1
Investing in Exploration and Production in Egypt
John NaismithTechnical Manager
Melrose Resources plc
Talk to Scottish Oil Club15 January 2009
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Melrose Resources plc� FTSE 250 listed E&P company
� Market Capitalisation of £235m
� Interests in Egypt, Bulgaria, USA, Turkey, France� Operates & holds material interests in all areas
� Net reserves 54 MMboe end 2007
� Net production 18 Mboepd 2008
� Entry into Egypt in December 1998
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� O&G accounts for 40% of Egypt’s exports and 10% of its GDP
� Effective upstream oil and gas licensing system
� Stable fiscally and contractually� Oil production is in decline, tension
between servicing gas exports and domestic demand
Oil & Gas industry in Egypt
Source: BP Statistical Review of World Energy 2008
Algeria
Libya
SyriaQatarOman
Egypt
Oil Production: Egypt & Others (1965 to 2007)
Oil
Pro
duct
ion
(‘000
bpd
)
Gas Production: Egypt & Others (1970 to 2007)
Gas
Pro
duct
ion
(Bcf
/d)
Algeria
Qatar
Egypt
OmanKuwait
SyriaLibya
20.06,000
4
� Population ca. 76 million, avg annual population growth rate 1.9%
� Population highly concentrated in Nile corridor and delta areas
� Only 4% of total area� Low income levels in remote and rural areas
� 17% of population live on less than $1 per day
� Fresh water availability becoming a significant issue� Risk of inundation of coastal areas
� Significant impact on agriculture, industry, populations
� High level of education but skills shortages, & labour market relatively inflexible
Context of Oil & Gas industry in Egypt
Source: IIASA / Cairo Demographic Centre, Feb 2007
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Upstream Regulatory Regime
Ministryof Petroleum
EgyptianGeneralPetroleumCorporation
EgyptianNatural GasHoldingCompany
EgyptianMineralResourcesAuthority
GanoubEl WadiHoldingPetroleumCompany
EgyptianPetro-chemicalsHoldingCompany
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Petroleum Licensing
� Concessions awarded with several exploration periods of 2 to 4 years� Contractor responsible for funding all operations in concession area
� Minimum work programs approved by EGPC/EGAS/Ganope
� After a commercial discovery, a non profit-making Operating Company is formed� Owned 50/50 by EGPC and Contractor
� Commercial discoveries converted into development leases (20+ years)
� Agreements in the form of Production Sharing Contracts� All production sold to EGAS
• Gas at fixed domestic prices• Liquids at Egyptian international prices
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Melrose Egypt Chronology
November 2007First production at West Dikirnis
November 2007Mesaha concession awarded
February 2007First production at West Khilala
June 2006Acquisition of Merlon by Melrose
December 2005 / June 2006West Dikirnis discovery (gas / oil)
October 2005West Khilala discovery
July 2005SE El Mansoura concession awarded
December 2003First production at South Batra
