Shell Libya was awarded five exploration blocks covering some 20,000 square kilometres as part of an agreement called the Liquefied Natural Gas Development Agreement (LNGDA), which was signed in Tripoli in May 2005. Shell is looking for deep gas in Libya’s Sirte Basin to increase supplies to the Mersa El-Brega LNG plant, which will undergo a multi-million dollar rejuvenation as part of Shell’s commitments under the LNGDA. Should Shell find gas in substantial quantities, surplus gas will be supplied to a new LNG plant to be built at Ras Lanouf, on Libya’s Mediterranean coast, to assist Libya in its goal to increase its LNG exports.

Shell Libya is drilling the first well of a major exploration drilling campaign in its five-block, 20,000 square kilometre concession in Libya’s Sirte Basin. Looking for gas in the deep formations of the Ajdabia Trough, Shell will be drilling to depths in excess of 18,000 feet, in frontier territory formations with pressures in excess of 15,000 pounds per square-inch (psi) and temperatures of over 350 degrees Fahrenheit. To tackle this terrain Shell Libya is using the KCA Deutag T-202, the biggest onshore rig currently operating in Libya. ‘Shell in the Middle East’ goes to Libya to meet Dr Shukri Ghanem, Chairman of Libya’s National Oil Corporation (NOC), to find out about Libya’s progress in opening up its oil and gas sector to international companies and to learn more of NOC’s aspirations for the future of the country’s oil and gas sector. We also meet members of Shell Libya’s Well Delivery Team during a visit to the rig site in the Sirte Basin...

Since the lifting of the international embargo on Libya, and the opening up of its oil and gas sector to IOCs [international oil companies], the number of IOCs operating in the country has risen from seven to 50.

Dr Shukri Ghanem, Chairman of Libya’s National Oil Corporation (NOC), says, “Our goal is to reach a production level of two million barrels of oil per day [bopd] and we will have achieved that by the end of this year and will go on to achieve three million bopd by 2012.

“So far we have had four EPSA [Exploration Production Sharing Agreement] bid rounds and whilst most of the companies with whom we signed agreements are still carrying out early stages of exploration, such as seismic surveys, some companies, notably Shell, have started exploration drilling, which is good news for us and is very exciting.

“Over the next year or two there is going to be a major increase in all aspects of Libya’s oil and gas sector but for now there will be no further bidding rounds until NOC has regrouped and consolidated its existing operations and made sure that its plans and strategies for the future are in place. I do not expect the fifth round of EPSA bidding to take place much before the end of this year,“ he says.

Apart from the new bidding rounds in which NOC has been involved with the IOCs, NOC is also in the process of renegotiating all its old agreements with IOCs to bring them into line with the terms of the EPSA 4.4 so that all companies operating in Libya are operating under the same type of agreement.

“In addition we are forming several joint ventures in the downstream sector in refining and in fertiliser production, as well as undergoing reorganisation within NOC, so we really have our hands full at the moment, trying to score a number of goals at the same time,“ says Dr Ghanem.

One of these joint venture projects is the rejuvenation of the Brega LNG plant, a project in which Shell is partnering with NOC.

“For this project the initial feasibility studies and assessments are going very well, with work expected to begin later this year,“ he explains. “This joint venture is extremely important for Libya and its economy and will prolong the life of the Brega plant and raise production capacity. NOC has also allocated land to Shell for the development of a new LNG plant at Ras Lanouf, but so far this project is just in the very early stages.“

Dr Ghanem goes on to say, “Shell is doing well here in Libya and has taken a bold and aggressive approach towards its exploration activities in the Sirte Basin and, indeed, has successfully bid for Area 89, a new exploration block adjacent to its existing concession in the Sirte Basin. This is a good indication of Shell’s expectations in Libya. “When I describe Shell as being aggressive and bold in its activities in Libya this applies to both its aggressive bidding for blocks in the EPSA rounds and its bold approach to drilling wells.

