“Tunisia’s energy strategy is to go for gas,” says Abdelaziz Rassaa, Secretary of State for Renewable Energy and Agri-Business at the Ministry of Industry, Energy and Small and Medium Enterprises. In support of Tunisia’s gas strategy, Shell signed a two-year Prospecting Licence in July with ETAP (Entreprise Tunisienne d’Activités Pétrolières), Tunisia’s national oil and gas company for the upstream sector. This followed the signing, in May, of a Memorandum of Understanding (MOU) between the Tunisian Government, ETAP and Shell Gas & Power to examine the country’s existing gas resources and gas utilisation. ‘Shell in the Middle East’ went to the July signing in Tunis and met with Abdelaziz Rassaa and Khaled Becheikh, Chairman and Managing Director of ETAP...

“Tunisia’s domestic energy market, for all sectors, utilises around 7 million tonnes of oil equivalent every year. Some 45 per cent of this is gas, with the balance being oil,” says Abdelaziz Rassaa, Secretary of State for Renewable Energy and Agri-Business at the Ministry of Industry, Energy and Small and Medium Enterprises.

“The energy strategy of the Government is to consume less and less oil and use more and more gas to fuel our power and heavy industrial sectors. With this uppermost in mind we plan to expand our exploration for, and development of, Tunisia’s natural gas resources.

“We also intend to develop our renewable energy sector, using both solar panels and wind turbines, and will be examining ways of using CNG [Compressed Natural Gas] to fuel the transport sector. At the same time we intend to reduce our domestic sector’s reliance on LPG [Liquefied Petroleum Gas], an imported and highly subsidised product,” he explains.

Abdelaziz goes on to say, “To assist with these major goals we have signed two new agreements with Shell. The first, signed in May, was a Memorandum of Understanding [MOU] to examine ways not only to develop our natural gas resources but to look at ways of using and marketing the gas once it has been discovered in commercial volumes and is being produced.

“The second agreement, signed on 13th July, was for a two-year Prospecting Licence for Shell to study the development potential for gas in the Metouia block in central Tunisia.

“The two new agreements with Shell are very important for us and we are extremely pleased to have entered into a new upstream working relationship with the company. Shell is one of the world’s major energy companies and has the most developed value chain in the global gas sector,” he says.

Shell has a long history in Tunisia and is today a prominent company in the domestic downstream sector, supplying fuels, lubricants and domestic bottled gas. Shell was also a major player in Tunisia’s upstream sector in the 1970s and 1980s, and Tunisia is still producing oil from some of the wells which were discovered and developed by Shell in the 1980s.

“However, Shell is not the only international oil company working in Tunisia,” says Abdelaziz. “Indeed, we have over 50 companies involved in the exploration and production of oil and gas, but we do not have a company with the global reach of Shell, from well head to end user, when it comes to the gas business as a whole.

“So Shell will be working with ETAP [Entreprise Tunisienne D’Activités Pétrolières], Tunisia’s national oil and gas company for the upstream sector, the Ministry of Energy and other Tunisian companies to examine ways to develop the country’s gas resources.

“Our local market for gas is relatively small and will not absorb all the gas we hope to produce in the next few years. So with Shell’s help we hope to become a gas exporter, which will bring enormous economic benefits for the country, and together we will develop a gas master plan for the country.”

He continues, “We will be examining many ideas for the future and, indeed, we already have several projects under evaluation. For example, one is the possible supply of electricity to Italy, via a 160 kilometre sub-sea power cable to Sicily.

“We are in discussion with the Italian Government, with whom we have signed an MOU, to study ways to connect the Tunisian and Italian electricity grids to provide Italy with electricity. This would be produced from a 1,200 megawatt gas-fired power station here in Tunisia, which would supply 800 megawatts to Italy and 400 megawatts to Tunisia’s domestic market.

“Tunisia is also developing a renewable energy sector, using solar panels and wind generators. Our solar electricity programme is quite advanced and is used mostly to produce hot water for the domestic market, with a target to have 500,000 square metres of solar panels in use by 2009. “Tunisia is already producing some 50 megawatts of electricity from wind generators and we will shortly be implementing a project to add a further 120 megawatts of wind-generated electricity to the system by 2010.