February 2003South Batra discovery
March 2001First production at Qantara
September 1999Qantara development lease awarded
December 1998Melrose acquires Odyssey
June 1998El Mansoura / Qantara concessions awarded to Merlon/Odyssey
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Melrose / Mansoura
� Good Contractor – JV relations crucial for success� 2008: 241 JV staff, 56 Melrose staff� All Egyptian, no parallel expat structure� Considerable joint study work Cairo/Edinburgh
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32 30’ Eo
32 00’ Eo
31 30’ Eo
31 00’ Eo
30 30’ Eo
30 00’ Eo
1000
00
0 N
950
000
N90
000
N
M E D I T E R R A N E A NM E D I T E R R A N E A N S E AS E A
ANUBIS-1
I.M May , 2003
EL MAX-1
31
30’N
o31
00
’No
30
30’N
o
ISMAILIA
ALEXANDRIA
PORT SAID
BATTERLAKE
W E S T E R N D E S E
R T
EL MANSOURA
EL QANTARA
DUMYAT
ABU SIR-1 Alexandria Nourth B-1
FAYOUM-1
Alexandria Nourth -2
ABU QIR NORTH
EL KING-1ST
IDKU NORTH-1
IDKU NORTH-3
Alexandria N. F 1
1
2
ABU QIR WEST
1
1
EL TABIA-2
ALEXANDARIYA-1
MARAKIA –1
KAFR EL DAWAR-1
NWD 310 -1BURG EL ARAB-1
MARYUT F2-1
MARYUT A3-1
SHALTUT-1
ABU QIR
GEBEL KANTARA - 1
GEBEL MELHA - 1
NWD 343 - 1
NATRUN GHIBLI-1
NATRUN GHIBLI E. -1
WADI NATRUN - 1
TAHRIR - 1
BIRLGAT - 1
GS 373 - 1
GH 418 - 1
N.DILINGAT - 1
HOSH ISA - 1
650 000 E500 000 E 550 000 E 600 000 E 700 000 E 750 000 E
GH 423 - 1 ITA EL BARUD - 1
S.DAMANHOUR - 1
MAHMOUDIYA - 1
DISUQ - 1
ABU QIR - 3
BUSEILY - 1
EL HASSA - 1
GIDDIYA - 1
BURULUS - 1
ROSETTA -2ROSETTA -7
BALTIM MARE.-1
BALTIM S.-1A
A10 7
Jg 064-1
9
NIDOCO
EL QAR’A
NORTH WEST -1
NIDOCO - 8
ABU MADI W.-1
ABADIYA -1
ABU MADI
4
F11ST
7
13
12
2
3
KHILAIA-1
BILQAS N.-1
EL HAMUL – 1
SIDI GHAZY -1
TIDA -1
QAWASIM -1
SIDI SALIM -1
KAFR EL SHEIKH -1
QALLIN -1
TANTA -1
SHIBIN EL KOM -1
GS 313-3
LL 87-4
SATA-3
KHATATBA-1
KK 85-1
OURABI-1
R 69-1
GS 216-1
UBUR-1
Q 71-`1Q 72-`1
ABU SULTAN
KABRIT-`1
HABASHI-1
ABU HAMMAD-1
MIT GHAMR-1
SINDY-1
E.D.-8
E.D.-7
EL MANS.-2DIKIRNIS-1
TARIF1
2A
SAWARIS-1EL MANS.-1
SHERBEAN-1
GELGEL-1
E.D - 4
SAN EL HAGAR-1
FASADA-1
ABU MONKAR-1
ABUL NAGA-1MATARIYA-1
S.-1
12
345
MALLAHA-1x
ROMMANA -1
EL FAYROUZ
SNEH-1
DRAK-1
PORT SAIDSOUTH-1
HOUT-1
GOBY-1S,T1
PORT FOUADMARINE SE-1
PORT FOUAD M. - 1
NOURAS-1
ABU ZAKN-1
KERSH-1
BARACUDA W. DEEP-1
PORT FOUAD M. SW-1
DARFEEL-1
OCTOPUS-1
SEMMAN-1
KAROUS-1
KAROUS S.-1
DAMIETTA-1
MAYAS - 1
ASFOUR-1
RAS EL BAR-1AIDA 1ST
SEKHMET-1
SEKHMET-2
BASARTA-1
NIDICO - 4
E.D.- 6
E.D -2
BILQA SW.-1
N.TALKHA-1
BATRA1
E.D -1
2
3
S.-1
TAL EL AHMAR-1
L . Burullus
L . ManzalaL . Idku
2
MANSOURA-3
MONAGA - 1
WAKAR -1ABU SEIF - 1
SEGAN - 1
S.BATRA - 1MANSOURIYA - 1
S.MANSOURA - 1
BALTIM E. - 1
BALTIM N. - 1
BALTIM N.E. - 1
2
ROSETTA
4
3
5
AKHEN
TUNA N.E1
1
W-1
N.IDKU2
4
HAPY - 1
1
N.DENISE-1W-1
OSIRIS
SEITH -1
E-1
KARAWAN -1
DENISE-1
N.W-1
TUNA -1
EL TEMSAH
1
2
E.-1
SETIPIO-1
BARBONI-1
E.D -3E.D -5
EL TEMSAH NW-2
QANTARA
EL WASTANI
2
E -11
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E A S T E R N D E S
E R T
SCALE
0 5 10 15 20 25 KM.
