By Mahinaz El Baz
Due to production increases, Egypt is set to achieve self-sufficiency in natural gas by the end of 2018. This path has not been easy, as the larger share of the country’s natural gas has been in deepwater fields.
Although there are many challenges facing deep-water gas exploration and drilling, innovative technologies represent an excellent solution to providing a wider, diversified, and sustainable mix of energy resources for Egypt’s future. Experts argue that the challenges posed by deepwater drilling have, in a remarkable short period, forced the oil and gas industry to develop significant new technologies and techniques.
The challenges of drilling in deepwater environments have necessitated the development of more advanced design criteria than usually used in onshore and shallow-water wells, according to Offshore Technology Conference’s paper titled, ‘Overcoming Deep and Ultra Deepwater Drilling Challenges’.
Deepwater Exploration and Drilling Challenges
Deepwater gas exploration presents an array of obstacles, even for the most experienced firms. Although the industry has improved its techniques through trial and error and technology advancements have driven down the costs of deepwater production, firms still face a number of challenges that cause lengthy development times, sometimes up to twelve years for deep-water projects, according to Arthur D. Little’s study, “Opportunities and Challenges for Global Deepwater Players.”
Many experts agree that there are obstacles facing deepwater exploration and drilling. “The main challenges of deepwater drilling are the massive cost of drilling [and] the absence of sufficient technology in drilling; [furthermore] the high pressure and high temperature wells in such water depth[s] require certain specifications in both drilling tools and wire line and completion tools,” said Mohamad Saad, Exploration Geologist at the Egyptian Natural Gas Holding Company (EGAS).
Confirming Saad’s opinion, Ahmed Shohdy, Development and Operation Geologist at Saudi Aramco, noted that deepwater exploration is difficult, due to the water depth, and requires long drill pipes to extract gas. Yet, in Shohdy’s opinion, the main challenge is the high pressure and high temperature of deepwater wells.
Focusing on pre-exploration processes, Amr Manhawy, General Manager at Seaharvest Oil & Gas Services, explained that there are many factors to be considered prior to exploring a new concession, such as cost, depth, pressure, and concession location. Moreover, Manhawy highlighted that some geological formations encountered at that depth require unconventional tools and casing sizes.
“All the above factors can cause a lot of serious problems while drilling, and the operator must take extreme measures to overcome [them],” Manhawy said, adding that this required a larger budget.
Everything from high exploration costs to short license periods and the uncertain environmental impact of drilling can make deepwater gas drilling a difficult venture, according to Hany Erfan, Senior Geologist at Dana Gas Egypt. He further noted that the development of the offshore Zohr field has produced a positive trend in the oil and gas industry. Despite the fact that frequent technological advances have made deepwater operations more feasible, the cost effectiveness of such projects remains a tentative obstacle in the fields’ development, Erfan added. Yet he pointed out that as global demand for energy increases, deepwater extraction will become more attractive despite these issues.
New technological solutions that are currently being developed offer an exciting glimpse into the future of gas exploration in Egypt. Shohdy believes that technology is the best way to overcome the obstacles facing deepwater gas exploration. He further noted that there are many available approaches to overcoming these challenges, such as using suitable mud types or employing drill ships or large semi-submersible rigs. He stressed, however, that many companies struggle with the high cost of such technologies and go bankrupt after encountering dry wells.
“While the technological advances are promising, the costs [of] developing and constructing these systems [reach] well into the tens of billions of dollars. Therefore, firms [hesitate] when it comes to exploring and producing deep-water gas sites,” stated Rifaat in agreement.
In order to cut costs, many energy firms participate in joint ventures when drilling exploratory wells. Even then, the high operational costs of drilling have caused many potential projects to go south. An example of this risk, Rifaat noted, is Shell Egypt. After investing millions of dollars as an initial investment, the company changed course and chose not to pursue deepwater sites in the Mediterranean.
Manhawy explained that proper cost planning—taking into account offset well data—is essential for overcoming these obstacles and for gaining an accurate estimate of the cost. “Another main pillar of having a successful drilling plan, is the [support of] the EGPC, [such as] the special agreement done between EGPC and BP instead of the old cost recovery scheme,” said Manhawy.
