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  February 2014
Gearing Up for an Exciting Year

Our 25th year in the upstream industry has some exciting highlights on the horizon.  In April, we'll be exhibiting alongside our partners, Sirius Exploration Geochemistry, at the big American Association of Petroleum Geologists conference in Houston. Later, in August, we'll be exhibiting together again at the Unconventional Resources and Technology Conference in Denver.  In the meantime, our representatives in the United States are ready to take any questions or queries you may have, and our Levantine Basin and Cenomanian-Turonian studies are available for purchase.  We hope the year has started on a good note for you all, and we look forward to seeing more of you as it continues.

Your Friends at StratoChem Services

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Industry News
Egypt Flag FlatEgypt: New Petroleum Pacts 
January 11th, 2014
(www.oilegypt.com)

President Adli Mansour has issued decrees approving eight new agreements for oil and gas exploration with investments worth $1.2 billion. Seven of the agreements, made by the Egyptian Natural Gas Holding Company (EGAS), were with Emirati, Italian, English, Irish and Canadian companies, in addition to a further amended existing agreement.

The new agreements are set to search for oil and gas in the Mediterranean, the Nile Delta and the Gulf of Suez. These areas were selected by EGAS for the drilling of a minimum of 17 new wells during a three-year period of research.

Mansour had previously issued 21 decrees for petroleum agreements for oil and gas exploration with international companies, with investments of a minimum of $713 million and the drilling of 109 wells.

In November, Minister of Petroleum Sherif Ismail signed nine crude oil and natural gas exploration agreements in the Gulf of Suez, Sinai and the eastern and western deserts that required minimum investments of $470 million and the drilling of 15 wells.

News from StratoChem
As part of our twenty-fifth anniversary celebrations, StratoChem has something big planned. Under the direction of our new marketing specialist, Gena Aziz, we'll be releasing a series of movies about StratoChem and its innovative geochemical solutions.  As they come out, we'll make them available on our website for all to see as a way of celebrating a quarter-century spent serving the upstream industry and the beginning of a brand new era of possibilities.
TransGlobe Announces 2013 Year-End Reserves Egypt Flag Flat
 January 28th, 2014
(gulfoilandgas.com)
 
TransGlobe Energy Corporation announces its 2013 year-end reserves and operations update before the opening of stock markets.

Reserves:
The Company's 2013 and 2012 year-end reserves were prepared by the independent reserves evaluation firm of DeGolyer and MacNaughton Canada Limited (DeGolyer), in accordance with National Instrument 51-101.

The following is a summary of DeGolyer's evaluation for the year ended December 31, 2013 with comparatives to the year ended December 31, 2012. The recovery and reserve estimates of crude oil, natural gas liquids (NGLs) and natural gas reserves provided in this news release are estimates only, and there is no guarantee that the estimated reserves will be recovered. Actual crude oil, NGL and natural gas reserves may be greater than, or less than, the estimates provided herein. All reserves presented are based on DeGolyer's forecast pricing, effective December 31, 2013 and December 31, 2012, respectively.

2013 Reserve Changes:
In 2013, the Company's activities focused primarily on the continued development of its operated West Gharib and West Bakr (acquired at the end of 2011) concessions in the Arab Republic of Egypt (Egypt).

In Egypt, the Company's 1P reserves fell 3 percent from 2012, representing a production replacement of 85 percent. On a 2P basis, the year-over-year decrease was 7 percent, equal to a production replacement of 53 percent, while on a 3P basis, the year-over-year decrease was 12 percent, equal to a production replacement of minus 4 percent. At West Gharib, year-end 2012 undeveloped reserve bookings were brought on production throughout 2013, which generally extended producing pools to the boundaries of the West Gharib lands. As a result, there were minimal new reserve additions to replace the 4.6 million barrels produced from West Gharib during 2013.

At West Bakr, significant reserve additions were achieved in the K and H fields due to detailed reservoir simulation, development drilling and production optimization. Overall, 2P reserves at West Bakr increased 22% on a year over year basis, which represented a 268% replacement of the 1.8 million barrels produced from West Bakr during 2013. East Ghazalat reserves were down year over year due to the 2013 appraisal drilling results and the corresponding decrease in the number of undeveloped drilling locations.