10
10
ROSETTA T
REND
BA
LTIM
TR
EN
D
TEMSAH TREND
NEOGENE
QATTARA –ALAMEIN
RIDGE
HINGE LINE
GAS TREND
850
000
N
Nile Delta – Regional Setting
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Achievements in El Mansoura/SE Mansoura
� $700m invested over 10 years� 16 Development Leases declared� Re-invigorated/new plays� First significant oil field discovered
onshore Nile Delta� Fast track developments� Current Production of 176 MMscfe/d
(130 MMscf/d + 7600 blpd) WI basisSE Mansoura
Mansoura Qantara
NE Abu Zahra
W Khilala
S Bilqas
Abu Arida
W DikirnisMansoura
W Mansoura
Salaka
Tamad
Tummay
Rawdah
Aga
Shinfas
S Mansoura
Turbay
S Zarqa
0
2000
4000
6000
8000
10000
12000
07 Feb 06
07 May 06
07 Au g 06
07 Nov 06
07 Feb 07
07 May 07
07 Aug 07
07 Nov 07
07 Feb 08
Oil
Rat
e (B
BLD
)W.Dikirnis
Tamad
TamadW.Khilala
Al Rawda
W.Dikirnis
0
20
40
60
80
100
120
140
160
31 Dec 02
30 Jun 03
31 Dec 03
30 Jun 04
31 Dec 04
30 Jun 05
31 Dec 05
30 Jun 06
31 Dec 06
30 Jun 07
31 Dec 07
Gas
Rat
e (M
MSC
FD)
S.Batra
MansouryaS.BelqasS.Mansoura
Gas ProductionOil Production
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Exploration Focus
BILQAS
MIT GHAMR
EL WASTANI
KAFR EL SHEIKH
QAWASIM
SIDI SALIM
QANTARA
TINEH
ROSETTA
GELGEL
ABU MONKARS.MANSOURAMANSOURIYA
DARFEEL,DENISE,HA’PY,SETH
EL QARA,BALTIM,A.MADI,E.DELTA,S.BATRA,KHILALA
PORT FOAD N.AL RAWDAH
KERSH,WAKAR,ABU ZAKN
TEMSAH,AKHEN
QANTARA
SHERBEEN
W.DIKIRNIS
EL TAMAD
REGIONAL SEAL WITH STRATIGRAPHICALLY TRAPPED MARINE CHANNEL AND TURBIDITE SANDS. EASILY IDENTIFIED ON SEISMIC, GENERALLY SMALL PROSPECTS
POT. EXT. CHANNELS, VAR. QUALITY RESERVOIR BENEATH REGIONAL SEAL
MARINE DEPOSITIONAL ENVIRONMENT, GOOD QUALITY SANDS
TILTED FAULT BLOCK PLAY AND ERODED HILL PLAY BELOW MESSINIAN UNCOMFORMITY
COASTAL SHALLOW MARINE RESERVOIRS IN TILTED FAULT BLOCK PLAYS
ABU MADI
FORMATION LITHOLOGY DISCOVERIESCOMMENTS� Early efforts
� Qantara field –difficult!
� Smaller KEF prospects identifiable from DHIs
� Abu Madi play assumed exhausted
� Then � Extensive 3D� Focus on deeper
horizons� Less obvious from
seismic� New Abu Madi
discoveries� Qawasim success
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Nile Delta – Geological Cross-section
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Sept.,2003I.M
N S
T.D. 3538 m ( 11608’ )
IEOC1966
ABU MADI - 1KB = 6.15 m. ( 20’)GL = 1.00 m. ( 3’)
972 ( 3189’ )
36( 118’ )
3007( 9866’ )
3150( 10335’ )3220( 10565’ )
3305( 10843’ )3335( 10942’ )
3459( 11349’ )
1219( 4000’ )
4100 m (13,452 ft. )
N. BILQ-1IEOC1981
RT = 6.7 m. ( 22’ ) GL = 1.7 m. ( 6’ )
2956( 9699’)
3567( 11.703’)
3860(12,632’)
92( 302’)
1260( 4134’)
1042( 3419’)
1649( 5410’)
2206( 7238’)
3040( 9974’)
3144( 10.315’)
3312( 10.867’)
T.D. 1980 m ( 6497’ )
MAN. - 3MERLON
2003
KB = 10 m. ( 30’)
GL = 2 m. ( 6’)
899(2951’)
1078(3538’)
1527(5010’)
1875(6151’)1879(6166’)
79(260’)
BILQ.SW-1IEOC1968
KB = 7.4 m. ( 24’ ) GL = 2.0 m. ( 6’ )
4571 m (14,997ft. )
1402 m ( 4599 ft )
N.TALKH-1MERLON
2002
KB = 7.0 m. ( 23.5’)
GL = 2.0 m. ( 6.5’)
832 ( 2730’)
1030 ( 3378’)
63 ( 207’)
3139 m (10,300ft. )
S. BATRA-1MERLON
2003
KB = 9.0 m. ( 30’ ) GL = 3.0 m. ( 10’ )40( 130’)
803( 2634’)
991( 3253’)
1460( 4790’)
2051(6730’)
2746( 9010’)2784( 9135’)
2876( 9435’)
3014( 9888’)
3300 m ( - 10827ft. )
742 ( 2434’)
945 ( 3100’)
1375 ( 4511’)
1957 ( 6421’)
2612( 8570’)
2965 ( 9728’)
2706 ( 8878’)2806 ( 9206’)
45(148’)
PETROBEL
E. D.- 71995
KB = 10.0 m. ( 33’)
GL = 1.5 m. ( 5’)
KB = 9.0 m. ( 30’ ) GL = 3.0 m. ( 10’ )
S.MANS.- 1
MERLON2003
T.D. 2961 m ( 9720’ )
754(2472’)
983(3224
2413(7916’)2450(8040’)
2613(85732’)
56(85’)
2916(9568’)
MIT GHAMR - 1
IEOC1966
KB = 17.0 m. ( 56’ ) GL = 4.5 m. ( 15’ )
2201 m (7221ft. )
X X XX X
X X XX
X
X X XX X
X X X
X X
X X XX X
X X XX X
X X XX X
X X XX
X
X X X
436 ( 1430’)
20 ( 66’)
1701( 5581’)
1117( 3665’)
2002 ( 6568’)
483 ( 1585’)
1014 ( 3327’)
653(2142’)
R – 69 - 1KB = 126 m. ( 413’ ) GL = 120 m. ( 394’ )
1977S.F.MINERAL
2487 m ( 8160 ft. )
201 ( 659’)
902 ( 2959’)
493 ( 1618’)
597 ( 1959’)
1414 ( 4639’)
1648( 5407’)
BALTIM E.- 1K.B. = 30 m. ( 98’ )WD = 45 m. ( 148’ )
IEOC1993
T.D. 3912 m ( 12835’ )
230(755’)
712(2336’)
3488(11444’)
3590(11779’)3646(11962’)
3756(12323’)
3850(12632’)
1259(4131’)
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~~~
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57Km.31Km.10Km.11Km.7Km.8Km.5Km.8Km.24Km.39Km.
