Apache, Shell target Egypt for unconventional gas in June

Apache Corp. and Royal Dutch Shell plan to commence producing unconventional gas from their joint venture in Egypt’s Western Desert by the end of June even as Apache is cutting investment in the nation because of falling oil prices.

Apache and Shell will start drilling the North African country’s first unconventional gas well in a pilot project by the end of March, Apache Egypt Region V.P. and General Manager Thomas Maher said in an interview in Cairo. Apache and Shell will drill two additional wells before talking with the government about full development of the field by horizontal drilling and fracing, he said.

Egypt is seeking new investments in natural gas to help alleviate an energy shortage that led to lower production at factories last summer, and to reduce bills for imported LNG. Before the 2011 uprising that ousted President Hosni Mubarak, the country had sufficient supplies to ship gas by pipeline to Jordan and Israel. Egypt now plans to import gas from Iraq via Jordan through an existing link, the Egyptian oil ministry said on March 10.

Zohr Prospect

Eni SpA discovered a gas field off the Egyptian coast—the Zohr Prospect—that is the largest find in the Mediterranean Sea, the Italian energy company said in August. Eni determined that a test well at Zohr has “great” production capacity and plans to drill an additional three wells this year, it said on March 10 in an emailed statement.

Apache sold 33% of its Egyptian business in 2013 to China Petroleum and Chemical Corp., known as Sinopec, with their production in the country now at 353,000 boed, mostly in the Western Desert. They plan to invest about $1 billion in the nation, down 35% in each of the past two years because of lower oil prices, Maher said. Apache is targeting for production to remain unchanged even with the reduced investment, he said.

Shell is the contract operator in the unconventional gas pilot project, with a 52% interest. Apache owns the other 48%. The operation lies within Egypt’s Northeast Abu Gharadig licensing area, in which Apache and Shell together have a 50% stake and state-run Egyptian General Petroleum Corp. holds the remainder.

Source: Bloomberg