In the Republic of Yemen (Yemen), reserves were reduced primarily due to production and reduced field activity associated with labor unrest in the country.

The Constant Pricing used to estimate future net revenues is as follows, with Egypt prices based on prices received for West Gharib, West Bakr and East Ghazalat production and Yemen prices based on prices received for production from Blocks 32 and S-1.

Pursuant to the SEC pronouncement in 2009, the Constant Price cases are based on the average of the reference price received on the first of each month during the year adjusted for respective differentials at year-end.

West Gharib production has been in the 12,000 Bopd range for the past 4 months. Well stimulations and completions have been ongoing however production increases have been offset by natural declines and well servicing. An additional 6 wells are scheduled for completions and/or stimulations during the first quarter.

West Bakr production declined from 6,000 Bopd in October, to 5,500 Bopd in November and 5,200 Bopd in December due to a number of pump changes and workovers along with service rig mechanical issues that hampered well servicing efficiency. An additional service rig was contracted on a short-term basis in order to alleviate the servicing backlog in November/December and boost overall production. January production has increased to average 5,900 Bopd MTD primarily due to new wells and an active workover program in December.

Operations Update (Arab Republic of Egypt):
Subsequent to the Mid Q4 update (December 9, 2013) the Company has drilled five wells resulting in three oil wells, one water injector and one dry hole.

At West Gharib (100% working interest) the Company drilled a Lower Nukhul oil well at Arta (waiting completion) and a water injector at Hana to optimize the Hana water flood. The rig is currently drilling a Lower Nukhul development well at Arta and is scheduled to drill up to nine wells in West Gharib during Q1 and Q2 of 2014 prior to moving to the new North West Gharib ("NWG") concession for the remainder of 2014.

At West Bakr (100% working interest), the Company drilled oil wells in H and K fields. The H field well encountered two oil zones and was completed and is currently producing approximately 300 Bopd from the lower-most zone. The K field well encountered oil in three zones (Asl A, B & E) and is scheduled for completion in the Asl E formation. The drilling rig is currently drilling in K field and is scheduled to continue working in West Bakr with 17 wells planned for 2014.

At South Alamein (100% working interest), the Company drilled and abandoned the West Manar exploration well.

West Manar was drilled to a total depth of 7,300 feet and cost approximately $1.9 million to drill and abandon, and the rig was subsequently released. This concession remains a high-potential exploration area for the Company however future exploration drilling is dependent on receiving the necessary military approvals to access the broader Boraq area of the concession.

At East Ghazalat (50% working interest, non-operated) drilling commenced on a shallow (planned 4,400 feet) exploration well at East Ghazalat #3. East Ghazalat #3 is located approximately 3 kilometers east of the Safwa development lease and is targeting a new play, a Cretaceous reef feature. Should this well be successful, it will significantly de-risk this play and which could result in additional drilling. A total of 14 drilling targets have been identified on the existing 3D seismic data, which DeGolyer independently evaluated as of December 31, 2012 and estimated the prospective resources in this play type to contain 6 million barrels (gross unrisked) on a P-mean basis.

Following East Ghazalat #3, the drilling rig is scheduled to drill two development wells in the Safwa field.

New Exploration Blocks, Eastern & Western Desert (100% working interest):
The Company has prepared and submitted an initial 18 wells for the necessary approvals on the North West Gharib ("NWG") block in the Eastern Desert. The Company has identified 79 drilling locations based on existing 3D seismic and geological modeling of the area. The Company is targeting the second quarter of 2014 to commence exploration drilling at NWG. Based on current mapping the Company has internally estimated a prospective resource of 71 million barrels on an un-risked deterministic basis for the entire NWG block. The 2014 drilling program will target up to 58 million barrels of the total 71 million barrels of prospective resource identified to date.

Based on surface and remote-sensing mapping, the same structural configuration that created the pools found in the West Gharib concession is likely present in the NWG, SW Gharib ("SWG") and SE Gharib ("SEG") blocks. The historical field size distribution data indicates that the average field size in the broader onshore Gulf of Suez (Eastern Desert) area is roughly 20 million barrels per field of recoverable resource. The Company has identified an additional 15 areas of interest ("leads") in the NWG block, 4 leads on the SWG block and 2 leads on the SEG block that will be followed up and further refined by field mapping and the high-resolution seismic acquisition program.

