Partnership with government, EGPC crucial to Egypt's future
A jackup with tender working for Amoco in the Gulf of Suez, circa 1960s.
- Amoco concessions in the Nile Delta. [8,261 bytes]
Bob C. MilesThe story of Amoco and Egypt is one of great pride in past achievements, high current activity levels, and big plans for the future. All these are made possible by the successful partnership between Amoco, the government of Egypt, and the Egyptian General Petroleum Corporation.
Amoco Egyptian Oil Company
As the country's largest oil producer, the partnership has been crucial to the development of Egypt's hydrocarbon energy industry, creating investment, thousands of jobs, and important foreign exchange earnings for the Egyptian economy. In recent years, a new dimension has been added to Amoco and Egypt. With Egyptian government's encouragement of gas exploration, Amoco and its partners have discovered new world-class natural gas resources in the Nile Delta. These resources offer the benefit of this clean and efficient energy source not just to Egypt, but for the whole Eastern Mediterranean region.
Early operationsThe story began in 1963 with the entry of Amoco (then Pan-American) to Egypt, at a time when Egypt was not nearly as friendly to foreign investors as it is today. Amoco emerged as the leader in Egypt's energy industry.
In March of 1965, Amoco drilled the El Morgan-1 discovery in the Gulf of Suez on a large concession granted in 1964. At the end of July 1965, Amoco and EGPC formed the Gulf of Suez Operating Company (GUPCO) as the joint venture company assigned to operate the field. The El Morgan field soon proved to be a giant. As of July 1997, it had produced over 1.25 billion barrels of oil, and is currently producing at a rate of 52,000 b/d. This early success fueled Amoco's investments in Egypt and produced a string of major discoveries.
A major oil and gas field named Abu Gharadig was discovered in the Western Desert in 1969, while during the 1970's, three additional major offshore oil fields were discovered in the Gulf of Suez: July, Ramadan, and October. To date a total of 40 oil fields have been discovered in both the Gulf of Suez and Western Desert by Amoco and total cumulative production exceeds 3.7 billion barrels.
Amoco's total investment in Egypt, mostly in the Gulf of Suez, amounts to almost $ 8 billion. GUPCO's oil production peaked in 1985 at an average of 575,000 b/d, and current production is about 320,000 b/d of oil. Gupco is the largest oil producer in the country, accounting for about 40% of Egypt's total crude output today.
Most of the major fields in the Gulf of Suez operated by GUPCO are currently on waterflood. Exploitation and exploration drilling in and around these major fields continues, with an average of five rigs running throughout 1997. GUPCO operates 88 platforms in the Gulf of Suez, with about 350 producing wells. Over 800,000 b/d of fluids are handled, mostly at the large Ras Shukheir facility on the West side of the Southern Gulf of Suez.
Amoco has brought the latest technologies available in all aspects of the energy business to Egypt and shared them with the partnership. Three-dimensional seismic technology, integrated multi-discipline work teams, the largest workstation network on the continent, 3D reservoir visualization, coiled tubing pipelines, horizontal and multi-lateral drilling: all are examples of leading edge technologies brought to bear on exploration and production in Egypt when they were first available.
Amoco recognized that Egypt had the potential for significant natural gas reserves soon after it began operations in the country. However, at that time, natural gas rights were not available and there was no domestic market.
In 1985, the Egyptian government changed the concession agreements to allow the contractors to share natural gas and liquids in the same manner as oil. This move gave foreign contractors the incentives needed to begin exploring for natural gas throughout Egypt. During the following years, the gas market grew, as the country realized it could fuel much of the domestic energy growth with natural gas, thereby continuing to export a significant portion of oil production.
In 1988/1989, large lease sales offered prospective gas acreage in the Nile Delta and Western Desert. Further incentives for contractors were added when Egypt amended the gas clause in 1993 to tie pricing of natural gas directly to crude oil prices in Egypt. This, combined with early success in several gas trends, led to the mushrooming of Egypt's natural gas reserves and production, which is about 1.5 bcf/d now.
Nile Delta focusAmoco chose to focus its exploration for natural gas on the Nile Delta basin. The company acquired acreage at lease sales in 1989 and 1993, and subsequently acquired additional acreage through farm-in and purchase.
