Annual Report & Accounts 2013

 

OPERATIONAL REVIEW EGYPT

Highlights

Average production of 102 MMcfpd of gas and 3,030 bpd of hydrocarbon liquids

Acquisition of three new high quality exploration concessions

Completion of five successful development wells

Commissioning of Phase II of the West Dikirnis LPG plant expansion project

Commissioning of the West Khilala front end gas compression project




Egypt Map

Petroceltic’s core area of operations in Egypt is in the onshore Nile Delta where it holds a 100% operated interest in 12 producing fields and 13 development leases in the El Mansoura area and the South East El Mansoura exploration concession, in addition to the newly acquired exploration concessions in 2013. These assets provide the Group with a solid and diversified production portfolio which generates substantial cash flow.

During 2013, the Company significantly enhanced its Egyptian exploration portfolio by successfully acquiring three new high quality concessions. The Company now holds a 37.5% non operated interest in the El Qa’a Plain block on the eastern shore of the Gulf of Suez. This concession, which is thought to be oil prospective, was ratified in October 2013. The Company also holds a 75% operated interest in the South Idku concession onshore in the Nile Delta and a 50% non-operated interest in the offshore North Thekah concession, which may contain an extension of the prolific Levantine Basin play. Both of these concessions were ratified in January 2014.

Political situation+-

During the first half of 2013, the economic and political situation in Egypt deteriorated and in July President Morsi was removed from office. In early July, a roadmap was prepared by a panel headed by the Chief of the Army which provided for the appointment of an Interim President and of a Committee to oversee the drafting of a new Constitution, to be followed by democratic elections. The Muslim Brotherhood government was dissolved and an interim government announced on 7 July. The Committee charged with writing the draft new constitution finished its task in early December and this was approved by a referendum in January 2014. Presidential and Parliamentary elections are scheduled to be held in early summer 2014.

During the second half of 2013, the Egyptian economy showed some signs of improvement and tourism is gradually returning to the country with the lifting of travel embargoes by several countries. As a result of this and the increased availability of funding from surrounding countries, the Standard & Poor’s and Fitch credit rating agencies have recently raised Egypt’s sovereign credit ratings.

Egypt experienced civil unrest in the first half of 2013 with sporadic strikes and protests in urbanised areas. During this period, the Company did not encounter any material disruptions to its operations. However, road blockades occurred around the West Khilala gas plant and the South Batra gas plant was temporarily occupied by individuals from the local community. These events were resolved through negotiation and the Company is continuing to expand its community programmes with investments in education, health and other social projects.

After the change of government, the Company experienced a period of slower receipts from EGPC in payment for its oil and gas sales. However, towards the end of the year this situation was remedied and the total receipts for the year were $126m. This is broadly in line with the terms of the Payment Rescheduling Agreement which the Company signed with EGPC in March 2012. By year end, total receivables had been reduced to $81m, compared to $108m at end 2012. At 31 December the overall level of arrears represented approximately half of the outstanding balance.

Production+-

In 2013, the Company’s daily production averaged 20,354 boepd on a working interest basis, equivalent to 9,053 boepd on a net entitlement basis. The working interest production split between gas and hydrocarbon liquids was 102.4 MMcfpd of gas and 3,030 bpd liquids (oil, condensate and LPG). Approximately 65% of the production was derived from the West Dikirnis and the West and South Khilala fields, with the remainder from nine smaller assets.

Throughout the year, the Company continued to invest in its existing fields through an ongoing development programme. At the West Dikirnis field, the LPG plant expansion project was completed and at West Khilala two new compressors have been installed to maximise the gas recovery. The Company also drilled and completed five development wells during the year.

West Dikirnis field+-

The West Dikirnis oil and gas field was discovered in December 2005 and production commenced in November 2007. The field comprises a 70 foot oil reservoir overlain by a gas cap and, to date, the Company has focused on maximising the hydrocarbon liquids recovery by drilling horizontal wells and installing LPG recovery and Gas Reinjection facilities. The field’s average annual production rate was 2,248 bpd of oil, condensate and LPG and an average of 17 MMcfpd of gas was produced and re-injected into the reservoir.

The LPG plant expansion project was completed in the fourth quarter of 2013, which enhanced the efficiency of hydrocarbon liquids recovery through the addition of a turbo expander and refrigeration unit.

Following depletion of the oil rim, the field is planned to be converted to gas production and the fields ultimate proved plus probable reserves are estimated at 18.7 MMbbl of hydrocarbon liquids and 73 Bcf of gas. The remaining reserves at the end of 2013 were 8.5 MMbbl of liquids and 31 Bcf of gas.

