Egypt popped back into the world exploration picture in a big way last year with the discovery of a supergiant gas field offshore, in the Mediterranean Sea.
Eni SpA drilled the discovery well on its Zohr prospect and encountered more than 400 meters of net pay and calculated the new field could hold 30 trillion cubic feet (Tcf) of natural gas. The find hit No. 1 on everybody’s list of big discoveries in 2015.
What most people forgot is that Egypt has offered excellent exploration opportunities for decades.
Look at an oil and gas field map of Egypt and you will see:
- Numerous oil fields in and around the Gulf of Suez southeast of Cairo.
- A significant number of gas fields north of Cairo in the Nile Delta area and offshore north and northeast of the Delta.
- A scattering of oil and gas fields generally extending westward from Cairo into Egypt’s Western Desert.
- A large cluster of mostly oil fields but also gas fields in the Western Desert area, centered about 100 miles from the Libyan border.
Much of the recent Western Desert exploration work has been done by Apache Corp., which has seen tremendous success in Egypt. The company has increased gross production there 12 percent annually since 1996 and generated more than $7 billion of free cash flow over the last six years.
“In a nutshell, Apache has had so much success because of its operating philosophy,” said AAPG member Joe Versfelt, regional exploration manager for Apache in Egypt.
That “acquire and exploit” philosophy enabled the company to build up a position of 48,000 square kilometers with 3-D seismic coverage through organic and accretive acquisition and government licensing.
“Since 2001, in almost 15 years, we’ve drilled anywhere from 40 to 100 exploration wells per year and 130 to 240 development wells per year,” Versfelt said.
Production takes place under a government-mandated system that can have “some non-intuitive outcomes, depending on the oil and gas price,” he noted.
By that, he meant they receive higher production totals in a lower-price environment, as well as lower totals in a higher-price environment, depending on how their share is calculated under the production-sharing contract.
“Apache largely exports its crude oil from Egypt, with some going to domestic supply. It’s sold at Brent (pricing) with a modest discount,” he said.
AAPG Emeritus member John Dolson helped initiate contemporary exploration interest in Egypt as co-author of a classic paper on the country’s petroleum potential in 1999, and has authored and edited several other papers and book sections on Egypt.
Dolson is director of DSP Geosciences and Associates LLC in Coconut Grove, Fla., a senior adviser for Delonex Energy in England and a former officer of AAPG. He gained extensive international experience in a 28-year career with Amoco and BP.
“When I look at Egypt’s history, it goes in waves. The Gulf of Suez lasted quite a while. Then the thing that touched off the Western Desert was a joint venture study back in 1999-2000,” Dolson noted.
“Apache was the one that said, ‘We’re buying into it,’” Dolson said. “It’s one of the best success stories I’ve heard in my life.”
Egypt’s Geology
A great deal has changed in exploration in Egypt since the 1990s, including the level of geological understanding.
“It’s hard to believe, but in 2000 you could not find a good map of Egypt with the shapes of the basins on it. That did not exist,” Dolson said. “Now there’s been a fundamental reinterpretation of the crustal structure out there, and it’s ongoing.”
Egypt’s geology is challenging to understand, and that’s no doubt an understatement.
At least a dozen major tectonostratigraphic events have affected traps, seals and petroleum systems. Reservoirs from basement to Pleistocene can be productive.
“We’re just surrounded by geology. It’s exciting,” Versfelt said. “The Jurassic is the main source rock in Egypt. It’s a Type 2 to Type 3 source,” although source rock possibilities run from Paleozoic through Miocene.
Because fossils are relatively scarce in Egypt’s subsurface, Apache uses multiple other methods, especially geochemistry, to help unravel the country’s tectonic history and to understand thermal maturities, he said.
That multiple-path approach is “important to understanding the petroleum system and the charge. Egypt is dominated by vertical charge,” Versfelt noted.
Dolson and his co-authors raised their estimate of Egypt’s undiscovered hydrocarbon resources when they updated the earlier petroleum-potential study. The country held plenty of promise even before last year’s offshore strike opened a new exploration area.
“In our 2014 paper we upped the unfound number to about 212 Tcf equivalent, but that was pre-Zohr. Those numbers are going to be proved now,” Dolson said.
And Egypt contains a number of different prospective areas for exploration, some of them lightly drilled so far.
“Overall bright lights would still be the Western Desert and the Nile Delta,” Versfelt said. “Upper Egypt and the Red Sea, those have different challenges in the low-price-oil environment.”
An important note about terminology: “Upper Egypt” is south Egypt. “Lower Egypt” is northern Egypt.
Dolson agreed about the Delta’s potential, and also about the current economic picture.
“I think the Nile Delta has a lot of life left,” he said. “The Nile is still going pretty good. A lot of that deep stuff is expensive, so we’ll see how it works out economically.”
“The challenge in Egypt right now is economics, and getting paid. A lot of companies haven’t been getting paid. There’s a lot of hesitancy,” he commented.
The Red Sea
Another extensive area of exploration interest for both Egypt and Sudan is the northern half of the Red Sea.
“The Red Sea has been played time and again for at least three decades. Its secrets really haven’t been revealed yet. It will take more seismic acquisition – it needs deep pockets,” Versfelt noted.
Dolson said the Red Sea area “has still got some intrigue. The last well Hess drilled there had some oil shows, but no reservoir.”
The Gulf of Suez went through an extensive period of exploration and has numerous discovered fields as a result, while more recent drilling interest has shifted to other areas.
“It’s fairly mature. But whenever people say things are mature, new things arise,” Versfelt noted.
Upper Egypt contains far fewer exploration penetrations than productive areas in the north, but holds intriguing potential.
“Upper Egypt is largely composed of Eocene carbonate cover within basement, but also with some Mesozoic, Jurassic-Cretaceous rifts,” Versfelt said.
“Those rifts are unexplored to the south. There’s a basin called Komombo and it’s in Upper Egypt,” Dolson said. “It looks just like the Muglad basin in Sudan. In fact, it’s on trend with it. It’s a nice little basin – there’s tons of structure on it.”
And not least, there are the exploration possibilities raised by the Zohr discovery.
Eni said Zohr’s structure has a deeper Cretaceous upside that will be targeted with a dedicated follow-up well, but the principal reservoir is in a Miocene carbonate sequence.
“Zohr is a very recent paradigm shift. While Miocene reservoirs are known here they are clastic reservoirs in Egypt and Israel, and in Cyprus, lately,” Versfelt noted.
“Where there’s one,” Dolson commented, “there’s got to be others.”
Versfelt said Apache “remains pretty bullish on Egypt overall, with our emphasis on the Western Desert.”
He finds the country an attractive place to live in as well as explore.
“Geologically, it is one of the most exciting areas in the world to work,” he said. “Egypt is a dynamic place.”