Making a splash offshore Tunisia

20 October 2000
Special Report Oil & Gas BG

BG International is a major player in Tunisia.

It is the country's leading overseas investor, one of the largest foreign holders of Tunisian exploration and production acreage, and supplies more than 65 per cent of domestic daily gas demand.

BG first moved into Tunisia in 1989, when it bought the international oil and gas interests of the US' Tenneco. These included two concessions, a 50 per cent holding in the offshore 2,724-square-kilometre Amilcar tract and a 49 per cent stake in the onshore/offshore Kerkennah West acreage.

BG's decision to focus on its core business, natural gas, led to the sale in 1996 of the oil producing Kerkennah West block to Germany's Preussag Energie.

BG then concentrated its efforts on developing the Miskar gas field in the Amilcar permit. About 120 kilometres offshore, and 60 metres underwater, the 325-square-kilometre Miskar field contained the largest accumulation of gas ever discovered in Tunisia: about 1 trillion cubic feet (tcf) of reserves.

Miskar had been discovered in 1974, and its substantial reserves were well documented, but the high carbon dioxide and nitrogen content meant economic extraction of the gas was complex and the field had not been commercially developed. But BG persevered and, after further seismic testing, and the drilling of another appraisal well, it signed an agreement in 1991 with the state energy company Entreprise Tunisienne des Affaires Petrolieres (ETAP) to proceed with development of Miskar. BG became the operator and was granted a 100 per cent interest in the concession.

At $640 million, Miskar 's development is still one of Tunisia's largest upstream development projects. The investment financed construction of the Hannibal processing plant, 22 kilometres south of Sfax, solving the problem of the inert gases, as well as a gas pipeline taking gas from Miskar to Hannibal.

Initial production at Miskar began in 1996 at a rate of 65 million cubic feet a day (cf/d) and rose steadily over the next three years to reach 159 million cf/d in 1999.

Under the terms of a sales contract signed with state power corporation Societe Tunisienne d'Electricite & du Gaz (STEG), all dry gas from the Miskar field is sold to the state for domestic consumption.

The start-up of Miskar was an important milestone for Tunisia, which until then had produced no dry gas of its own. Gas production soared, reducing the country's dependence on foreign suppliers for its energy needs and making Tunisia self-sufficient in gas.

But with Miskar expected to start slowing down by about 2009, and with STEG estimating domestic gas demand to be rising by about 5 per cent a year, current production levels will not be enough to prevent the government looking elsewhere for gas supplies.

BG has plans to offset the expected downturn. In May this year, the company announced a $450 million Tunisian investment programme to be carried out over nine years. Of the total, $120 million is allocated to the expansion of Miskar, taking capacity to over 200 million cf/d after 2001.

The key element of the Miskar enlargement is the installation of an offshore compression module, which will be tendered in 2001 and commissioned two years later. A minimum of three further development wells will be drilled too. Work is already underway at the Hannibal processing station which has to be modified to take account of the increased capacity.

The bulk of BG's investment, about $300 million, will be used to develop the Hasdrubal gas and condensate field, also in the Amilcar permit, southwest of Miskar. BG shares the exploration permit for Hasdrubal with ETAP and acts as the field's operator.

Hasdrubal, discovered a year after Miskar, has already shown promise. An appraisal well, Hasdrubal-3, drilled in June 1997, flowed at 2.1 million cf/d, and Hasdrubal-4, drilled the following year, tested at 4.6 million cf/d. This puts Hasdrubal's recoverable reserves at about 260 million cubic feet of natural gas and 25 million barrels of condensate.

The Tunisian government has decided to delay production of the gas from the field until 2007, in advance of the decline of Miskar.

The first stage of the Hasdrubal development will start in 2002, with the drilling of a new appraisal well, which will assess the additional reserves potential in the Amilcar permit.

In addition to the general development of the field, there will also be a tie-in with the facilities at Miskar, which by 2007 will have spare capacity. Infrastructural development of the field is expected to take place two-three years prior to first gas, with major contracts scheduled to be awarded in 2005.

In addition to the Miskar and Hasdrubal programmes, BG is planning to invest some $25 million in new exploration in Tunisia. In Hasdrubal South West, BG plans to shoot 300 square kilometres of 3-D seismic work next year and drill an appraisal well in 2002.

BG is also looking hard at the Jugurtha field, 20 kilometres west of Miskar, which was originally discovered by Elf. Like Miskar, Jugurtha is a complex reservoir and the gas has high carbon dioxide deposits, once again making it costly to process. However, due to the shrinking domestic gas supply, BG is studying the possibility of pumping Jugurtha gas directly into a custom-built power station, providing the company with a further integration into Tunisia's downstream sector.

In the final strand of BG's development programme, the company is looking even further downstream. BG has joined with government agencies and the Tunis Bus Company to discuss the possibility of developing natural gaspowered vehicles. The government has set a target of 20 per cent of vehicles to run on gas by 2010, with a feasibility study due next year.

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