“This first well, at 18,000 feet, will be one of the deepest wells ever drilled in Libya and will not present an easy task. We are very enthusiastic about this first well, however, and hope that Shell will find a big deep gas reservoir. “Shell is one of the biggest IOCs in the world and has all the technology needed to do this kind of frontier drilling, so we have the greatest confidence in the company’s abilities. Shell has developed a great many technologies in the oil and gas industry and we are very happy that the company is here and is being so active on all fronts.“

Shell is also committing to its social responsibilities and is aiming to give back to the local communities in which it operates.

“I hope that other companies will take notice of this and also make social contributions to Libya’s communities as this is very important to the people of Libya,“ he says.

“In the past IOCs have done very little in this area but NOC is insisting that IOCs now establish social investment and sustainable development programmes to contribute to the future of the country. This applies particularly to the further education and training of Libyans, specifically in cross-postings, for the transfer of knowledge and technology - in addition to sponsoring sporting events and becoming more involved with Libyan society in general.

“We don’t want IOCs and their employees to be isolated in enclaves, only focusing on oil and gas production. We want them to become part of Libyan society. We want to see a situation in the future whereby we think of the Libyan offices of these IOCs as Libyan companies, not as offices for foreign companies operating here in Libya solely for profit,“ he says. “Shell is a big company and we like to do business with the best so if we can develop more business opportunities in the future, with Shell, we will be very happy to do so. As a result, we are looking for more engagement with Shell and I believe that this is mutual and that Shell would also like to participate even more within Libya’s economy.“

A few years ago the Libyan economy was almost totally State-run, but during the last few years there has been a major drive to encourage the private sector to play a greater role in the development of Libya’s economy and to improve the general economic situation and standard of living for the people.

“The road has not been easy and Libya still has a problem with its bureaucracy. However, the economy has improved and as oil is the biggest revenue earner for the country – production has increased, oil prices are high – this is the sector which is driving the development of the economy. This is true from all aspects, bringing investment by international companies, an increase in employment opportunities and, of course, an increase in oil production and subsequent revenues.

“So, all in all, the Libyan economy is doing quite well and, of course, that is in part due to oil prices reaching US $100 per barrel. The days of cheap oil are definitely over and I believe that a lot of the blame for this lies in the mismanagement of the global oil industry some 25 to 30 years ago. Insufficient investment was made in training and many young people chose other careers because of the lack of opportunity in the oil and gas sector.

“In addition, the control of oil prices has moved from the hands of the producers, namely OPEC [Oil Producing and Exporting Countries] into the hands of speculators, and this has not been good for global economies.

“However, we are all now aware of the fact that growing demand for oil and gas cannot, and will not, be met by increased production, so oil prices are very unlikely to fall by much. I believe that a floor in the oil price at US $100 is very realistic but should the geopolitical situation cause another war in the Middle East then oil prices will really go through the roof,“ Dr Ghanem concludes.

Dr Ghanem was Libya’s Prime Minister from 2004 to 2006 and was voted the ‘Petroleum Industry’s Number One Executive’ in 2006.

Since being awarded the five exploration blocks to explore for gas in Libya’s Sirte Basin in 2005, Shell Libya has conducted extensive 2D and 3D seismic surveys covering all the blocks and has identified several prospects.

Marc Gerrits, Exploration General Manager, Shell Libya, says, “Following evaluation of all the data, we have now selected nine locations as potential drilling candidates in these five blocks – more are expected as we evaluate new data which is still coming in.

“The wells we are drilling will be some of the most difficult wells ever drilled in Libya and will also be some of the most challenging exploration wells that Shell will drill anywhere in the world in 2008.

“The main focus for all of us in the Exploration and Well Delivery Teams is to reach our target horizon in the deep formations of the Ajdabia Trough. As no one has drilled these formations in this area of Libya before we have had to cater for all contingencies in our well design. As we proceed with the drilling campaign, wells will be drilled more quickly as we will be able to adapt our well designs using the new data acquired in this first well.

“Whilst the first well is over 18,000 feet deep we will be drilling wells as deep as 20,000 feet. In this drilling campaign we will be using some of Shell’s proprietary technologies which we hope will result in a step change in drilling performance in the difficult zones.