In the Western Desert, the South Ghazalat concession will be covered by an 800 km2 seismic acquisition program during the initial evaluation. This large block is situated on the western margin of the prolific Abu Gharadig Basin, immediately west of the non-operated East Ghazalat block, where a Jurassic gas-condensate discovery was made and announced late in 2013.

The total seismic program will consist of approximately 1,800 square kilometers of 3D seismic and 300 kilometers of 2D seismic. Subject to approvals and crew availability, the Company's target is to commence acquisition in the Eastern Desert during Q2 of 2014. It is expected the full program, providing broad coverage of the new concessions, will be completed in early 2015.

New EGPC Bid Round: EGPC has recently announced a new bid round which offers 15 blocks across Egypt. The company plans to evaluate the offered blocks. As a result, the Company may bid on several new exploration blocks that would augment the recently acquired ~800,000 acres of exploration acreage.

Egypt Flag Flat Apache Plans Further Development for Active Egyptian Program
January 30th, 2014
(www.oilandgas360.com)

Apache Corp. has applied for licenses to develop two recent discoveries in the Western Desert of Egypt, where drilling now includes horizontal wells targeting conventional and unconventional resources.

The company said it expects approval this year for development leases for discoveries in the North Tarek and Khalda Offset concessions.

 

In the Khalda Offset area, the Apries-1X well tested 4,389 b/d of oil and 14.2 MMcfd of gas from Paleozoic Basur sand in the Shushan basin. The $5-million well cut 87 ft of net pay in the Basur.

 

The NTRK-H-1X well in the North Tarek area, which is in the Matruh basin, tested 20 MMcfd of gas and 250 b/d of condensate from 60 ft of fraced Jurassic Lower Safa pay. Drilling of the well followed the Upper Safa gas-condensate discovery in the NTRK-G-1X well, which was drilled to 15,710 ft at a cost of $7 million (OGJ Online, May 7, 2013).

 

Last year, Apache received approval of 20 leases converting short-term exploratory rights into 20-25-year development licenses covering 66,000 acres. The company now has 119 development leases in Egypt covering almost 2 million acres.

Apache has 25 rigs at work in Egypt, including four drilling horizontal wells. Its exploration leases cover 5 million acres. Sinopec International Petroleum Exploration & Production Corp. last year bought a one-third interest in Apache's Egypt business (OGJ Online, Aug. 30, 2013).

 

Apache works in the country through joint ventures with Egyptian General Petroleum Corp. called Khalda Petroleum Co. and Qarun Petroleum Co.

 

Drilling in 2013

Last year, Apache operated an average of 26 rigs and drilled more than 250 wells in Egypt. Gross average production in the third quarter was 346,530 boe/d.

 

Drilling in 2013 included the Western Desert's deepest well, NRQ-8X, which reached 19,322 ft in the North Ras Qattara Concession of the Alamein basin. The well, an appraisal of the NRQ 3151-1X discovery, encountered 98 ft of net pay in the Upper and Lower Safa formations. Apache said it expects to test the well this quarter.

 

Elsewhere, Apache is developing Meghar field, a 2012 discovery in the Abu Gharadig basin. Three wells drilled in the second half of 2013 logged 127-181 ft of net pay in Lower Bahariya, Upper Bahariya, Abu Roash G, and Abu Roash E sands.

 

In Southwest Abu Gharadig field, the SWAG-8 development well flowed 756 b/d of oil and 15.3 MMcfd of gas during tests of 36 ft of Abu Roash G pay.

 

On the Siwa Concession of the southern Faghur basin, the Khalda venture drilled the first development well in SIWA-L field. The SIWA 2-L2 flowed naturally on test at the rate of 3,047 b/d of oil from Paleozoic Desouky sand. Two SIWA-L wells are together producing more than 8,000 b/d in an early-production system. Apache plans additional development drilling this year.

Another Faghur basin well, TAYIM-W3 in the West Kalabsha Concession, tested 2,412 b/d of oil and 5 MMcfd of gas from 32 ft of total pay in the Upper and Lower Safa.