IEOC (Agip's subsidiary in Egypt), is Amoco's partner on several blocks. Additional blocks are held with Repsol and British Gas. Early discoveries on two of the three concessions acquired in the 1989 lease sale provided the success needed to encourage Amoco's growth in the Delta, similar to the El Morgan story in the Gulf of Suez.
The first Amoco interest discovery, in mid-1993, was the Baltim East Field. The initial discovery well flowed 31.6 MMcf/d and 586 barrels of condensate. This field is in a Miocene aged river channel, on trend with the Abu Madi Field, the initial gas discovery in the Nile Delta (discovered in 1967 by IEOC and owned by EGPC).
The Baltim concession is operated by IEOC, as is the Temsah concession, where a second, and more significant, discovery was made immediately following Baltim East. The Temsah Field is in an older Miocene interval than Baltim, where the sands were originally deposited in relatively deeper water.
The discovery well in Temsah flowed 34 MMcf/d, plus 2,290 b/d of condensate. By early 1995, as appraisal of the Temsah and Baltim East Fields continued, it became clear that another major gas trend might exist in younger Pliocene sands. The first well to test the Pliocene was the Denise-1 on the Temsah concession. The well proved the play concept, encountering over 300 ft of net pay and testing 15 MMcf/d of gas.
Amoco has aggressively explored the Ras el Barr concession (Amoco operated, IEOC 50% interest), which was signed in May 1995. At the time of the signing, Amoco had a seismic boat on the acreage acquiring 3D data. The first well spud in September 1995, and to date, Amoco has drilled four new field discoveries, and two appraisal wells to the large Ha'py Field.
Additional seismic surveys, both 3D and 2D, have identified numerous prospects for future drilling. The rapid cycle time from award to discovery is indicative of Amoco's commitment to the Egypt gas business. Other successes on the Amoco N. Sinai and most recently BG N. Sinai blocks have led to the realization that the Pliocene trend extends across the entire Eastern side of the Delta.
80% success rateIn total, Amoco has a working interest in 21 new field discoveries since 1993, with a success rate of nearly 80% - fantastic for anywhere in the world. Numerous prospects are yet to be drilled, and the challenge now is to capture new markets for the gas both within and external to Egypt.
With the gas supply picture rapidly growing, it soon became clear to Amoco and Egypt that enough gas was being identified to supply the rapidly growing Egypt market for many years to come. Amoco began to aggressively seek markets for Egyptian gas in the Eastern Mediterranean, including Jordan, Israel, and Turkey.
In November, a memorandum of understanding was signed during the Middle East and North Africa (MENA) conference in Cairo to build an LNG facility in Egypt and export gas to Turkey. Commercial discussions are ongoing with Turkey, which in addition to a rapidly growing natural gas market, seeks diversity of supply.
Egypt is well positioned geographically, by virtue of both geography and natural resources, to supply significant volumes of gas to Turkey, once commercial arrangements are successfully concluded. Volumes being discussed in the LNG project range up to 1 bcf/d over a several year rampup.
In addition to actively seeking export markets for Egypt, Amoco has also brought vehicular natural gas to Egypt. Through a NGVC, a joint venture between Amoco and EGPC, Amoco brought the technology to convert and fuel both public vehicle fleets and private cars with compressed natural gas.
While this business is still in its early years, it has the dual benefits of allowing Egypt to use its abundant natural gas locally, thereby allowing more oil to be exported, and addresses the air pollution problems facing Cairo by reducing vehicle emissions. Amoco continues to investigate all other aspects of the natural gas value chain in Egypt and the region.
The futureWhat does the future hold for Amoco in Egypt? A continuation of emphasis on maximizing the value for Amoco and Egypt of the major Gulf of Suez oil properties. Amoco continues to devote major resources and all available technology to improve one of the company's core assets, which is of course of vital interest to the Egypt economy.
At the same time, Amoco expects continued growth of the natural gas business in Egypt and the region. When gas exports become a reality, Egypt is well positioned to become a gas supply hub for the Eastern Mediterranean, and beyond. Amoco will be a big part of this new natural gas business as Egypt enters the 21st century.
Copyright 1997 Oil & Gas Journal. All Rights Reserved.