Overview

Dana Gas has operated in Egypt through its subsidiary, Dana Gas Egypt (DGE), since 2007, focused on developing and providing natural gas and gas liquids, including condensate and LPG. Since entering Egypt, it has become the nation's fifth largest gas producer.

 

DGE operates 14 Development Leases onshore at the Nile Delta, all with 100% working interest. In addition, DGE operates Block 6 North El Arish offshore Concession Area with 100% working interest. It also owns a 50% non-operated interest in the Block 3 El Matariya Concession Area onshore the Nile Delta. The onshore Block 1 North El Salhiya Concession Area was relinquished towards the end of 2018 with one Development Lease application under process.

Dana Gas also has a partial interest (through its Danagaz Bahrain subsidiary) in an LPG recovery plant in the Gulf of Suez with annual capacity of 130,000 tons.

The business strategy in Egypt is to continue to balance investment opportunities against collections to ensure that a robust financial position is maintained. Going forward, there is an active programme to improve performance for various wells in the development leases. These will be executed in 2019 and will help the Company to mitigate natural field production declines.

 

Assets

Dana Gas focuses its exploration, development and production efforts in two areas: 1) onshore Nile Delta; 2) offshore Mediterranean.

It is a 100% operator in 4 concessions and 50% non-operator of 1 concession onshore as well as 100% operator of one offshore concession.

 

Nile Delta operations

Dana Gas's operations in the Nile Delta commenced in 2007 when it purchased the assets of Centurion Corporation, which operated two onshore concessions. The company currently has four onshore concessions: El Manzala, West El Manzala, West El Qantara and North El Sahiya (relinquished in 2018). The area covers 796 square kilometers and an external independent engineer (Gaffney Cline and Associates) estimates it holds more than 89 million BOE of reserves. The four concessions include 15 development leases with gas and condensate production from 15 fields. Current gas production is about 160 MMscf/day 5,300 bbls/d condensate plus 235 tons/day of LPG. (equivalent to 34.5 kboepd)

 

In 2014, Dana Gas successfully bid and won additional blocks in the Nile Delta. It has 100% interest in the North El Salhiya/Block 1 (now relinquished) and North El Arish except for one development lease /Block 6 (3039 km2) and 50% interest in El Mataria/Block 3 (1525 km2).

 

El Manzala

The El Manzala Concession was awarded in 1995 and is the longest concession held by the company. It undertook an exploration period until its agreement expired in 2002 following the award of three development leases: El Wastani, El Wastani East and South El Manzala. The first two fields are currently producing with output averaging 1,460 boepd.

 

West El Manzala Concession

The West El Manzala Concession was awarded in June 2005. The exploration period concluded in 2013 of which 11 development fields remained. In addition, two further fields were awarded: Balsam and Begonia and both are under development [having begun drilling in mid-2015]. The field production is passed through the El Wastani integrated gas plant.

 

West El Qantara Concession

The West El Qantara Concession was awarded in 2005. The exploration phase expired in 2013 and the concession now consists of two development leases. Four fields were discovered during that time: Sama, Salma Delta, Salma Delta North and Tulip.

 

North El Salhiya (Block 1)

Dana Gas was awarded the onshore concession as part of the EGAS bidding round in 2014 with 100% operating interest. It is adjacent to Block 3 and its West El Manzala and West El Qantara concessions. Dana Gas drilled a new exploratory well in Block 1 during 2018 and made a discovery in East South Abu El Naga field (ESAEN-1). The development is expected to begin production in 2019. The remainder of the concession has been relinquished

 

El Matariya (Block 3)

 

Dana Gas has a 50% non-operated interest in the El Matariya Onshore Concession, alongside BP, who is the operator.

BP drilled the Mocha-1 well, which did not encounter commercial quantities of hydrocarbons. The exploration well has helped to de-risk other prospects and has proven the presence of a working petroleum system in the onshore Oligocene for the first time. Under the terms of the agreement, BP carried Dana Gas's share of the cost of the well. BP has taken the decision to continue exploring the concession and Dana Gas has exercised their option to continue participating alongside BP. In 2019

Dana Gas and BP will jointly drill another exploration well, which will be operated by Dana Gas. Although the scale of this opportunity is relatively small, if successful, it will be tied back quickly into the existing facilities in the Nile Delta.