 

Apache said Khalda Petroleum recently completed expansion of Kalbsha facilities enabling oil production to increase by 4,500 b/d this quarter.

 

Horizontal drilling

The first well of a multiwall horizontal drilling program, AG-115H in Abu Gharadig field, has come on stream and produced averages of 1,681 b/d of oil and 3 MMcfd of gas during December. Production is from a 1,970-ft lateral of a horizontal section in a 20-ft oil zone in Abu Roash D limestone. The well cost $6.5 million to drill and complete.

 

A horizontal well targeting the Abu Roash G dolomite in Main Razzak oil field is being tested. Drilling is in progress on a horizontal well targeting Abu Roash G sandstone in North El Diyur field, a horizontal well targeting Abu Roash G dolomite in North Ras Qattara field, and two horizontal wells targeting the Upper Bahariya formation in Umbarka and Neama fields.

 

Apache said average production from its Abu Gharadig basin properties reached a record 55,214 boe/d gross in December, up 90% since acquisition of the assets in 2010.

Flat Omani Flag Oman Plans to Award Two Oil Blocks to International Firms
January 20th, 2014
(gulfoil&gas.com)

Oman's government plans to award two oil blocks to international firms for exploration in Southern Oman this year, which is part of five blocks tendered last year.

The Ministry of Oil and Gas is on the verge of finalising negotiations with foreign companies, said a senior official of the Ministry of Oil and Gas, on the sidelines of the International Unconventional Gas Conference and Exhibition here.

"We continuously offer open blocks to the market," said Salim bin Nasser Al Aufi, Undersecretary at the Ministry of Oil and Gas. "We have already finished negotiations for five oil blocks," added Dr Saleh A Al Anboori, Director General of Management of Petroleum Investment at the Ministry of Oil and Gas.

Oman government last month signed one each production sharing agreement with Total Exploration and Production Oman Petroleum B V and Petrogas Kahil for developing an offshore oil block in northern coast and an onshore block in Al Wusta region, respectively.

The first agreement with Total was for developing offshore block 41 spread in a large 23,850 square kilometre area off northern coast, while pact with Petrogas was for onshore block 55, spread in an area of 7,564 square kilometres.

As many as twenty-two multinational firms are currently exploring for - and in some cases producing - oil in almost 25 concession blocks in the Sultanate under production sharing agreements. Presently, multinational oil companies contribute 30 per cent of total crude production, while PDO constitutes the remaining 70 per cent oil output. As huge investment is required for bringing oil above the ground in view of the peculiar nature of reservoirs in Oman, the government has been encouraging multinational firms to undertake exploration on production sharing basis.

Meanwhile, David Dalton, Middle East Regional President of BP, said that the British oil company has already started procurement for developing the Khazzan tight gas field in north-central Oman with an envisaged investment of $16 billion. Oman government and the British company signed a gas sales and production sharing agreement last month.

Well Drilling Programme
Dalton said that the full-field well drilling programme has already been started. "We have one rig operating in the area now and we are bringing two more rigs. As and when they are operational, BP will be adding more wells," said Dalton, adding; "We hope to have around 50 wells completed by the time we commission the project in 2017." The full field development will involve a drilling programme of around 300 wells over 15 years to deliver plateau production of one billion cubic feet of gas per day and 25,000 barrels per day of gas condensate.

BP is signing agreements with key contractors for ramping up field development programme over the next few months. BP has 60 per cent stake in block 61 and Oman Oil holds the rest 40 per cent.

Apart from Salim bin Nasser bin Said Al Aufi, Raoul Restucci, Managing Director of Petroleum Development Oman, Menahi Al Anzi, Deputy CEO - Exploration and Gas, Kuwait Oil Company David Dalton and Jerome Ferrier, President of International Gas Union, have addressed the International Unconventional Gas Conference here yesterday.

 

Iraqi-Kurdish-Turkish Oil Dispute
January 24th, 2014
(gulfoilandgas.com)

A headlong collision across Middle East fault lines is drawing close as Turkey, Iraq and ethnic Kurds who run their own region in between wrangle over oil exports. Time is running out as more oil flows through a new pipeline from Iraqi Kurdistan for export from Turkey, in defiance of Baghdad, which has threatened to punish both Ankara and Arbil for "smuggling" oil out of Iraq.