“Tunisia has, in fact, all the electricity it needs. Our challenge in the future will be to find ways to export our surplus production, with Europe being the primary market, especially for electricity produced using renewable technology.”

Abdelaziz then says, “Another area we are examining is the use of CNG in Tunisia’s transport sector. To this end we have been in discussion with Shell Egypt as the company has an advanced and comprehensive distribution network which is extremely successful.

“At present Tunisia’s domestic market uses a lot of LPG, which is imported and heavily subsidised by the Government. So we have a programme to convert the domestic gas market from LPG to natural gas.

“We are also looking at the development of pipelines to deliver gas to European markets, as well as the possibility of the development of a small LNG [Liquefied Natural Gas] plant.

“So,” concludes Abdelaziz, “Tunisia’s energy strategy is based on the development of its natural gas resources, whilst examining ways of exporting gas to Europe, through pipelines or as LNG, and by using gas to produce more energy for export to the European markets in the form of electricity. And we certainly hope that the signing of these two agreements with Shell will help us achieve those goals.”

“ETAP is very pleased to have signed two agreements with Shell for the development of Tunisia’s gas sector,” says Khaled Becheikh, Chairman and Managing Director of Entreprise Tunisienne D’Activités Pétrolières (ETAP).

“The first agreement was an MOU, signed last May. This was for joint studies to be conducted between ETAP and Shell to examine the potential for the development of Tunisia’s gas industry as a whole, including projects such as gas pipelines and LNG facilities. Another important aspect of the MOU was that Shell will help ETAP develop its manpower. The second agreement was signed in July for a two-year Prospecting Licence in the Metouia block.

“Metouia is an open block which covers an area of 5,140 square kilometres. Shell will be carrying out airborne magnetic and gravity surveys of this area, examining seismic and other existing data to evaluate the potential for deep gas reservoirs in commercial volumes. If the results of the Prospecting Licence are deemed successful, this licence will be converted into an Exploration Licence.

“A few shallow oil wells have been drilled in the past in the Metouia block which produced evidence of a hydrocarbon system, but not in commercial volumes.

“Today we are interested in exploring at depths of around 4,500 metre, with Shell, and we hope to find deep gas plays. We have recently drilled some deep wells to the south of Metouia to depths of over 4,000 metres and have had some hydrocarbon shows.”

Khaled goes on to explain, “ETAP is currently producing 1.3 million standard cubic metres per day of gas, whilst the Miskar concession, operated by British Gas, is producing a further 5 million standard cubic metres per day of gas.

“This level of gas production, along with the royalties we receive in the form of gas products from the Trans-Mediterranean pipeline which is routed through Tunisia and delivers gas from Algeria to Italy, is insufficient to meet the country’s demands for gas. It is for this reason that ETAP is obliged to purchase the balance from Algeria.

“In terms of oil, Tunisia produces over 110,000 barrels per day [bpd], of which 75,000 bpd is produced by ETAP. Tunisia has a refining capacity of 35,000 bpd to meet local demand, which is mainly for gas oil, LPG and jet fuel.

“We export crude oil and import the refined oil products we need, mostly from other Mediterranean countries. That said, the crude oil produced in Tunisia is very light crude oil, called Zarzaitine, and is highly suitable for refining into gasoline and aviation fuels.”

Like any other country in the world, Tunisia is looking for further economic growth and with the current high oil and gas prices there is a major focus on the oil and gas sector, which today makes up some 8 per cent of the country’s Gross Domestic Product [GDP].

Khaled says, “The energy strategy for Tunisia is to find and produce more natural gas, which is a cleaner and more environmentally friendly fuel than oil.

“Working with British Gas, ETAP is developing large volumes of gas in the Hasdrubal concession, which will come into production in 2009, and add an additional 3 million standard cubic metres per day of gas to the country’s current production volumes.

“In partnership with other international oil companies ETAP has also made other fairly recent discoveries and over the next few years these will come into production, increasing the country’s gas production even more.

“So,” says Khaled, “ETAP is now focusing on gas and is re-examining its existing hydrocarbon resources which in the past may not have been economically viable. With today’s high oil prices and the new technology which is available, increased recovery is now both economically viable and easier.

