Egypt signs first gas fracking contract with Apache, Shell

Deya Abaza , Wednesday 17 Dec 2014

Texas-based Apache Corp and Shell Egypt to invest up to $40 million in three horizontal wells and 'fracking' in Western Desert

Egypt has become a net importer of natural gas in recent years as rising domestic consumption (Photo: Reuters)

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.

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