The Scotsman: Shell seeks more gas from deepwater Egypt area: "Royal Dutch Shell said on Sunday it had found up to 1 trillion cubic feet (tcf) of gas so far in a deepwater concession in Egypt, but a rig shortage had delayed further exploration drilling to mid-2006.": Posted Monday 19 December 2005

By Edmund Blair

CAIRO (Reuters) - Royal Dutch Shell said on Sunday it had found up to 1 trillion cubic feet (tcf) of gas so far in a deepwater concession in Egypt, but a rig shortage had delayed further exploration drilling to mid-2006.

Shell wants to find enough gas in its North East Mediterranean Deepwater (NEMED) concession to build its own liquefied natural gas (LNG) processing unit, or train, in Egypt. The North African country began LNG exports this year.

Zainul Rahim, chairman of Shell Company in Egypt, told reporters his firm had found 0.8 tcf to 1 tcf of gas in NEMED, where water depth is as much as 3,000 metres. He said Shell would need about 3 tcf to supply its own LNG train.

"We are hopeful that we will be able to secure or confirm enough reserves to enable us to get at least one train going," he said on the sidelines of a gas conference in Cairo.

But he said drilling three or four further exploration and appraisal wells in the area had been delayed because of a global shortage of rigs able to drill to the depths required. Shell had originally planned to drill the three or four new wells in 2005.

"The rig has been held back in Brazil and it will not be with us until about May or June next year," Rahim said, adding that this could push back planned production from the concession to 2010 at the earliest and more likely closer to 2011.

Shell had previously said it wanted to start production as early as 2009.

Rahim said Shell was already talking to the government and operators of Egypt's two LNG plants about building a new train but had not decided which of the two sites it would choose.

Egypt exported its first LNG cargo in January from the single train at its Damietta plant, in which Union Fenosa and Eni have stakes. Exports from two LNG trains at the Idku plant, in which BG is a major shareholder, followed later in the year.

ENOUGH GAS

Egyptian Oil Minister Sameh Fahmy said the timetable for building new trains was being discussed with investors.

"It is planned in Idku to have six trains, but in the near future, I think we are going to have an additional two trains in Idku and an additional one train in Damietta," he said.

"As soon as we find rigs and we start the development programme, we can decide immediately when is the reasonable time (for new trains) ... We have enough gas but we have to develop the gas," he told reporters.

He said Egypt's proven gas reserves were 67 tcf and industry experts expected reserves to rise to 100 tcf to 120 tcf.

Several companies have delayed drilling campaigns because of the spike in demand for oil rigs, which pushed up rig prices. Analysts say the demand for expensive rigs indicates energy companies expect oil and gas prices to stay high.

Rahim said the cost of a rig in the past two years had risen to as much as $500,000 a day from about $150,000 a day. He said Shell had booked the rig for NEMED for about $250,000 a day.

He said Shell, which already produces oil and gas in Egypt, was planning to carry out 3-D seismic work in its North East Abu Gharadig and West Sitra oil and gas concessions in Egypt's Western Desert in 2006.

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