Apache, Seagull find cache of oil in Egyptian desert

HOUSTON -- Qarun, a shah who lived in Moses' time, is said in the Koran to have had so much treasure that it was "a burden to a body of strong men." But his wealth was his undoing -- he was swallowed up by the earth, weighed down by his riches.

These days at the oil field in Egypt's western desert that bears the name of the greedy king, and at five other sites, two independent oil companies are drawing Egypt's natural riches back from the earth at a furious pace, drilling more than two wells per month this year on one concession alone.

Houston-based Apache Corp., the largest U.S. independent oil company operating in Egypt, has about 11 million acres in the country under lease in four concessions. The majority of the land is virtually unexplored and straddles the Nile River south of Cairo. Seagull Energy Corp. is Apache's partner in three of the prospects that it obtained when it bought Global Natural Resources earlier this year. Houston-based Seagull also holds 100 percent of two other concessions in and near the Gulf of Suez. So far in 1996, 25 wells have been drilled in the Qarun concession and two more wells are being drilled. The companies have kept five drilling rigs working there constantly. Exploration has been slowed there by the shortage of land rigs cause by the furious pace of activity in the area. "We produce 50,000 barrels a day in North America and there is a good possibility we could be at that in five years in Egypt," said Raymond Plank, Apache chairman. "We could do over there in five years what it took us 40 years to do in the states." Compared to some of the larger oil and gas finds in Egypt, specifically in the Gulf of Suez and more recently in the Nile River delta offshore area, the western desert has not generated that much excitement, but analysts say it is a perfect situation for independents such as Apache and Seagull. The oil wells there are easy to drill, relatively inexpensive -- about $1 million to $3 million apiece -- and they produce high-quality oil. "The prospects in the western desert are some of the premium opportunities in the world," said George Gaspar, energy analyst with Robert Baird & Co. "Apache and Seagull have plenty to handle now but this should give them the impetus to broaden internationally in the future." "We like Egypt a lot," said Barry Galt, chairman of Seagull. "I would be very surprised if we have bid on our last concession in Egypt." Attempts to develop Egypt's western desert by majors have yielded mixed results, but never enough potential for a major oil company to invest heavily in the area. "There have been a dozen wells drilled there by companies that could have had Global for lunch and not even known they had eaten, so the western desert had not historically been the site of large discoveries," said Robert Vagt, former chairman of Global Natural Resources and now president of Seagull. "Luck played a big part in the success of our first well." The major oil companies have been active in other parts of Egypt. Amoco Corp. has had a presence there for more than 30 years, and is the largest oil producer in the country. It has pumped 3 billion barrels of oil out of Egypt since 1963. Although Amoco has focused much of its activity in Egypt in the Gulf of Suez, the company has explored in the Western desert, discovering one of the country's first natural gas fields, the Abu Gharadiq field, in 1969. Dave Tayrien, regional manager for public and government affairs at Amoco in Houston, said the company never wrote off the western desert but instead turned its attention elsewhere after having little success there. "We were less fortunate in our activities there," Tayrien said. "And any success we would have had in the western desert would have paled compared to our other successes in Egypt." Last month, Seagull paid $74 million cash for the stock of Esso Suez plus other assets held by Esso Egypt Ltd. Esso Suez held 100 percent of the East Zeit concession in the Gulf of Suez, where Seagull will produce about 5,000 barrels of oil per day. Esso Egypt Ltd. owns the entire working interest in the South Hurghada concession, located onshore near the Gulf of Suez about 250 miles southeast of Cairo. Two oil discoveries have been made there but it is still considered an exploratory area. In 1997, Seagull will be participating in about 30 wells in Egypt, said Gerald Colley, the company's senior vice president of international exploration and production. "There are many companies several times our size that are not drilling a quarter of that," Colley said. In the Qarun concession, with an estimated 80 million barrels of oil, Apache has a 75 percent interest and Seagull has 25 percent it acquired when it bought Global Natural Resources. Oil from the field began flowing into permanent production facilities late last month. The Qarun concession is operated by Qarun Petroleum Co., an Egyptian corporation owned jointly by Apache/Seagull and the Egyptian General Petroleum Corp., the national oil company. The 1.9-million-acre Qarun concession has been producing since November, with the oil being trucked out to a local refinery. The area's production is now running about 19,000 barrels of oil a day but that figure is expected to climb to about 40,000 barrels a day by the end of the year. By trucking out as much as 10,000 barrels a day, the companies were able to start booking revenue from the wells almost immediately rather than wait for a pipeline to be built out of the desert. A 30- mile crude oil pipeline from Qarun has since been completed and is in operation. In addition to the Qarun Field, Apache has a 40 percent interest in the Khalda Concession, which it shares with Reposol Exploracion Egipto, with a 50 percent interest, and Samsung Co., which holds 10 percent. That area, northwest of the Qarun Field, produces mainly natural gas which will be sold to Egypt to fuel a 640-megawatt power plant on the Mediterranean Sea. The Khalda Concession has an estimated 800 billion cubic feet of gas reserves. Apache and Seagull also each hold a 50 percent interest in the 460,000-acre Darag Block, near the north end of the Gulf of Suez, and the 6.8-million-acre East Beni Suef Concession south of the Qarun Field. Seagull acquired those interests from Global Natural Resources as well. Plans are to drill two wells in the East Beni Suef early next year. Two crews are shooting three-dimensional seismic logs for the Darag Block. Drilling there is expected to begin in 1997.

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