“We are looking at a time frame of between five to seven months for each well, with initial costs per well being quite high - although we expect to reduce costs considerably over the course of the campaign.“

Marc goes on to say, “We are presently right on track with our exploration programme, with a young and energetic team of highly motivated people of whom I am extremely proud and whose achievements to date have been remarkable. We have been fortunate in that we have managed to recruit a large number of talented Libyan staff and, indeed, staffing levels at Shell Libya now show that out of a total of some 140 staff over 70 per cent are Libyans.“

Meanwhile a key concern for Shell Libya has been HSE [Health, Safety & Environment] issues, “particularly with regard to road safety,“ says Marc. “We have made a huge effort with our contractors and sub-contractors to ensure compliance with Shell’s global road safety standards and are installing IVMS [In Vehicle Monitoring Systems] in all of our operations vehicles.

“However, it takes diligence and continuous monitoring by everyone to ensure that standards are met and that HSE issues are in the forefront of everyone’s mind, every day.“

Marc concludes, “In the last round of bidding for further concessions - the EPSA [Exploration and Production Sharing Agreement] 4.4 - Shell was awarded Area 89, a concession of some 1,750 square kilometres adjacent to Shell’s existing five blocks.

“This is a very interesting area, providing both shallow and deep prospects and new plays. Shell has committed to drill six wells in Area 89 over a five-year period. The initial survey work has already been planned and we hope to shoot seismic in 2008 and plan to drill the first well in late 2009.

“But back to the matter of drilling this first well,“ he says. “We are in an important phase of our exploration campaign in Libya with future gas development depending on positive results from this and future wells. I am confident that we have done as much as possible to give us the best chance to find gas - and I am sure that we will be successful.“

Shell Libya started drilling its first well, the Rashda A1-NIC214, in February. Wim van Vliet, Well Delivery Manager for Shell Exploration & Production Libya, says, “The KCA Deutag T-202 is a heavy duty drilling rig with all the specialised equipment needed to drill the deep HP-HT [high pressure and high temperature] wells we will be drilling in the Sirte Basin looking for deep gas. The T-202 is a 15,000 psi [pounds per square inch], 3,000 hp [horse power] rig and has recently been overhauled in the UAE before coming to Libya.“

The Rashda well is 150 kilometres from the coast and some 900 kilometres from Tripoli. “Whilst quite remote, the actual well site is easily accessible as the desert in this area is flat and arid, providing a good solid surface for our vehicles, so we have not had to build any roads,“ says Wim.

“We have, however, built a small air strip to use should we need to call an aero-ambulance for any emergency evacuations. and we have levelled an area to build the well site and construct storage, accommodation and administration facilities for the 100-plus crew members who are operating the rig,“ he explains.

Crew changes will be carried out using a charter plane from Tripoli, which will land at an existing air strip some 40 kilometres from the rig site. From that airstrip, crew will be bussed in using specialised transportation.

“This is the first well to be drilled in the campaign for the LNGDA blocks with 11 more well sites having been identified and planned to date,“ says Wim. “Shell Libya was also recently awarded an adjacent block and we will drill a further six exploration wells in this concession.

“If we find gas in sufficient quantities we will need to drill another 30 to 40 appraisal and development wells in the course of the next few years,“ he says.

Most of the vertical exploration wells will be between 17,000 and 19,000 feet deep. To date, no other IOCs or local companies have been successful in drilling to these depths in Libya nor to the target horizon in the Nubian Sands.

“One of the major challenges of this campaign will be the HP-HT element of the sub-surface structures,“ he says. “We expect the formation pressures to be well in excess of 10,000 psi. At the targeted depth the formations are likely to be tight and abrasive, leading to slow and difficult drilling conditions.

“High formation pressures also affect our choice of equipment, which has to be heavier with a higher rating than most standard drilling rigs. In addition, the design specifications for such items as well heads and BOPs [blow out preventors] are more demanding.

“The high temperatures can adversely affect our downhole equipment. This will impact our logging tools in particular, which will reduce our monitoring capabilities in the final stages of the well when temperatures reach their maximum. It will prove more difficult to establish the formation rock and fluid properties, key requirements in case we want to develop the fields into production.