Talks have borne little fruit and, with the Kurds seeking buyers for the oil from their autonomous territory thanks to an agreement with Turkey signed in November, Ankara will soon be forced to take sides.

"Turkey must now choose either to turn its back on Baghdad and go ahead with its deal with the Kurds, or suspend direct exports from the region until an agreement is reached between the central government and Arbil," said a senior Iraqi official who asked not to be named.

"Unfortunately, facts on the ground show that Ankara eventually will go ahead with their deals with the Kurds at the expense of their relations with Baghdad."

Oil traders expect at least one symbolic cargo of the oil to be exported by the end of the month, preferably with Baghdad's consent, but without it otherwise.

"That will put additional pressure on Baghdad to negotiate with a sense of urgency," said a Kurdistan-based industry source on condition of anonymity. "We always thought that it (the pipeline) would be the catalyst for the initiation of serious discussion and resolution of the export problem."

Behind the scenes, and the hotter rhetoric, the private voices in Baghdad and Arbil are, however more united - but in pessimism that an enduring compromise can be found to a dispute that has strained Iraq's federal unity.

If a deal is elusive, the Kurds retain some powerful political cards to play in the formation of any Iraqi government after elections at the end of April. Equally, Baghdad could cut funding to the northern enclave.

Kurdish officials are positive Ankara will stand by them and publicly say they are hopeful a bargain can be struck with Baghdad, but in private admit their differences are almost insurmountable.

The latest round of talks ended inconclusively in Baghdad on Sunday. Iraq's Deputy Prime Minister for Energy Hussein al-Shahristani is due to visit the Kurdish capital Arbil for further negotiations in the coming days, although no date has been formally announced.

Turkey has sought to stay above the fray.

"We have repeatedly said, these are decisions that they will make among themselves," Turkish Energy Minister Taner Yildiz told reporters. "I believe our brothers will meet at a good point."

Ankara may want to see a formal agreement in place before allowing continuous exports from the region, but industry sources there are sceptical any deal would hold.

"Turkey has come to a point where it has to take extra care," said one. "I don't see a lasting solution... but there could well be a temporary arrangement so that the pressure in the system can be relieved, at least in the interim."

Bargaining In Baghdad

Autonomous since 1991, Kurdistan has often chafed against central authority, and even raised the prospect of secession from Iraq, but is nonetheless reliant on Baghdad for a slice of the OPEC producer's $100 billion-plus budget.

Baghdad has warned it will sever that lifeline if the Kurds exports oil without its consent. The Iraqi cabinet this month approved a draft budget for 2014 that would slash the region's share of state revenues unless it exports 400,000 barrels of crude per day via State Oil Marketing Organisation (SOMO).

That is well above Kurdistan's current export capacity of around 255,000 bpd, industry sources say.

Officials in the region are confident the budget will not pass in parliament because most Sunni lawmakers are boycotting the assembly, and a Kurdish walkout would likely prevent a quorum.

Nonetheless, they are considering their options should it come to that.

"If Baghdad cuts the budget as they threatened, then Kurdistan has a lot of cards to play," said a senior official in Arbil on condition of anonymity. "Not allowing the flow of oil from Kirkuk to Ceyhan is one of them."

It is not clear how the Kurds would prevent pipeline oil flowing from the Kirkuk oilfields to Turkey's Mediterranean port of Ceyhan, but a stretch of it runs through their territory.

Another less provocative option would be to twist Iraqi Prime Minister Nuri al-Maliki's arm before a parliamentary election due on April 30, in which he will need Kurdish support to win a third term or form a government.

"The threats being made today only demonstrate that oil disputes are most likely going to be on the negotiating table between Kurdish and Arab parties when forming the next government," said Ramzy Mardini, nonresident fellow at the Atlantic Council.

In This Issue
Upcoming Events

2/5 - "NAPE Expo" - Houston. USA

2/17 - "International Petroleum Week 2014" - London, UK

2/24 - "E&P Data and Knowledge Management 4th Global Praxis Interactive Technology Workshop" - Abu Dhabi, UAE

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