It is worth noting that in 2012 BP announced it has awarded the first contracts for project 20K™, a multi-year initiative to develop next-generation systems and tools to help unlock the next frontier of deep-water oil and gas resources, according to BP’s press release. BP is currently developing the project, which they hope will make it possible to drill up to 20,000 per square inch (psi). One of the core aspects of the project is relying-on sub-sea production facilities, which significantly increases the amount of hydrocarbons that can be extracted from a field. BP estimates that if Project 20K™ achieves its objectives, as much as 20 billion barrels could be recovered over the next 20 years.
Moreover, BP sees potential applications for the technology in Egypt and other deep-water basins around the world.
Erfan noted that to properly plan the entire process, specialists must gain a solid understanding of the geo-mechanical properties, stream regimes, down-hole pressures, and environmental hazards in deepwater and ultra-deepwater projects. “They must design and construct the platforms and equipment necessary to combat the marine and environmental challenges and extract the gas as safely and as efficiently as possible,” he added.
He further highlighted that highly specialized training is essential to ensure that all facilities are operated properly. While the technological advances are promising, the costs for developing and constructing these systems are very high. In the light of economic, technical, and logistical challenges related to deepwater drilling, the new and developing technologies could prove to be a long-term solution to the feasibility issues associated with the extraction process. Advances are being made to combat environmental and safety hazards and to improve the design of production facilities, Rifaat said, noting that these developments will make operations more cost effective.
Collaboration for a Safe and Sustainable Future
The growing cooperation between Egypt’s government and energy firms will create a more attractive environment for investment and development, according to experts. “To grow such cooperation, flexibility is essential. Changing agreement to suit different conditions is an important factor, which has already been done,” said Manhawy.
Applying new technologies is also necessary, he added. The government should encourage energy firms to apply new technologies in each and every well in an effort to lower prices. International oil companies (IOCs) must have the opportunity to implement these new techniques in order to eventually reduce the total cost.
Egypt’s government is already making efforts to cooperate with energy firms. Firms tend to avoid horizontal wells due to their high costs, but the government should encourage firms to drill them, Shohdy said. It is noteworthy that on average, horizontal wells are more expensive and technically difficult to drill than average vertical wells. Despite their higher cost, an increasing number of horizontal wells are being drill around the world, according to Roy Nurmi’s article at the Middle East Well Evaluation Review.
Affirming the need for extra efforts, Erfan highlighted that the government should work with energy firms to cover most of the empty areas with high resolution processed seismic lines, which could decrease the required time to study offshore concessions, and to increase licensing periods to ensure that the firms have adequate time for deepwater well investigation.
The government should also initiate a huge geological and geophysical project to identify reservoir geometry and fairway maps based on the available seismic and well data, Erfan added. This database would reduce the time companies would need to study possible drill sites. Furthermore, he said that the government faces an important decision on whether to change some concession agreements to encourage large firms to invest in high risk areas.
In addition, experts emphasize the importance of collaboration between exploration firms and service firms. They advise service firms to increase investment in local capacity development; adopt collaborative models between operators, service providers, and equipment manufacturers for the deployment of integrated deepwater technical solutions; and increase modularization through the development of compact plug-and-play production systems that can be configured for maximum efficiency over the life of a deepwater field, according to the Arthur D. Little study.
Service and equipment suppliers must have a disciplined approach to capital contractor management to ensure a high return on their assets. This approach requires aligning capacity with ever-changing demand across geographical locations. It could also require strategic growth through mergers and acquisitions in order to increase scale and market share, according to the cited study.
Energy firms drilling for natural gas in deepwater locations face many significant challenges. Technology can alleviate these obstacles, but it comes at a high price. Due to financial, technical, and logistical obstacles, firms are slow to incorporate recently developed technology. To overcome these challenges, experts suggest multiple solutions, such as cost planning, training, and flexible concession agreements. If implemented, they believe, these policies and actions will boost Egypt’s production of natural gas, facilitating the government’s efforts to diversify the country’s energy mix and to achieve self-sufficiency in natural gas.