 

Offshore

 Eastern Mediterranean

 

North El Arish (Block 6)

 

Block 6 North El-Arish exploration concession area, awarded in 2014, is the first offshore Concession Area for Dana Gas in Egypt and contains significant growth potential. Several prospects and leads have been defined through advanced 3D seismic, including two that are drill ready. The Merak prospect is a large and robust structure which is defined by closure at Lower Miocene and Oligocene levels. The Lower Miocene is analogous to the prolific Tamar and Leviathan trend that has been very successful for Noble and its partners in the Eastern Mediterranean. The Merak prospect shares many geophysical attributes similar to the Tamar discovery.  The Oligocene objective is analogous to the play which has been very successful in the outer Egyptian Nile Delta such as the Atoll, Salamat and Notus Fields and most recently in the Nour-1 exploration well located about 40 km away from Merak. 

 

Dana Gas began drilling the Merak-1 well in May 2019 and reached depth of 3,890 metres. It failed to make a commercial discovery and was plugged and abandoned.

 

The Block contains three other independent prospects, which remain unaffected by the Merak-1 well result.

 

GPEA

 

In September 2014, Dana Gas concluded a Gas Production Enhancement Agreement (GPEA) with the Egyptian Natural Gas Holding Company (EGAS) and the Egyptian General Petroleum Company (EGPC). It was a landmark agreement which formed the basis for an important development program that increased production 30% over the last three years to current levels.

 

Under the GPEA, the Company agreed to undertake a long-term staged work program over a seven-year period which will see 37 new wells drilled and equivalent number of work-overs being completed.

The value for Dana Gas is two-fold: enhancing its Egyptian assets with the increase in production but more importantly, the agreement allows the Company to export condensate directly to the international market.  The cash proceeds generated from the Egyptian Government's share of the incremental condensate sales will be used to pay-down the outstanding receivables owed to Dana Gas by the Government.

 

International condensate sales commenced in April 2017 and by the end on 2018 the Company concluded 8 cargo sales, each equivalent to approximately 155,000 barrels of condensate, generating approximately $85 million. More sales are due to happen in the remainder of 2019 and into 2020.

 

El Wastani Gas Plant

 

The El Wastani Gas Plant is located in the Nile delta near Damietta and is managed and operated by a joint venture between Dana Gas EGAS. The joint venture company is El Wastani Petroleum Company (WASCO)]. The plant was commissioned in December 2006, initially as an early production facility, but then expanded in two phases to a 160 MSCFD gas processing plant equipped to separate wet gas into dry gas, liquid condensate and LPG. The processed gas is sold and delivered to the national grid.

 

​In the first quarter 2014, the plant underwent a major maintenance and tie-in work programme which saw a major facility and equipment upgrade that added 40 MMscf/d. New pipeline tie-ins were laid down to add additional capacity from the fields in the neighboring West El Manzala Concession.

 

In June 2017, the gas plant completed a planned shutdown safely and successfully. There was a complete shutdown for five days for critical inspection and maintenance and a further partial shutdown for four days. The work was conducted by Egyptian contractors, which included 1,300 personnel working with WASCO. There were 105 planned activities including major repairs and inspections undertaken and the work was concluded with no recordable incidents or environmental spills, reflecting our excellent HSSE performance.

 

EBGDCo

 

The Egyptian Bahrain Gas Derivatives Company (EBGDCo) is a joint venture with EGAS and Apricorp to build and operate a Natural Gas Liquids (NGL) extraction plan approximately 1 km south from Ras Shukheir U-104 in the Gulf of Suez region. The plant has been built adjacent to the existing Liquefied Petroleum Gas recovery plant owned by EGPC.

 

The EBGDCo plant is designed as a high-efficiency gas liquids extraction plant that will process feed gas flow of up to 150 Mmscf/d from the Egyptian National Gas Pipeline Grid. It aims to recover Propane and Butane from the inlet gas stream and return on-spec residue gas to the gas pipeline grid. Commissioned on the 1 October 2012, the plan delivered its first cargo of propane. After startup, consolidation projects were undertaken to increase plant capacity to 180 MMSCFD.

In 2018, a number of projects were carried out adding an additional processing capacity of 15 MMscf/d to the current feedstock gas handling capacity. The capital expenditure was financed by the principal buyer and without shareholders' contribution.

 

​Reserves

 

Gaffney, Cline & Associates (GCA), carried out an independent evaluation of Dana Gas Egypt's reserves as at 31 December 2018. Following this review, the Group's proved plus probable reserves (2P) as at 31 December 2018 were estimated at 90 MMboe (31 December 2017: 117 MMboe). The decrease in reserves was on account of production during the year, which was not replaced through exploration drilling activity, and reserves revisions resulting from early water breakthrough in the Balsam minor horst and in the El Basant Field where new studies reduced the gas in place volumes and the recovery factor.​