“However, Shell has developed a great deal of technology when it comes to drilling in difficult conditions and Shell Libya will be accessing Shell’s global network of expertise to its advantage when we drill these wells.

“One technology we will be using, which has never been used in exploration drilling in Libya before, is Managed Pressure Drilling [MPD]. This means that when we drill the well we will not just be using drilling fluids to counteract formation pressures but also surface equipment.

“This equipment allows accurate control over the pressure in the well bore by using a rotating head on the drill string and a choke on the returning fluids. This enables us to increase or reduce the pressure in the well bore as needed.

“Another very useful technology is in the area of communications and collaboration. We will be linking to Shell’s Real Time Operating Center [RTOC] in Houston, using satellite communications to transfer real time data from the well site to Houston. In the RTOC experts in different disciplines will be able to monitor our operations and provide expert advice. “When drilling HP-HT wells one of the biggest challenges is managing the unexpected onset of over-pressure in the well bore, which can be rapid, sudden, highly unpredictable and very difficult to manage.

“So by using the RTOC in Houston, global specialists will be able to assist us in monitoring over- pressure incidents within a quarter of a second of them taking place and will be able to advise on what action to take.

“Another problem with HP-HT wells is drill string vibration caused by the hard rocks. Drill string vibration can lead to premature and frequent failure of the drill string. The ROTC can help us manage and minimise this effect by advising us on what drilling parameters to apply such as WOB [weight on bit], RPM [revolutions per minute] to slow down or speed up the drill string, or they can advise on whether we need to change the configuration of the BHA [bottom hole assembly].

“Shell is a leader in the reduction of drill string vibration and has many proprietary algorithms which were developed at our research centres in Holland,“ says Wim.

He goes on to say, “Like all major projects in remote desert locations, HSE is the single biggest challenge. The greatest exposure that we have, in terms of fatalities and serious injuries, is in the area of road safety and for the last two years we have been trying to impress the importance of basic road safety on our staff, and the staff of our contractors and sub-contractors.

“Shell has introduced three Golden Rules, which are ‘Comply, Respect and Intervene’. In Libya we are focusing strongly on compliance.

“We are, in fact, rolling out a set of five rules for road safety here in Libya. These are - every vehicle must be pre-approved, the driver for every trip must be pre-approved, all journeys must have a Journey Management Plan, every journey must be pre-approved by the on-site Shell representative and, finally, every vehicle making a journey must be fitted with an IVMS [In Vehicle Monitoring System] unless there is more than one vehicle - in which case at least one vehicle must be fitted with an IVMS. So we hope these rules will reduce incidents and keep our people safe,“ he says.

Shell in Libya aspires to the vision of ‘leave your footprints and take only your photographs with you’. “In other words,“ says Wim, “we want to leave the place the way we found it. The site was filmed before we started so we can compare it with the way we leave the site when we have completed our operations.

“All waste material will be sorted and removed to Ajdabia or Tripoli, where it will be disposed of in a proper manner. In the drilling operations we have chosen to use a synthetic oil-based mud [SBM], or drilling fluid.“ SBM is an environmentally friendly alternative, manufactured by Shell in Malaysia. It uses a by-product from Shell’s Middle Distillate Synthesis process at its Gas to Liquids [GTL] plant in Bintulu.

So, the drilling campaign has started in earnest and tenders are already being evaluated for a second rig to start drilling operations later this year.

“We have a heavy schedule ahead,“ says Wim. “With so many wells to drill, and the time it takes to drill a well ranging from five to seven months, we may well be contracting more rigs as the campaign moves along.“

The Rashda A1-NC214 being drilled in the Ajdabia Trough will not only be the first well of Shell Libya’s drilling campaign but represents the first time that Shell has drilled a well to this sort of depth in Libya.

Carlo Nicolai, Senior Geoscientist with Shell Libya’s Well delivery Team, says, “One of the big challenges of working in this basin is that no other company has ever drilled for these targets at these depths and so we have no offset data on which to draw, which really makes this well frontier exploration. The geology of the target horizon, the Nubian sandstones, and its overburden, the Upper Cretaceous Sirte to Etel formations, is quite untested.

