well within its grasp, but is dependent on the regional political dynamics; this may prove more complex than finding the gas in the first place.

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