The Propelling Impact of Natural Gas Growth

The Propelling Impact of Natural Gas Growth

On the second day of the Upstream Technical Convention, Deputy Reservoir General Manager and Board Member of Petrobel, and Santo Giannone, Deputy Exploration Manager at Petrosilah, James Pendergrass, chaired the final technical workshop dedicated to natural gas growth. The workshop commenced with Wood Mackenzie’s trace of Egypt’s natural gas history and was then followed by three more success stories from natural gas fields and unconventional fields that were presented by SDX and Shell, respectively.

Natural Gas Growth Story

Research Associate at Wood Mackenzie, Stephen Fullerton, has tracked Egypt’s natural gas path and forecasted the upcoming years for the natural gas industry. “The Egyptian gas market really has gone through transformations in the past few years,” Fullerton highlighted in his presentation, as he examined the challenges faced by the gas market and previewed endeavors to address said obstacles.

“Over the studied period of 2008 through 2016, Egypt only discovered that more natural gas resources were produced in two of the years [2008 and 2015],” Fullerton explained during his presentation; stressing the significance of this fact he further added “these gas discoveries helped keep up production rates and drive Egypt forward.”

The session moved on to highlight how the natural gas resources landscape has evolved over the years. Fullerton cited Wood Mackenzie’s data for discoveries and production specifically between 2009 and 2012, pointing out that during this period, “Egypt only discovered a third of the resource that it produces, which was a real concern and has been addressed going forward. The reason this happened was because easy gas had been discovered. So, companies were having to focus on higher cost exploration, and this, at the time, was not as attractive as the gas prices that they were receiving, for their gas [volume discovered] was reasonably low. There is a buildup of arrears [that the Egyptian government owed IOCs] and a general idea that Egypt wasn’t viewed as an attractive place to invest capital,” he said. However, new laws issued to help protect contractors – for example the new gas market regulating law – and new discoveries that have recently surfaced in areas including West Nile Delta, Nooros and Zohr, have “transformed the Egyptian gas market” and Egypt has thus grown to become an increasingly attractive market.

In recent time, Egypt has grappled with increasing arrears for oil and gas companies. Yet, simultaneously, Egypt has also been developing natural gas, especially as the sector has seen significant payments issued from the Egyptian oil sector to IOCs in the past months alone. “Wood Mackenzie anticipates arrears continuing to fall and [that they] would be paid off by mid-2019, in line with the IMF agreements,” Fullerton pointed out.

With its location among numerous prominent natural gas fields and LNG facilities, Fullerton viewed Egypt as a potential natural gas regional trading hub. “Egypt would appear the most logical destination for gas from fields like Aphrodite, Calypso, Leviathan and Tamar, either into the domestic market or into the LNG facilities to be exported,” he said.

SDX Route to Natural Gas from South Disouq

The first presentation of the workshop focused on SDX strategy and activities towards achieving the natural gas discovery and early production in South Disouq concession, leading to a further exploration of its potential. The session was presented by Stephan Jackson, Senior Staff Geophysicist at SDX Energy.

In April 2017, SDX Energy announced natural gas finds at the concession, where it both operates and holds a 55% equity interest. Jackson, highlighted that the South Disouq concession was already producing; however, by adopting innovative forces in drilling new wells, the company was able to strike natural gas in the Abu Madi field.

Throughout the presentation, Jackson stressed that by means of “…successful exploration programs, [the] agility of small, well-funded operators and a pioneering attitude to exploration, the company can unlock significant natural gas resources.”

“Our experience in South Disouq shows that a company can take an area where people have drilled wells before and, just by applying a tiny bit of innovative force, [the company] can come up with a new exploration concept in that area,” Jackson told Egypt Oil & Gas on the sideline of the workshop, adding that SDX’ stands as an, “…example of how thinking slightly differently can bring success.”

Shell’s Unconventional Natural Gas Appraisal in Egypt

Despite the increasing natural gas discoveries and the widely held belief that Egypt can be reach self-sufficiency before the end of 2018, Shell has been exploring unconventional natural gas resources within the country’s borders.

Reservoir Engineer at Shell Egypt, Amr Zaher, presented during the workshop a session on the unconventional natural gas appraisals in Shell Egypt’s portfolio, highlighting the Apollonia reservoir as an example of an unconventional opportunity.

The main drive for Shell to address unconventional resources is that “the natural gas market has opened up and the new gas law is out, so if a company has the right opportunity and a cost-effective strategy, then it definitely has a chance to succeed,” Zaher explained.

Part of Zaher’s presentation revolved around showcasing the Apollonia unconventional reservoir, which is characterized as a carbonate reservoir, and consists mainly of low permeability limestone and high-porosity soft chalky.

“The reservoir is already producing. It is close to infrastructure and facilities and there are large amounts of gas in place,” Zaher said commenting on what he considers to be the key drivers of the reservoir. Meanwhile, the challenges faced by Shell in operating Apollonia included the “…chalky [nature of the] reservoir.” Zaher also pointed out that, “It is very thin and poor in terms of vertical connectivity. It has a thick transition zone and the water produced is very high.”

At first, the operating companies tried vertical fracs for the Apollonia reservoir, but it was proved that, “Vertical well performance does not justify economic full field development even with stimulation.” Thus, firms resorted to, “…horizontal wells with multi-stage hydraulic frac, which resulted into much better sustainable relatively higher gas rates compared to the stimulated vertical wells,” Zaher stated.

Addressing Reservoir Uncertainties

Shell Egypt has adopted an integrated methodology in recognizing and handling the uncertainties in its fields’ operations. Reservoir Engineer at Shell Egypt, Mostafa Abdelkhalek, gave the concluding presentation of the “Natural Gas Growth Story” workshop, presenting the company’s approach in addressing the BTE natural gas discovery.

Shell’s approach included “…Statistical Risk Analysis (SRA), which can be used to analyze and quantify the risk associated to any kind of problem or business,” Abdelkhalek pointed out. “In BTE study, SRA was used with Monte Carlo simulation to pinpoint all the possible outcomes of gas recovery.” The approach further encompassed, “…Material Balance Equation [MBE], which has been recognized as one of the basic tools for interpreting and predicting reservoir performance,” according to Abdelkhalek.

In order to transfer data from SRA into MBE, the company required the use of a programming language. “The experimental design model is created to assess all the possible scenarios of different uncertainties,” Abdelkhalek concluded, explaining that it is a “…fast and easy model to use.”

The propelling potential of the natural gas industry, highlighted through these sessions, has shown that the industry is well on its way to further enhance production and surpass a state of self-sufficiency.


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