10Km.
500m.
1010
SEA BOTTOM
~~~~~~
~~
25 ( 82’)
890 ( 2920’)
1110 ( 3642’)
1494 ( 4902’)
2095 ( 6874’)
2751 ( 9026’)
3058 ( 10,033’)
3213 ( 10,542’)
3702 ( 12,146’)
4087 ( 13,409’)
2795 ( 9170’)2851( 9351’)~2823( 9292’)
?
?
?
SHORELINE
MIT GHAMR
EL WASTANI
KAFR EL SHIEKH
DABAASID
I SALIM
QAWASIM
QANTARA
CR
ETA
CEO
US
JUR
ASS
ICLI
AS
DO
GG
ER
MA
LM
APT
AINALB
.CEN
.
(TR
OT
.)
(SE
RR
.)(B
UR
D.)
(AQ
UIT
.)
(LA
NG
H.)
NE
OG
EN
E H
ING
E L
INE
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Practicalities of 3D in the Delta (2)
� In an area where crops can be harvested 3 times per year…
…discussing access to farmland for seismic operations can be time-consuming and problematic
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2008: SE El Mansoura 3D Survey
� Did you say “breakfast for 1,000?!?”
� Base Camp, Western Geco crew
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Practicalities of Drilling in the Delta
� Clustering development well sites has reduced land issues (e.g. West Dikirnis)
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West Khilala Gas Field
� Discovered Oct 2005
� Found thick Abu Madi channel sands of 18%-28% porosity and Darcy permeability
� Re-invigorated Abu Madi play in onshore Delta
� Field on stream February 2007
� Current production >100 MMcfpdfrom 6 gas producers
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Field trip to Bahariya Oasis (Western Desert)– Cretaceous fluvial/estuarine sands, possibly deposited
by proto-Nile. A reservoir target in the Western Desert and similar to the Cretaceous targets in SE El Mansoura
– Further exploration success clearly depended on getting out into the field and studying those rocks really close-up!
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• Discovered Gas Down To with West Dikirnis-1 (Nov 2005)
• Then found oil with WD-2 (June 2006)
• First significant oilfield onshore Nile Delta
• Drilled appraisal wells and used as Phase I development wells
• Phase I complete (6 oil producers)– Field on stream November 2007– WD-1 kept for future gas re-injector
• Phase II: Horizontal wells, Gas Re-Injection, LPG recovery
NW SE
WD1
WD1
WD2
WD2
West Dikirnis Oil Rim Field
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� Wells Drilled 49
� Successful Wells 25
� Success rate 51%
Exploration Success Rate
� Exploration wells drilled from 2000 to 2008 by Melrose/Mansoura in Qantara, El Mansoura and SE El Mansoura Concessions
� Wells drilled to targets in:� Kafr El Sheikh, Abu Madi,
Qawasim and Sidi Salimformations
Melrose Exploration Statistics2000-2008
24 (49%) 25 (51%)
SuccessesFailures
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Mesaha Block – Logistics
Very remote: logistics issues� 12-18 hrs to first aid facilities,
then flight to hospitals, etc
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Mesaha Block – Ground Operations
� Varied terrain, from rocky desert to jebel to sandy desert including dunes
� Implications for ground operations
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Current/future challenges for Melrose Egypt
� Pursue further horizontal well drilling in West Dikirnis
� Deliver Gas Re-Injection and LPG Projects to plan
� Continue to exploit El Mansoura Concession
� Build the PI in SE El Mansoura Concession
� Mature Mesaha to readiness for seismic and then drilling
Cycle B
Cycle A
Cycle C
GOC
OWC
N` S
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