Any unexpected collapses trigger a recovery phase that paves the route for resuming the state of prosperity and wealth once more. Any industry swings continuously over the ups and downs due to the economic conditions. No matter how long would it take to overcome the downs, a healthy industry can always control once back its wheel
This is the case of the petroleum industry nowadays; witnessed a fall down of operations, yet hopes for restoring its records this year. Focusing on the upstream drilling activities in Egypt, there has been a decrease in the number of total wells drilled in 2009 compared to 2008. Such a decrease was expected to occur due to the state of market unsustainably worldwide caused by the economic recession. According to figures, a total of 325 wells were drilled during the first three quarters of 2009, compared to 465 wells drilled during the same period a year earlier. This shows that there was a 30% decrease compared to 2008, the year during which oil exceeded the unprecedented price of $140 a barrel.
As a matter of fact, the 2009 drilling operations are similar to ones achieved in 2005, in terms of the number of wells drilled. Both were on an average number of 300s (200 development wells, ~ 75 exploration and the remaining are water injection and appraisals). Despite this similarity, the industry, since 2005 until 2008, succeeded to boost its drilling activity, from 329 to 671 wells drilled across the country, bringing a record 100% increase. Throughout this period of time, there was a gradual increase in the drilling activity in spite of the high prices of rigs and equipments. Based on the theory mentioned earlier, the industry has the ability to restore its drilling successes once more by coping with the changing conditions of the market.
Back to our evaluation of Egypt’s drilling activity over the past five years, we found out that there have been some shifts in the areas of interest. For instance, the Gulf of Suez has always been holding most of the country’s oil reserves and production, however, the attention given to this area has slightly moved to the Western and Eastern Deserts. This is due to the low costs of drilling and shorter duration. Moreover, there has been another move towards the area of Upper Egypt, where various successful discoveries were achieved by Dana Gas. Also, the industry heads pay more attention to the areas of Nile Delta and Mediterranean Sea, which are considered a pivotal gate for natural gas, holding approximately 81% of natural gas reserves and that is the reason why the natural gas drilling is tremendously increasing in both areas.
In terms of well types, the highest segment of drilled well is the development wells, which count for more than 60% of the total number of Egypt’s drilled wells. In the second place come the exploratory wells (average 25%), followed by water injection and appraisal wells (each with an average of 5%).
The drilling operations are characterized by the contribution of mega operators that hold considerable activities in the country. On the top of the list, Apache has deserved the place with its active drilling agenda. Since 2005, the U.S Corporation drilled more than seven hundred development wells, mainly in the Western Desert, in addition to some water injection wells, which help enhancing the flow of its oil wells. Moreover, Apache drilled more than 130 exploratory and appraisal wells, which is an unprecedented record in the Egyptian upstream sector.
It is worth mentioning that Apache’s portfolio in Egypt includes seven concessions: West Ghazalat, East Bahariya, West Kanayes, North Tarek, Sallum, Siwa and West Kalabsha.
Another major drilling operator is symbolized by ENI-Agip Group, which drilled nearly 400 wells during the same period of time (more than 300 development wells, approximately 65 exploratory wells and around 20 water injection wells).
British Petroleum (BP), British Gas (BG), Royal Dutch Shell occupy the 3rd, 4th and 5th places in the list of top operators respectively.
The drilling activity of BG is considered as modest due to the fact that the company has two main concessions located in the Mediterranean Sea (Rosetta Concessions and West Delta Deep Marine block) and some of its wells are deep marine that requires longer drilling schedules.
As for the Royal Dutch Shell, the company’s total drilling operations during the past five years did not exceed 80 wells, despite that the company is classified as one of the oldest operators in the Egyptian market, with its history going back to the 1960s. The company’s exploration activities have been limited to specific areas of the North East Abu Gharadiq concession located in the Western Desert and the ultra deep marine North East Mediterranean concession (NEMED).
In the 2009 list of top operators, Apache kept its leading position by drilling more than 100 wells, 81 of which are development wells, while the remaining ones are exploratory wells. Eni-AGIP Group came second, followed by BP, Shell and BG.
In spite the fact that most drilling activities have been concentrated in the Western and Eastern Deserts as mentioned before, the costs of drilling is surprisingly high at areas where drilling is low, such as the Mediterranean Sea. This is due to the high rig rental rate and the necessity for complicated technologies in such deep offshore drilling and the tough nature of the formations, know for their high pressures. The average depths of deep marine wells reach up to 15000 ft. The drilling cost in this location was the highest compared to other areas during 2009. Approximately $430 million for more than 15 wells were paid in this area.
The Mediterranean Sea area is followed by the Western Desert and the Gulf of Suez in terms of total drilling cost. The Western Desert attracted more than $250 million for 140 wells until 2009 Q3, while the bill of drilling at the Gulf of Suez area counted for $170 million for 16 wells during the same period of time. the Gulf of Suez used to be one of the most active area, with highest expenditure levels for decades, however, this status changed few years ago as most of this area are becoming mature brown fields and exploration activities slowed down. Yet, some small companies, such as PetroSA (The South Africa’s National Oil & Gas Company) are still attracted to the smaller reserves of the Gulf of Suez.
With more areas with lower drilling costs, Sinai had a total drilling cost of $70 million for 14 wells, which is slightly higher than the Delta that had $65 million paid for 19 wells. Finally, the Eastern Desert had the lowest drilling bill until the 2009 Q3, $29 million for 24 wells. The reason behind this small amount lies in the fact that the Eastern Desert is the shallowest drilling area in the country; average depth of drilled wells is 4500 ft.
With a broader look at the international market, forecasts show that $278 billion was spent in the period between 2004-2008 on offshore drilling. With low spending in 2009 and expecting to remain low as well in 2010, the coming five years are anticipated to get back to previous levels of growth, with a total of $376 billion. By 2013, the global drilling market will more than double compared to 2004, estimating the drilling investments will reach up to 89 billion.
By Yomna BassiouniDownload