“To evaluate the sub-surface of this basin we have acquired extensive gravimetric and magnetic data, as well as 2D and 3D seismic, and extensively used analogues where this play works in other parts of Libya.

“In the past Libya has only sought oil so most of the wells in this area have been drilled into the relatively shallow Eocene and Paleocene carbonate plays, which have produced some substantial discoveries of oil.

“These wells, however, only touched the top of the Upper Cretaceous sequence so now, as we search for gas, we must drill deeper into unknown territory with our target being a reservoir at a depth of over 18,000 feet in the Nubian sandstones.

“The formations in the shallow sections of the Rashda well are not expected to pose unusual problems for our team. In the third section we will drill through nummulitic carbonates and finish the section in shales with carbonate stringers. It is here that we expect the pressures in the well to ramp up and begin to experience over-pressures,“ explains Carlo.

The challenge for the geologists is to be able to accurately predict where the over-pressured sections begin as the team needs to be able to isolate them from the normally pressured sections. It is at the end of the third section, at around 12,000 feet, where they expect to be able to do that.

Carlo continues, “The fourth section will present the team with some more difficult drilling as we will be penetrating Upper Cretaceous formations consisting of older, and so harder, carbonates and shales. It is also in this section that the temperatures are expected to rise to over 350 degrees Fahrenheit, which will mean that some of the down hole logging tools will not be able to function accurately.

“The final section will be short and into what we hope will be a deep gas reservoir in the Nubian sands.

“To find hydrocarbons you need three things. You need a trap with a seal, and this we have with the Upper Cretaceous shales, which in Libya are called the ‘Etel’. You need a reservoir, which here is provided by the Nubian Sands. Finally, you need a source rock, which in our case is the world-class source rock of the Upper Cretaceous Sirte formation, which is juxtaposed to the Nubian Sands and which has made a substantial contribution to Libya’s oil production over the last 40 years.

“So,“ concludes Carlo, “we hope that we will be lucky and as we say in Italian, ‘La fortuna aiuta gli audaci!’ which, in English, means ‘Fortune helps the brave!’.“

“The Rashda A1-NIC214 is being drilled in five sections,“ says Gordon Poss, Senior Well Engineer with Shell Libya’s Well Delivery Team. “The conductor pipe, the first section of the well, is unusually large for Libya, at 30 inches in diameter and to run this pipe we will use a 36-inch rock bit to drill the hole to a depth of 352 feet. The conductor pipe is used to support, or hang, all the casing we run down the hole, which in the case of Rashda, when completed, will weigh in at over one million kilogrammes, or a thousand tonnes.

“The second section of the well will be drilled with a 26-inch rock bit to a depth of 3,175 feet, where we will run and cement 20-inch casing. The purpose of this is to isolate the fresh water aquifers and weak formations.

“The 17.5-inch section is the next section and this will be cased with 13.375-inch casing to a depth of some 12,000 feet, making it the longest section of the well. The 17.5-inch section is designed to isolate some of the weaker formations in the well bore before we drill down into the over-pressured section.

“With the fourth section we will begin to drill through the over-pressured formations and the real work begins. Here we will drill a 12.25-inch hole and set 9.625-inch casing to a depth of 17,840 feet, at the top of the target reservoir. Bottom hole pressures are expected to be nearly 15,000 psi, with temperatures of around 350 degrees Fahrenheit.

“The fifth, and final section, will be around 611 feet long to bring the well to a total depth of 18,451 feet and will be drilled with an 8.5-inch bit. First we will log the reservoir and if we find gas and a suitable reservoir we will then install a 7-inch liner and casing and test the well to evaluate its productivity.

“This will be one of the deepest wells ever drilled in Libya and one of a very small number of wells drilled in the Ajdabia Trough, where the hydrocarbon bearing formations are much deeper than in the surrounding areas. It is tough drilling but we have the best technology, the best equipment and the best people using the biggest rig here in Libya , so we all hope for success for Shell and for Libya,“ concludes Gordon.