“We have signed the agreements with Shell because we believe Shell to be one of the best and most important companies in the international energy sector. Shell also has the technological know-how to explore for gas in the type of deep geological formations we have here in Tunisia.

And whilst Shell ceased operating in Tunisia’s upstream many years ago, Tunisia has had a good experience of using Shell’s ground-breaking technology in the past, notably in the development of the Tazerka offshore field during the early 1980s.

“So we are pleased to welcome Shell once again to Tunisia, and look forward to the company bringing with it its technological expertise and international experience for the development of our gas industry, for Tunisia’s future and for our mutual benefit,” Khaled concludes.

“Shell’s Exploration & Production business is very pleased to be back in the Tunisian upstream sector and to have signed a new Prospecting Licence with ETAP,” says Bruce Levell, Shell Vice President, Exploration New Ventures.

“Shell has been in Tunisia’s downstream sector for 85 years, since 1922, and was present in the upstream sector from 1949 until 1990. Indeed, Shell was responsible for one of the country’s biggest oil discoveries in the Tazerka field in 1973.

“This was an offshore discovery requiring innovative technology to develop the field, and it led to Shell introducing, for the first time in the oil and gas industry, a single anchor leg mooring system with a riser through which oil was produced from sub-sea well heads [see photograph over page].

“I said earlier that Shell was pleased to be back in Tunisia’s upstream, but in fact Shell re-entered the upstream sector here in 2006 when it acquired minority shareholdings of 16.6 per cent in each of two of the country’s offshore permits, the Cap Serrat and Bechateur permits, both of which are operated by Anadarko.

“The agreement that Shell signed in July with ETAP is for a Prospecting Licence in the Metouia block, an area of over 5,000 square kilometres. The licence is for a two-year period, with an option to extend for a further year.

“The work programme of the licence includes screening studies and geophysical surveying technologies, such as airborne high resolution gravity and magnetic surveys, geological fieldwork, reprocessing existing seismic data and the analysis of well samples.

“In the Metouia block, Shell will also apply its state-of-the-art technologies which have been developed over the years by its Exploration Research and Development Department. “The agreement includes an option for 2D seismic acquisition if the licence period is extended and, following the two-year study, both parties may conclude that an exploration campaign should begin, which would obviously involve deeper and more detailed studies.

“Shell’s previous exploration activities in central Tunisia identified the presence of hydrocarbons. However, at that time, because of a combination of the relatively low volumes, the depth of the reservoirs, the difficulty and costs associated with recovery and the low price of gas and crude oil on the international market, the volumes were considered to be non-commercial.

“Times have changed and, with a combination of today’s oil prices, at around US $78 a barrel, and with the new technologies that Shell has developed over the last 20 years, these resources could now be more commercially attractive. Hence the Prospecting Licence we signed in July.”

Bruce goes on to explain, “Our activities will focus on a potential sweet spot that has been identified in the Metouia block. However, a full understanding of the play has not been systematically pursued. Although only small volumes of seismic data have been acquired during this time, the wells drilled have indicated the presence of a working hydrocarbon system.

“This is still considered to be high risk, frontier exploration. The Prospecting Licence does not include seismic surveys nor the drilling of exploration wells and it is only in the event of encouraging results from these studies that Shell would convert this Prospecting Licence into an Exploration Licence and commit to seismic acquisition and exploration drilling.

“Shell’s Exploration & Production [E&P] and Gas & Power [G&P] businesses work with a high level of co-operation and Shell’s re-entry into Tunisia is a very good example of this. In May Shell Gas & Power signed an MOU with ETAP that outlined areas of potential co-operation in the country’s gas sector.

“By working together Shell E&P and G&P can develop an integrated solution to assist Tunisia in its goal to develop more of its gas reserves and then find new ways to bring this gas to international markets.

“This is an exciting opportunity for Tunisia, for ETAP and for Shell, and I hope that the combination of ETAP’s local knowledge and Shell’s technological capability will work together to create a fruitful partnership and contribute to the development of Tunisia,” Bruce concludes.

