TAG Oil has received approval to enter into a petroleum services agreement ('PSA') by the Egyptian National Petroleum for Exploration and Development Company ('ENPEDCO') for the development of the unconventional Abu Roash 'F'('ARF') reservoir within the Southeast Ras Qattara concession (the 'SERQ Concession') in Egypt’s Western Desert.
This award follows a competitive bidding process initiated by Egypt’s Ministry of Petroleum and Mineral Resources through the Egypt Upstream Gateway. The PSA will become effective upon execution of the definitive agreement and the posting of a US$100,000 performance letter of guarantee.
About the SERQ Concession
The SERQ Concession spans approx. 2,000 sq km (512,000 acres) and benefits from extensive existing subsurface data, including full 3D seismic coverage and several existing wellbores. The area has a record of conventional oil production from deeper formations that intersect the ARF reservoir. Conventional production will remain and continue to be developed by ENPEDCO. TAG Oil will have access to several shut-in wells within the concession offering low-cost re-entry opportunities to evaluate the ARF’s unconventional potential.
TAG Oil has completed detailed technical studies of the ARF reservoir, identifying it as a low-permeability carbonate formation with substantial development potential. The Company believes the reservoir holds a high likelihood of commercial success using proven horizontal drilling and hydraulic fracturing technologies, methods that have already demonstrated positive results in TAG Oil’s Badr Oil Field (BED-1) concession in Egypt, as well as in comparable plays such as Canada’s Montney formation and the Eagle Ford shale in the United States.
To further confirm its development strategy and quantify the ARF’s resource potential at the SERQ Concession, TAG Oil has completed an independent evaluation of the reservoir. Results are expected to be released next month.
Development Plan
TAG Oil’s proposed development of the ARF will advance in two (2) phases:
Phase 1 – Firm Commitment Evaluation Period (Two (2) Years)
- Re-entry of one (1) or more existing vertical wells to perform Diagnostic Fracture Injection Testing (DFIT) of the ARF.
- Drilling a new vertical well or sidetracking an existing well (vertical or horizontal), followed by potential hydraulic fracture stimulation of the ARF.
Phase 2 – Optional Development Period
Upon the successful completion of Phase 1, and based on actual production results and cost analysis, TAG Oil will have the option to proceed with full-scale commercial development of the ARF reservoir under acceptable economic terms to be agreed by both parties.
Commercial Terms
Under the PSA, ENPEDCO will pay TAG Oil a sliding-scale service fee based on production volumes, ranging from 55% to 48% of gross project revenue. This fee compensates TAG Oil for funding 100% of the capital and operating expenditures associated with the ARF development at the SERQ Concession. All royalties and taxes will be paid by the Egyptian General Petroleum Corporation on behalf of the Company.
Abby Badwi, TAG’s Executive Chairman and CEO, commented, 'We are very pleased to have received this approval, which represents another significant step in expanding TAG Oil’s footprint in Egypt. While the initial phase focuses on piloting the development concept, the reservoir characteristics and our proposed strategy are based on proven technologies that have consistently delivered successful outcomes in similar projects across North America.'
Source: TAG Oil
