Hopeful future lies ahead

Egypt’s economy has long been one rich in resources and potential, with the petroleum and gas field currently at the helm of resource development. While much of the global economy has been consumed by the difficulties of the global financial crisis, Egypt’s economy has shown consistent production rates in mining natural resources, making readily available the fuel for a growing domestic and international market.

Recent developments in the gas and oil sector show that through innovative and efficient processes, Egypt’s petroleum industry continues to produce satisfactory results for its market demand.

In spite of a comparatively fair whether trade climate, major companies must proceed with considerable caution and precision to ensure the maximum results for a beneficial market, as well as official cooperation throughout the drilling and development process.

Drilling is often considered the driving force behind the production process. As such, the regulations and politics of the drilling process are exceedingly important in the oil and gas community.

As with any major sector procedure, results are achieved through a combination of legal obligations, government commitment, and economic calculations.
Developments such as the announcement made earlier this year by the Egyptian Minister of Petroleum Eng. Sameh Fahmy to assign15 new protects for drilling 64 exploratory well in the Upper Egypt region, indicate the great importance of and attention to the drilling process. The expected $438 million spent on the investment reflects Egypt’s active role in the regional economy.

A close look at a range of successful companies and conglomerates in the country rounds out the politics and procedures of drilling in the oil industry, with an up-to-date breakdown of current drilling projects and procedures to view as examples.

Dana Gas is one of Egypt’s leading petroleum companies, with centers located throughout the Gulf, greater Middle East and Asian regions. Over the past quarter, the company operated two exploration concessions and nine development leases in the Nile Delta region, with collaborations in the Upper Egypt region. With production rates ranking 34.7 kboepd in 2009, the company anticipates a steady rise for the coming quarter, with continued exploration drilling, which has wielded no fewer than 12 new source discoveries in recent years. As one of the leading petroleum establishments in the country, Dana Gas has spearheaded a large portion of the Minister’s plans to revamp Egypt’s drilling map, first put in place in 2000.

In conjunction with Dana Gas Egypt, Sea Dragon Energy Inc is currently overseeing drilling projects for wells in the Al Baraka Field, in collaboration with the Egyptian Chinese Drilling Company (ECDC). The agreement, which entails the drilling of 10 new wells in the region, was recently discussed in April of this year. According to company spokespeople, the rig responsible for these first 10 wells is rated to 10,5000 feet, equipped to evaluate comprehensive geological sections. Along with geological assessments for the wells, comprehensive coring and logging systems must be put in place in order to best moderate the wells digging of the wells themselves.

Besides the rig technique, the company has employed a new 450 2D seismic program to help put into place seismic lines, whose launch date of May 2010 assures a fast paced, technologically advanced methodology.

For high-pressure zones, Sea Dragon Energy Inc has entered into a project with NW Gemsa Concession, Vegas Oil and Gas, and Circle Oil Plc for drilling operations, in which wells with depths of up to 9,860 feet have been established. After precautions were taken by cementing the 95,8 inch casing at 8,000 feet.

With a goal of excavating the oil-bearing sandstones of the Miocene Kareem Formation, the drilling is expected to help obtain valuable information for future reservoir projects. As a secondary goal, the drilling will help procure pre-moiocene Nubia specimens, and achieve a well depth of 15,000 feet.

Upon achieving the 15,000 feet depth, the rig will be transported to help with further projects, while total hydrocarbon bearing zones logged and appraised.
Hess Corporation, another leading oil drilling operation, continues to develop exploration opportunities first announced in 2006. The projects achieved over 50% working interest in the West Mediterranean Block 1, an important deepwater section. According to the company’s spokesperson, the 25 year development lease plan lends the corporation enough Leigh-way to complete projects in the following categories: Abu Sir, El King, Al Bahig, El Max.

Petroleum heavyweights BG Egypt and Edison International SPA have entered several collaborative works over the past few decades. Recently, Edison International agreed to a 20-year concession agreement for offshore oil drilling in the Abu Qir area. The $1.4 million investment will see a series of exploration, production and development wells for the pending future, with the overall achievement goal to procure and process 70 billion cubic meters of gas matter.

For yet another example of current drilling procedures, BP Egypt’s primary focus lies in exploration wells (drilling) and production. The exploration procedures have seen a series of successes over the recent quarter, with hopes of continuation into the second half of 2010. The company’s ongoing drilling projects include extensive exploration in the Nile Detla, with the hopes of doubling Egypt’s current gas reserves via new technology use. First cemented in 2008, new fields were first discovered and mined in Saqqara, located in Suez. Nearly two years later, petroleum continues to be processed from this and other company discoveries.

As is to be expected, government regulations, backing, and funding play a paramount role in drilling politics and procedures. Whether collaboration with the Egyptian Government, Ministry of Petroleum, or backing by the Egyptian General Petroleum Company (EGPC), projects depend a great deal on the approval and support of official offices.

One exciting success was achieved by Novatek, which recently enjoyed getting both the green light and the backing to proceed with projects ahead of schedule, beginning operations for two wells in 2009 instead of the scheduled 2010. “We said earlier that we had to start drilling in 2010. But if we receive seismic interpretation data soon enough, we could start drilling at the end of 2009. Anyway, drilling must be launched no later than early 2010,” Leonid Mikhelson of Novatek, was recently quoted as saying.

More promising still has been a change in technology tactics, as discussed by National Oil Production Company (NOPC) in recent news. The company, of which Citadel Capital holds 15% ownership, has revealed an increase in production rates of 80% since the close of 2009, indicating continued success due to drilling operations. This translates into up to 6,100 boepd from Egypt’s drilling operations.

Overall, companies involved in Egypt’s increasingly outstanding oil drilling sector have demonstrated great flexibility in the complex policies that involve government, company alliances between private and public sectors, through contracts that involve both domestic and international parties. The Ministry of Petroleum oversees the majority of large-scale drilling operations for exploration wells fielded in the Mediterranean region, the Nile Delta and Suez. Legal guidelines encourage companies to set up and excavate in the exploration drilling process, as exhibited in the Ministry’s announcement this February that stated explicit goals of aggressive exploration in the Mediterranean region, in a bid to encourage further resource discovery as well as to further pit Egypt as an attractive investment for foreign funds.

Stating that this has “succeeded in increasing participation of Egyptian companies in petroleum and mining operations,” Minister Fahmy continues to push ahead with his framework for major drilling projects.

With companies such as BP at the helm of drilling operations, the political implications stand to greatly help Egypt’s economy, as well as playing a major role in global trade. The May 14th announcement to bid on deepwater drilling in the North Alexandrian region, made on the part of Minister and BP President Hisham Makawi, as well as the general manager of German company RWE, Hans Hermon Iki, demonstrated yet again the nature of drilling politics, as the multi-national party anxiously awaited approval from Egyptian parliament. With low market rates on gas, and the high risk, high cost nature of the drilling process; the process continues to be tenuous, although many believe a hopeful future lies ahead.

By Clarissa Pharr


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