Algeria is a key part of Petroceltic’s strategy to develop energy resources in the North African and Mediterranean regions. Algerian petroleum resources are world-class with 35 billion boe of proven hydrocarbon reserves (Source: Wood MacKenzie) and supplies approximately 10% of Europe's natural gas via existing pipelines to Italy, Spain and to LNG projects. This supply capacity is set to expand with the recently completed Medgaz pipeline to Spain and the Galsi pipeline to Italy which is under development.
Petroceltic was awarded the Isarene Production Sharing (“PSC”)Contract in April 2005, as Operator with a 75% equity interest, partnered with Sonatach, the National Oil and Gas Company of Algeria. Petroceltic's Isarene PSC area is located in the south of the Illizi Basin in South Eastern Algeria. The original permit area covered in excess of 10,000 sq km and is bordered by a number of fields with proven oil and gas production. The In Amenas project to the east is Algeria’s largest wet gas project, jointly operated by BP, Sonatrach and Statoil. The Repsol operated oil field Tiffernine is less than 15kms from the northern block boundary of the Isarene permit.
Work Programme
Following a successful 2009/2010 five well drilling campaign Petroceltic, in conjunction with Sonatrach, secured an addendum to their Production Sharing Contract which provides for a two year extension period, from the 26th April 2010, to carry out appraisal work on four discovery areas, namely Ain Tsila, Isarene North East, Isarene North West and Hassi Tabtab. The total area retained for delineation is 4032 sq km (equivalent in area to approximately 16 North Sea Blocks).
Petroceltic has a dedicated multi-disciplinary appraisal team which has focused primarily on the compilation, synthesis and integration of all geological, geophysical and reservoir engineering data. In addition, the appraisal team compiled an inventory of potential Ain Tsila delineation drilling locations of which six locations were high-graded. These wells, AT-4 through to AT-9, were drilled and tested during the period from November 2010 through to December 2011. All of the delineation wells were drilled on the Ain Tsila field. The map below shows the location of all of the wells drilled on the retained license area, including wells previously drilled on the satellite fields.
In order to establish the maximum flow potential from the wells fracture stimulation, horizontal drilling (2 wells) and the use of open hole multi stage fracture completion equipment was incorporated into the well design. The fracture stimulation and the enhanced completion design have been extremely successful in enhancing production from the wells. The testing results from the delineation program were extremely encouraging producing the best results on the permit to date. With the exception of AT-6, all wells flowed gas to the surface and wells AT-8 and AT-9 produced gas and gas condensate rates far in excess of anything experienced so far on the Licence or in the region. Well AT-7 was significant in demonstrating that commercial flow rates are achievable in the Southern part of the field outside of the current 3D seismic cover.
Impact of the Delineation Programme
Following the delineation programme the estimated mid case gross hydrocarbons in place for the development have been revised upwards to over 10,000 billion cubic feet of gas in place, recovering 2,400 billion cubic feet of gas and more than 200 million barrels of hydrocarbon liquids. First gas is anticipated from the development in 2017. Initially some 35 wells will be required to establish plateau production of between 300-500 MMscf/d of gas. Depending on the recovery factors achieved a total of 150-200 wells could be required over the 30 year life of the permit. Significant additional capital expenditure will not be required until 2014 and the total capital spend up to first gas is expected to be in the region of $1.7 billion to commence recovering some 650 MMboes over the lifetime of the permit.
Next Steps
The results of the delineation drilling program and the previous exploration programme are being incorporated into a Final Discovery Report (FDR), which is effectively a field development plan. The FDR will be submitted to Sonatrach for review early in 2012 and, subject to Sonatrach’s agreement and a declaration of commerciality, the report will be submitted to the Algerian regulatory body, Alnaft, for final approval. Once approval is granted a “Joint Body” incorporating representatives from the partnership will be formed to manage the development activities.
Enel Farmout Transaction
In April 2010 Petroceltic announced that it, has signed an Agreement with Enel Trade S.p.A. (“Enel”) under which Enel acquired an 18.375% interest in the Isarene PSC from Petroceltic. Upon completion of the farmout, Petroceltic will hold a 56.625% interest in the PSC and continue as Operator. Enel will hold an 18.375% interest and Sonatrach will hold the remaining 25%. The final piece of regulatory approval for the transaction was received in December 2011, when formal ratification of the transaction by the Algerian Council of Ministers was announced.
Enel is one of the largest European energy utilities and is the second largest buyer of Algerian gas. Enel’s unparalleled knowledge of European gas markets combined with its historic relationship with Sonatrach makes it an ideal partner for this phase of the Isarene development project. In addition to the capital investment of the transaction, this strategic alliance should provide substantial support for the future marketing of Isarene gas.
Algerian Overview:
Isarene Permit Area:
Top of page