West Khilala field+-

The West Khilala gas field was discovered in 2005 and came on stream in February 2007. The field was maintained on production plateau at approximately 95 MMcfpd for four years before commencing a natural decline in late 2010. The average production rate during 2013 was 40 MMcfpd of gas and 34 bpd of condensate from seven wells.

In 2013, the West Khilala-9 infill well was drilled near the crest of the structure. Most importantly this well has demonstrated a limited field-wide movement in the water aquifer since field start up, thus confirming the field reserves estimates. In addition, the West Khilala-3 well was successfully side tracked to a new location in the reservoir and the West Khilala-4 well has also recently been side tracked. The gross ultimate field reserves are 285 Bcfe and by year end 2013 approximately 69% of this volume had been produced.

South Khilala field+-

South Khilala was discovered in May 2009 and was placed on production in October 2009 using the West Khilala processing facilities. The average production rate in 2013 was 16.5 MMcfpd of gas and 29 bpd of condensate from two wells. During the year, the South Khilala-2 development well located in the southern lobe of the field started to produce some water and consequently, the field’s ultimate gross proved plus probable reserves have been downgraded from 62 Bcf to 51 Bcf of which some 27 Bcf remains to be produced.

South Damas field+-

The South Damas field has performed exceptionally well since inception and ultimate recovery rates have been progressively upgraded to the current estimate of 57 Bcf of gas and 0.28 MMbbl of condensate. The average production rate for the year from the field was 19 MMcfpd of gas and 126 bpd of condensate from two wells. The field had produced about 18 Bcf by the end of 2013.

Other fields+-

Petroceltic operates seven smaller fields in the Nile Delta which are tied back to the Company’s facilities and pipeline infrastructure and contributed approximately 3,679 boepd to 2013 production.

The Tamad field gas cap blow down commenced in August 2013 after simulation studies confirmed the oil rim had been economically depleted. The South Zarqa-1 well was successfully side tracked in the second half of the year and placed on production in November. The East Dikirnis oil field was tied back to the West Dikirnis facilities in January 2013.

Exploration+-

Nile Delta

The exploration potential in Petroceltic’s onshore Nile Delta acreage is relatively mature and in December 2012 the remaining exploration area of the El Mansoura concession expired. One further exploration well, South Dikirnis-1, is planned for drilling in 2014 to test a prospect located in the West Dikirnis development lease, which is targeting unrisked prospective resources of 7.6MMboe.

The South East El Mansoura exploration concession contains some modest gas prospectivity in the Tertiary formation and an untested, high risk Cretaceous oil play. The concession expires in July 2014 and the Company is performing a final evaluation of the prospect inventory to decide its future strategy for the block.

Three new concessions

Our core acreage position in Egypt has increased by over 300% with the addition of three new concessions. In November 2012, the Company was awarded a 37.5% non operated interest in the El Qa’a Plain concession in partnership with Dana Petroleum and Beach Energy. The block is located in an under explored sub basin on the eastern shore of the Gulf of Suez and contains a substantial number of oil leads identified on existing 2D seismic data. The gross unrisked prospective resource potential is estimated to have a mean of 140MMbbl. The licence was ratified in October 2013 and signed in January 2014 and the forward plan is to acquire 450 sq km of 3D seismic followed by the drilling of one or more exploration wells.

The Company also holds a 75% operated interest in the South Idku concession in the onshore Nile Delta, which was awarded in April 2013 in partnership with Edison. The block provides the opportunity for the Company to leverage its regional technical knowledge and operating capabilities. Though it is currently at an immature state of exploration mapping of the limited existing dataset on the block has resulted in the identification of a number of leads with cumulative unrisked prospective resource potential of circa 400 Bcf and 30 MMbbls condensate.

The Company has also acquired a 50% non operated interest in the North Thekah concession in the deep water Mediterranean. This concession was awarded in April 2013 in partnership with Edison and it potentially contains a multi-tcf extension to the Levantine Basin play which has already yielded several significant gas discoveries in the region. The Company plans to acquire 3D seismic over part of the concession in 2014-15.

Mesaha concession

Petroceltic holds a 40% operated interest in the frontier Mesaha exploration concession located in southern Egypt on the border with Sudan. Following 2D seismic acquisition, the Company drilled and completed its first exploration well in the area in February 2013. The well did not encounter hydrocarbons and was plugged and abandoned. The concession has since been relinquished.