Apache investing $1.4bn in Western Desert concession area: Khalda president

By Mohamed Adel

Egypt currently faces a crisis in the production of oil and gas and is unable to repay foreign companies operating in the oil sector. In light of these circumstances, Daily News Egypt spoke to Taher Abd Al-Rehim, president of Khalda Petroleum, the joint venture between Egyptian General Petroleum Company (EGPC) and the US company Apache, to discuss the company’s plans.

First, how much investment is being targeted for the coming fiscal year?

Apache, the foreign partner, is targeting approximately $1.4bn in investment in their fiscal plan for next year in order to carry out development and exploration in the concession areas of the Western Desert.

The total investments of the company for the current fiscal year is $1.2bn. Dues owed to Apache by the government did not cause them to reduce their plan of investment for the coming fiscal year – in fact, it actually increased.

How many exploratory and developmental wells are planned to be drilled in the next fiscal year?

The company will be drilling 40 exploratory wells and 100 developmental wells, as well as 25 water injection wells to compensate for the natural decreases in rates of production in the fields, and to increase these rates as well.

The current fiscal year’s plan aims to drill 149 wells, with the cost of drilling a single well from 5m to 7m dollars.

How many rigs are currently being operated in Khalda’s concession areas? What is the cost of renting the rigs per day?

We have 35 rigs operating in the company’s concession areas in the Western Desert, which is equivalent to 50% of the existent rigs in the Egyptian market.

The rigs are divided into 20 for drilling wells, and 15 for development, and are being rented from SinoTharwa Drilling Company and Egyptian Drilling Company (EDC).

The value of renting the rig is $20,000 per day, as well $9,000 per day for other equipment.

What is the company’s plan to increase the rates of production of oil and gas from the Western Desert?

Khalda is aiming to increase rates of oil production to 148,000 barrels per day, as compared to the current rate of 140,000 barrels.

As for gas, we are considered one of the major gas-producing companies, and we aim to increase our rates to 950m cubic feet daily from the current rate of 910m.

Khalda is distinguished by its ability to link the wells it drills to production within three weeks of their completion.

Egypt’s total oil production is approximately 680,000 barrels of crude. The Western Desert contains 55% of the production. Gas production stands at 4.9bn cubic feet per day.

To what extent has Apache, represented by Khalda, been searching for shale gas in its concession areas of the Western Desert?

The Northeast Amun Well 3 was completed and the primary results proved the existence of large quantities of shale gas.

The Amun 3 well was started last January and finished in April, and the cost of drilling was approximately $5m.

Rock samples were taken from a slice of the shale formation, revealing shale gas present throughout the height of the formation, which is estimated to be 300 feet.

The company sent the rock samples to the lab to analyse them. The initial results of the analysis revealed the presence of large reserves of shale gas in the company’s concession area in the Western Desert.

Hydraulic fracturing of the rocks containing gas will begin in July, its first test of shale gas production in Egypt.

The results of the company’s experiment in shale production in Amun 3 will appear in September. Testing of the well will cost the company approximately $1m.

Amun 3 also contains other layers containing oil and gas extracted from layers of sand.

A research and exploration study will be conducted on shale gas after the initial experiment is completed to confirm the project is cost-effective, as hydraulic fracturing is considered among the most expenses stages of production.

In Egypt we are searching for shale gas in very deep layers, 12,000 feet underground.

The studies conducted by the company prove that shale gas is present throughout Khalda’s concession area in the Western Desert.

What has been done thus far in terms of linking the hydraulic field to production?

Approximately 180m cubic feet daily has been linked from the hydraulic field to production over the past month.

It is considered one of the largest shale gas fields in the Western Desert. Its reserves are estimated at around 260bn cubic feet, in addition to 11m barrels of condensates. It was evaluated by drilling three successful exploratory wells.

 

Is there any expansion underway in the company’s gas processing plants?

Expansions are currently underway in the Khobra processing plant in order to raise its production from 30m cubic feet per day to 70m, with $1.8 million in investment. This will be completed by the end of the year.

Khalda is operating its treatment plant at 110% of capacity, and cannot increase it beyond this.

Can Khalda increase its current rate of gas production?

Yes. We can produce more than we are producing currently, by at least about 150m cubic feet, but we do not have capacity to treat this quantity, so we’re not producing it.

 How large are the company’s reserves of natural gas?

Khaleda’s reserves amount to approximately 4tr cubic metres of extractable gas.

What are Khalda’s latest discoveries in its concession areas?

A new well called Bat has been discovered and is comprised of 100bn cubic metres of gas reserves. Approximately 40m cubic metres will be produced next August, and currently, production facilities for the well are being established.

Are there any fields for which government agreements are approaching expiration?

Yes, the agreement on the northern Al-Baraka field will end in 2016, and it will be prepared early for renewal. This field produces approximately 10,000 barrels of oil daily.

What happened regarding the Qasr compression project?

The compression project for the Qasr field is being implemented at a cost of $300m, and will be completed in March 2015. The project will increase the pressure of gas produced from the field in order for it to be delivered to the Abyad treatment plan.

In the framework of developing older fields, the company is executing a compression plan for the Qasr field, which is considered one of the largest gas fields in the Western Desert region. The gas produced and condensers will be sent to the Salam Gas and Abyad plants for final treatment, and the field accounts for 60% of the company’s production.

Is a re-evaluation taking place for the company’s concession areas in the Western Desert?

Seismic studies are being conducted in the Qasr area to explore large reserves as a means of increasing production rates.

The studies will be completed at the end of this year and strive to explore additional large reserves in the Qasr field. The company will lay out a plan for intensive exploration for exploratory and developmental wells following the completion of the studies.

How do you view investment in the petroleum sector in light of both the lack of security and political stability as well as the accumulation of government debt to foreign partners?

The Egyptian petroleum market is very attractive and it is a good sign that the executives of global companies work in Egypt despite the debts. I want to emphasise that paying debts to partners will serve as an incentive for them to increase their investments in concession areas, which will lead to increased oil and gas production rates.