Egypt Signs First Gas Fracking Contract with Apache, Shell
Texas-based Apache Corp and Shell Egypt to invest up to $40 million in three horizontal wells and “fracking” in Western Desert
Deya Abaza, al-ahramonline
Apache expects higher gas prices in Egypt by year-end
Egypt signed its first contract with foreign oil firms to extract gas using fracking, the same technique used in producing shale gas, a move that could unlock large reserves of energy.
Texas-based Apache Corp and Shell Egypt will drill three horizontal wells in the Abu El-Gharadiq region of the country`s Western Desert with investments of up to $40 million, said the Petroleum Ministry in a statement on Wednesday.
The pilot project, as described by ministry spokesman Hamdi Abdel-Aziz, will involve the use of hydraulic fracturing, or fracking, to retrieve the unconventional gas, embedded in underground rock formations.
Egypt`s technically recoverable reserves of unconventional gas are estimated at 100 trillion cubic feet (tcf), according to a 2013 report by the U.S. Energy Information Administration, higher than its reserves of conventional natural gas, which stand at 77 tcf.
Egypt has become a net importer of natural gas in recent years as rising domestic consumption, particularly by the electricity sector, and dwindling exploration have created a shortage in the local market.
Though the costs of extracting unconventional gas are higher than those of producing conventional natural gas, it is still less costly than importing liquefied natural gas (LNG), as the government plans to do starting in 2015, industry insiders told Ahram Online.
The cost of liquefaction, transport, insurance, regasification and general logistics associated with importing LNG mean that it would cost us some $14 per million BTUs (British Thermal Units), says former Petroleum Minister Osama Kamal, whereas producing unconventional gas here would cost $4-5 per million BTUs.
Shale oil and gas has in recent years experienced a boom, notably in the United States, thanks to the development of new technologies.
Egypt`s government has been reviewing gas prices for foreign oil firms, including Apache and Shell, to encourage them to step up exploration and production.
Apache, Shell Sign Fracking Deal with Egypt
Natural Gas Asia
Egypt has signed a deal with Apache Corporation and Shell Egypt to extract unconventional hydrocarbons by fracking in the Western region, oil ministry announced Wednesday.
Tariq al-Mulla, Chief Executive of EGPC and Tom Maher, President of the US based Apache Corporation and Aiden Murphy, Chairman of Shell Egypt, signed the contract.
The project will entail investments of around $30–40 million along with drilling three horizontal wells, the ministry said adding that this project will open up new horizons for the Western Desert region for the production of unconventional gas.
Egypt has been facing shortage of natural gas due to rising domestic demand amid declining output. Cairo is looking to fill the demand gap by sourcing LNG from suppliers such as Algeria.
Earlier this month, Egypt agreed to import six cargoes of LNG from Algeria between April and September next year. The agreement regarding this would be signed by the end of this month in Algeria, Egypt’s oil ministry said.
To allow for smooth import of the fuel, last month, Egyptian Natural Gas Holding Company (EGAS) finalised a five-year deal with Norway’s Hoegh LNG for supply of FSRU by the end of first quarter of 2015.
In May this year, Höegh LNG signed a Letter of Intent (LOI) with EGAS for the use of one of its FSRU as an LNG import terminal in the port of Ain Sokhna, located on the Red Sea`s Gulf of Suez.
The FSRU was scheduled to start operations in the third quarter of 2014 but was delayed.
Editors note: The news that Shell Egypt and its joint venture partner Badr Petroleum Company had performed hydraulic fracturing using foam to tap natural gas in the Apollonia Reservoirs of Egypt’s Western Desert led to a call for a moratorium on the practice in 2012.
The Western Desert makes up about two-thirds of Egypt’s land area and spans from the Mediterranean Sea south to the Sudanese border and from the Nile River Valley west to the Libyan border. While the area is sparsely populated, there are concerns that fracking could pollute groundwater supplies.
The Egyptian Initiative for Personal Rights issued the 2012 moratorium the call, urging independent impact studies and the development of regulations to cover the practice. Fracking, or plans to use fracking to extract gas, have been controversial globally because of the harm caused through the use of chemicals in the process, raising fears that fracking pollutes groundwater supplies. This is particularly relevant for Egypt, because the country is dependent on limited sources of water.
Newspaper reports indicated that no environmental impact assessment (EIA) had been conducted for the project. In addition, two other companies are also have been involved in fracking. Apache (USA) was involved in fracking operations in wells in the East Bahariya field in the Western Desert, which contains aquifer systems of fresh groundwater on which both tourism and all agriculture by the inhabitants of the western oases depend. Agiba Petroleum (joint venture with Italian ENI, Russian Lukoil, and IFC) is also using the technology in its Falak and Dorra fields in the Western Desert.
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Photo on front page: Shell fracking in the desert. Source: Platform London. Photo on this page: Diagram of fracking practice to be applied in Egypt. Source: Egypt Independent.
