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The 10th issue of the Shale Gas Investment Guide brings you in-depth analysis and reporting on the European, North African and global shale gas markets, together with key market data and indicators.
Shale Gas Investment Guide | by Wojciech Kość
ALGERIA AND EGYPT

Algeria & Egypt: They Might Be Giants

Unlike their North African peer Morocco, Algeria and Egypt have long had functioning oil and gas industries. They appear to have a difficult time changing their thinking to embrace the benefits of unconventionals.

Despite having one of the largest oil and gas reserves in Africa and the world, Algeria’s hydrocarbons production peaked in 2005 for gas and in 2007 for oil. This affected negatively the country’s export capacity, one of the important drivers of Algeria’s economic growth, with share of hydrocarbons in total exports expected to fall to 96.3 percent in 2018 from the 2014 figure of 97.8 percent, which might not be a large fall in percentage figures, but certainly one of several billion dollars in sheer capital terms, according to the US Energy Information Administration.

ACTIVE ALGERIA
In order to maintain dynamics of economic growth, the Algiers government is attempting to get shale gas exploration – and possibly production – under way. A recent report from the International Monetary Fund urged Algeria to engage foreign oil and gas companies more or face abrupt decline in production. Algeria appears to be doing just that, with a batch of new shale gas concessions granted in 2014 to interested companies like Shell or Statoil.

The country’s national oil and gas company, state-owned Sonatrach, has been active in drilling pilot shale wells since 2013, analyzing data to determine feasible productivity rates or the type of fracking best suited for geological conditions. Algeria is shale gas potential is estimated at 20 trillion cubic meters (TCM). The company plans to finish three horizontal wells for shale oil and gas in the Ahnet basin by the end of 2015. Once the Ahnet pilot project will be completed, from 2016 to 2020 at least two pilot wells will be drilled in the Berkine and north Timimoun basins.

But Sonatrach is by no means the only active player in Algeria. Spain’s Repsol is operating through Canada’s Talisman Energy on several concessions. The Dutch major Shell has a stake in the Timissit concession, where it is targeting shale gas reserves in partnership with Statoil and Sonatrach. For their part, Statoil began shale exploration in Algeria in the last quarter of 2014. The company plans to drill two wells on the Timissit concession by the end of 2017 latest.

Finally, France’s major Total claims it will launch production off its acreage on Ahnet and Timimoun concessions, where it is targeting shale as well as tight gas, alongside conventional resources. The company believes the Ahnet basin might produce at least four billion cubic meters (BCM) a year.

TRICKY IN EGYPT
While shale gas exploration in Algeria is moving forward, even if slowly, the future of the unconventional industry in Egypt just got tricky. Egypt is the second-largest dry natural gas producer in Africa, with vast reserves both onshore and offshore, as well as an important transit route for oil shipped from the Persian Gulf to Europe and to the United States. The country has recently seen its ambitions to become a regional gas power receive a major boost - although one that may end shale gas exploration before it has a chance to take off for good.

Just as Egypt’s domestic gas demand started eating into exports, from which gas has begun to be redirected to cover internal demand, Italy’s ENI discovered an estimated 850 BCM of gas off Egypt’s Mediterranean Sea coast. Should ENI strike an agreement with the Cairo government - which has a history of putting off oil and gas companies - Egypt’s domestic demand will be met easily, with excess gas destined to boost exports again. However, this large new supply of gas may hinder shale exploration, currently led by Royal Dutch Shell and US explorer Apache in cooperation with the Egyptian General Petroleum Corporation (EGPC).

Shell and Apache are jointly investing to develop shale oil and gas reserves in the Al-Obayyed field in the Appolonia Basin. The EGPC and Shell have agreed to allow Khalda Petroleum, a JV between Apache and the EGPC, to operate the pilot project and full field development.

Reservoir modelling carried out by Khalda Petroleum has suggested that horizontal drilling and multistage fracture stimulation will yield economic production rates. The pilot project, which began in mid-2015, includes a commitment of $30-40 million (€27-36 million) for three wells. Construction works of surface facilities started in September and will last until December 2015, while the first well will be linked to the facilities by the beginning of January 2016. Apache is confident production will begin soon from the Al-Obayyed field and it has price negotiations under way with the EGPC.


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