Overview

The Egypt region represents Apache's largest acreage position with approximately 11.1 million gross acres in 22 separate concessions (19 producing concessions). Apache is the largest producer of liquid hydrocarbons and natural gas in the Western Desert and the second largest in Egypt. Apache's production is operated under two joint ventures, Khalda and Qarun Petroleum Company. In addition, we have production from non-operated properties at Northeast Abu Gharadig (NEAG).

The region’s 2009 production through the end of the third quarter totaled 450,247 barrels of oil equivalent (Boe) per day, or 26 percent of Apache’s total production.

During the third quarter 2009, the Egypt Region achieved new daily gross production records for gross oil and condensate at 174,600 barrels per day (Bpd) and gross gas at 807 million cubic feet of gas per day (MMcfd). Net production was 155,600 Boe per day, a 1.6 percent decrease from the second quarter, while gross production increased by 16,700 Boe per day or 6 percent, from 273,800 to 290,500 Boe per day. The region completed 134 of 146 wells and conducted 650 workovers and recompletions through the third quarter 2009.

 Development Projects

The new Salam Gas Plant Trains 3 and 4 and the Northern Pipeline Compression project are now fully operational and have added an additional 200 MMcfd and 10,000 barrels of condensate per day gross (100 MMcfd and 5,000 barrels of condensate per day net) primarily from the Qasr field discovery.

In the third quarter, gross gas production averaged 702 MMcfd. Two shutdowns of the Obaiyed Gas Plant, which processes over 210 MMcfd of Qasr gas under a tolling arrangement, are scheduled in the fourth quarter, which will result in the deferral of about 1 billion cubic feet (Bcf).

Khalda has commenced a major oil project development in the Kalabsha area in the southwest area of the concession leases to handle production from development of the Phiop discovery and other fields in the area. The associated new facilities will be phased to bring on stream 20,000 Bpd by the second quarter 2010, climbing to 30,000 Bpd by end third quarter 2010. The new facilities will have capacity to handle 40,000 Bpd. Associated downstream oil and storage debottlenecking projects are also underway for completion in 2010.

 Khalda Area

Apache operates Khalda with a 100-percent working interest. The area produces oil, natural gas and natural gas liquids from several fields. Implementation of waterflooding, fracture-stimulation and various artificial lift techniques including electric submersible pumps (ESPs) and sucker rod pumps (SRPs) has given new life to many old fields. During the third quarter, Khalda’s oil production overtook that of the BP-operated Gulf of Suez Petroleum (GUPCO) joint venture to place Khalda as the second largest oil producer in Egypt.

Exploration highlights
Apache completed drilling and/or testing operations on six new wildcat wells, resulting in two new field discoveries during the third quarter. More wildcat wells are presently drilling. Apache has 100-percent working interest in all but one of these wells. Some brief highlights of the two new discoveries and significant appraisal and development wells in the greater Khalda Concession area as follows:

The Chelsea-1X wildcat in the Khalda Offset Concession tested 19 MMcfd of gas and 650 Bpd from 31 feet of Upper Safa sand, and 1,800 Bpd from 38 feet of Alam el Bueib (AEB) sand. A development lease is pending approval by the government, and production is expected to commence by year end.

The Prince-1X wildcat in Ras Kanayes concession logged 66 feet of Upper Safa pay. The first zone of two to be completed tested at a rate of 28 MMcfd and 1,100 Bpd. The second zone recently completed at a rate of 11 MMcfd and 753 Bpd. Apache has a 64 percent working interest in this concession.

In the Phiops area of the Faghur basin, Apache continues to have exceptional development results in the Cretaceous AEB formation, which has been an important driver of production growth. During the third quarter, Apache’s success continued with one recompletion of an existing well and two new appraisal wells. The field discovery well, Phiops-1X, was recompleted from the Safa to the AEB at a rate of 4,600 Bpd. Also during the quarter, the Phiops-2X encountered 143 feet of AEB oil pay that tested up to 7,200 Bpd. The Phiops-6X logged 157 feet of AEB oil pay and is awaiting completion. This well extends the Phiops accumulation northward onto our Shushan concession. Production at the Phiops field is presently facilities constrained to 8,000 Bpd. Addition of new facilities is already underway to expand capacity in this area to 40,000 Bpd
 

 Qarun Area

Qarun, the source of our original oil production in Egypt, comprises six exploration concessions and 29 development leases across 1 million gross acres. During 2008, several new oil fields were discovered in the Bahariya formation in the East Bahariya concession on a positive geological trend identified from 3-D seismic acquired in 2006. Current daily production is approximately 45,500 Bpd, 90 percent of which comes from long-life waterflood fields. Over the last two years, water injection has doubled year on year with daily water injection currently 50,000 barrels of water per day (Bwpd).

 Northeast Abu Gharadig (NEAG) Area

Apache began exploring with operator Shell Egypt in NEAG in January 1997 following the acquisition of Mobil’s interest. Apache and Shell have made seven new field discoveries since 2002, including three new discoveries in 2008 that are expected to start producing later in 2010. Production from the concession is currently at 13,000 Bpd and 42 MMcfd. A growing volume is now coming from new Bahariya oil fields located just north of Apache’s Yomna Field in East Bahariya Concession.