North Africa Silurian hot shale has potential
The region has plenty of unconventional oil to exploit. Politics is the only real obstacle
North Africa can lay claim to a long history of searching for unconventional oil, with Egypt first encountering shale oil in the 1940s during phosphate mining activities. But until now the region’s potential has been untapped; no surprise, perhaps, given the bountiful conventional resource base found in Libya, Algeria and Egypt.
This may change. Given the extensive resource base – the Silurian “hot shale” is the most important Palaeozoic hydrocarbon source rock in North Africa – the region has received renewed attention in recent years, as a potential source of significant production. Silurian hot shales are slightly radioactive (and therefore detectable) if they have rich organic content, which is good indicator that hydrocarbons are present.
Those host countries with the most prodigious conventional reserves are also those with the most prospective unconventional oil deposits. Libya is regarded by the US Energy information Administration (EIA) as the country with the world’s fifth highest technically recoverable shale oil resources, with estimates at 26 billion barrels. As for tight oil, Libya, Algeria and Tunisia are in the top 15 countries in terms of the highest ranking reserves, reckons consultancy IHS.
Plenty of potential
Analysts see the hot shales shared by Algeria, Libya and Tunisia as a significant pointer to the region’s unconventional potential. Says Steve Trammel, research director for unconventionals at IHS: “Despite the problems, there is a lot of potential in the Silurian hot shales. The pipelines are already there and there is water availability in Algeria and to a lesser degree in Tunisia.” The below-ground resource base is strong, but above-ground factors will also shape the pace of development. Algeria is better positioned to see unconventional development happen faster than more unstable Tunisia and Libya, says Trammel.
Algeria plans to stage its first licensing rounds for exploration of its unconventional resources in 2014. These are to include acreage holding shale oil, though Algeria’s vast shale gas reserves – estimated by the EIA to rank fourth globally – will likely absorb the attention of international oil companies, ahead of the shale oil opportunities.
Egypt and Morocco – outside the Silurian geological belt – also boast shale oil deposits that have attracted international interest. Egyptian General Petroleum Corporation’s engineering subsidiary ENPPI estimates the Egyptian Eastern Desert contains 4.5bn barrels of shale oil that are only accessibly by underground mining methods. In the Western desert, the Abu Tartour area contains about 1.2bn barrels of shale oil which it says could be extracted during mining for phosphates and used for power production in the mines.
In May 2011, US independent Apache Corporation announced plans to explore for shale oil in the Western Desert of Egypt. Apache has 74,000 acres in the East Bahariya field, and says that concession alone could hold as much as 2.2bn barrels of shale oil. However, as of end-2013, the company – which sold a third of its stake in its Egypt business to China’s Sinopec in August last year - had not revealed any Egyptian shale development plans.
Morocco has oil shale deposits (or kerogen oil, as opposed to tight, shale oil) in Tarfaya in the southwest of the country, and in the Timahdit deposit further north. Ireland’s San Leon Energy is developing an in situ oil shale technology in Tarfaya, which is onshore.
In 2005, Morocco’s state-owned oil company, Office National des Hydrocarbures et des Mines (ONHYM), announced a new oil shale policy. Lacking the conventional resources plays of its regional neighbours like Algeria and Libya, it has attempted to incentivise interest in its deposits. These efforts have registered some success, with the country’s two oil shale deposits already in exploration phases. Brazil’s Petrobras signed a preliminary deal with ONHYM in 2007 for the Timahdit 2 block, 240 km southeast of the capital Rabat. This is reckoned to hold 18bn tonnes of oil shale reserves.
In August 2013, San Leon Energy signed a similar deal with ONHYM, granting it exclusive rights to a 36 square km block in the Timahdit deposit for two years, to evaluate the commercial viability of a surface retorting project. Timahdit’s shale oil yield in the awarded area is considered to be the highest in Morocco with an average of 99 liters per tonne (l/t) in the rich layers and, says San Leon chairman Oisin Fanning, has significantly less moisture content than many other international oil shale deposits.
According to San Leon, recent analysis by Enefit OutotecTechnology (EOT) confirmed that the Timahdit oil shale has commercial potential using Enefit’s surface retorting process and further raw shale oil upgrading. As a result of the dry nature of the Timahdit shale, the project will have an output capacity for power generation as a side product. San Leon’s Tarfaya deposit is located in southwest Morocco along the Mauritania frontier, though the company says the deposits are some distance from the politically sensitive Western Sahara region. Tarfaya is showing a 75 l/t flow, says Fanning.
San Leon’s Fanning tells Petroleum Economist that the company is looking to source financing of $1bn to develop production of Moroccan shale, and is seeking partners for a plant with capacity of between 5,000 and 10,000 barrels a day of oil (b/d). The aim is to set up a separate company to attract partners “This is a big push for us, but with a 99 l/t yield in Timahdit – which is both very high and very dry – that reduces the costs considerably,” he says. “Also, there is no exploration risk. It is black production all the way through, and the infrastructure in Morocco is good.”
Fanning says the licensing terms for shale developments offered by ONHYM are attractive. “The fiscal terms are excellent and your recover all your costs – and with oil prices where they are now, it’s proving extremely profitable,” he says. The company expects an announcement on funding in 2014, with a typical timeline for building the production plant of 18 months to two-and-a-half years.
Overall, North Africa’s shale oil developments are a story of potential rather than practice. With political strife disrupting Libya’s oil and gas sector, and also affecting Tunisia and Egypt, it looks like the less endowed corners of the region like Morocco will be setting the pace in the next few years. And if Algeria can capture oil majors’ interest in its shale gas plans, the Maghreb giant’s unconventional deposits may also come in for renewed attention.