“Shell Tunisia is very proud that Shell Gas & Power signed an MoU with the Tunisian Ministry of Energy in May and that Shell Exploration & Production signed a two-year Prospecting Licence with ETAP in July,” says Ahmed Bassalah, Shell Country Chairman for Tunisia.

“Shell has been a key player in Tunisia’s downstream sector since 1922, when the main focus for Shell was on the sale and distribution of motor and aviation fuels and lubricants. Today, after more than 80 years of developing the retail fuel sector business, there are 164 Shell-branded retail stations in Tunisia, a country with 10 million people. Shell is a market leader for fuel and lubricants and Shell retail outlets in Tunisia serve 140,000 customers every day, selling 580 million litres of fuel every year.”

In 1949 Shell begin exploration and production operations in Tunisia, which were carried out through a joint venture. These interests were later divested and Shell did not return to explore for oil and gas in Tunisia until 1973, with the award to Shell Tunirex of an offshore concession. This later led to the discovery of the Tazerka field.

Ahmed explains, “The Tazerka field went into production in 1983 using an FPSU [Floating Production and Storage Unit] and Shell produced oil from the Tazerka field for many years. Shell also explored for hydrocarbons onshore but without commercial success.

“Meanwhile, Shell had been developing substantial downstream interests in the LPG, or butane, market in Tunisia with the establishment of Butagaz. An LPG storage, filling and distribution plant was built in the Radès petroleum zone, and in 1987 Shell established a second LPG company called Sudgaz, which is a joint venture between Shell and Total.

“Over the years Shell has developed Butagaz into a leading LPG brand within Tunisia and today Shell is the second largest LPG supplier in the country, with a 31 per cent market share.”

In 1991 Shell built a lubricant oil blending plant at Radès, which today produces some 25,000 metric tonnes of lubricants a year. The Radès plant was awarded ISO 9001 certification in 1994, making it the first business in Tunisia to be awarded ISO certification.

“Shell is also active in Tunisia’s bitumen market,” says Ahmed, “and supplies of bitumen are delivered to customers in the construction sector from a depot at Radès. The Shell bitumen plant can blend five different grades of bitumen to suit customers’ specific needs and is currently selling around 25,000 to 40,000 tonnes a year.”

In 2006 Shell E&P re-entered the Tunisian upstream sector by taking a 33.3 per cent shareholding in a joint venture with Petro-Canada and Anadarko to explore for hydrocarbons in two offshore blocks in the Mediterranean, namely Bechateur and Cap Serrat.

“So,” concludes Ahmed, “the new signings are good for Shell Tunisia and we look forward to further developing our relationship with the Government of Tunisia.”

“The signing in May of the MoU between the Tunisian Government, ETAP and Shell Gas & Power is part of Shell’s regional strategy to develop and expand its gas positions in the countries of the Middle East and North Africa,” says Mounir Bouaziz, Shell Gas & Power’s Vice President for New Business Development for the Middle East, North Africa and the Levant.

“Shell has successful gas businesses in Oman, Egypt and Abu Dhabi, and is developing new opportunities in Qatar, Saudi Arabia, Libya, Algeria, Syria and now, today, in Tunisia.

“Shell will help Tunisia examine its existing gas resources and gas utilisation, focusing on areas of potential co-operation and ways to create new opportunities for Tunisia’s gas business.

“Tunisia is a gas resource holder with a growing domestic economy, located in a good strategic position geographically. The country is already connected to Europe through a sub-sea gas export pipeline from Algeria, which passes through Tunisia to Italy. The capacity of this pipeline is currently being expanded so that by 2009 it will be able to deliver in excess of 35 billion cubic metres of Algerian gas per annum to Europe.

“Shell will also be looking at other ways to use new Tunisian gas discoveries which will shortly be coming into production and, together with the Ministry of Energy and ETAP, will create a new gas master plan for Tunisia.

“Another element of the MOU is the development of Tunisia’s Human Resources and Shell has agreed to assist in the establishment of a training programme for people working in Tunisia’s gas sector.

“So,” concludes Mounir, “Shell is extremely pleased to be working here in Tunisia and we look forward to a long and very successful relationship.”