Tunisia has only modest proven oil reserves of just over 300 million barrels; possible reserves are estimated at 700 million barrels. Oil production is currently around 71,000 barrels per day (bpd), well off the country's peak oil output of 12,000 bpd, last seen in 1984. The country became a net oil importer for the first time in 2000 due to a lack of significant discoveries and only patchy exploration activity. This also coincided with a greater focus on promoting exploration and production (E&P) in non-associated gas.
But petroleum demand continues to rise and with it government energy import bills, creating political pressure to try and increase domestic production. According to government data from the Institut National de la Statistique (INS), rising oil import costs helped widen the country's trade deficit to US $3.9 billion in 2006 up from US $2.66 billion a year earlier. Energy imports themselves were up 26% at 2.85 billion dinars (US $2.17 billion).
To address this, a presidential decree was issued at the end of 2006 calling for increased investment in E&P, developing new sources and encouraging state oil and gas company Etap (Entreprise Tunisienne d'Activités Pétrolières) to gain access to equity oil abroad. The government is also actively promoting a new refinery to be built under co-operation with Libya: Tunisia currently imports over half of its petroleum product demand.
The country has certainly been the target of IOC interest in the past - but has lacked any major discovery. The government had recognised when the country became a net importer that it needed to create the right investment environment. The hydrocarbon law was overhauled in 2000 and the new version included a reduction in the tax rate from 75% to 50% for foreign firms, as long as Etap has a minimum 40% stake in any concession. Royalties are 10% for oil and 8% for gas.
The past six years have each seen annual licensing rounds held with the government trying to promote exploration activity offshore in the Gulf of Hammamet and the north coast, as well as onshore in the northwest of the country. Also included have been smaller fields which Etap has historically regarded as uneconomic.
At the start of 2006 the government opened up 82% of Tunisia's territory for exploration, extending the overall acreage available to 138,000 km
. Last year, it issued 12 gas and oil exploration licences compared to just three in 2005. A licensing round for 2007 has already been launched with first bids to be submitted by April and awards due in October.
Notwithstanding the small reserves and modest oil and gas production, IOC interest in the country is comparatively high, as reflected by foreign direct investment figures. Official data released in December 2006 showed that the energy sector attracted the largest share of capital inflows last year at 470 million dinars (US $359 million), up 41% thanks to the large amount of licences awarded and the success of government incentives. Total FDI in 2005 was 966 million dinars (US $737 million), up 14.6%.
Tunisia is still hoping for a big oil find, or at best several medium-sized prospects, which would help reduce its import dependency. Today, some 73% of existing production comes from six fields: El Borma, Ashtart, Oued Zar, Adam, Dion and Miskar. The remainder is sourced from 26 smaller sites around the country.
According to Etap, total remaining hydrocarbon reserves are estimated at 838 million barrels of oil equivalent (boe), of which 426 million boe (51%) are crude. Gas production averaged 6.8 million m
per day (m
pd) in 2006 with the majority (5.2 million m
pd) from the Miskar offshore field. Other associated gas producing fields include: El Franig-Baguel-Tarfa, Oued Zar-Hammouda-Adam and El Borma.
At the end of 2006 44 companies were active in Tunisia's E&P sector working on 42 permits - 26 onshore and 16 offshore. IOC interest in the country is supported by several discoveries over the last 12 months and the announcement of some development programmes for existing finds.
In January, Canada-based Pennine Petroleum said it had exercised its option together with Exceed Capital Holdings to take part in a seismic programme at the onshore Jorf permit, 150 km southwest of Gafas in south-central Tunisia. The companies will acquire 200 km of seismic at the concession - held by Cygam Energy - in order to finalise the location for an exploratory well to be drilled later this year. Existing seismic data has identified two anomalies at the one million acre permit whose northern boundary is within 35 km of the Gulf of Gabes. It is also traversed by oil and gas pipelines from the El Borma field and thus connected to the La Skhira oil terminal.
Last July, Austria's OMV drilled its second successful exploration well within a year at the Jenein Sud permit. Combined flow rate of the formations were 5,970 bpd of oil and 58 million m
pd of gas. It is now carrying out further appraisal work including the acquisition of 3D seismic and drilling additional wells. OMV views Tunisia as one of its ‘core regions' and says the success of these wells "confirms the potential of this block and reinforces our plans for further growth in Tunisia."
OMV and Etap each hold 50% of the block, which covers 1,992 km
, 700 km south of the capital Tunis. The first well at the site produced 1,500 bpd of oil and 1,625 boe/d of gas. OMV has been active in Tunisia since the 1970s. Its acquisition of Preussag's oil and gas portfolio in 2003 gave it control of seven producing oil fields in the southeast of the country, the most prolific of which is Ashtart where its current production is around 9,000 boe/d.
Meanwhile, PetroCanada is currently reviewing results of two commitment wells it drilled at the offshore Melitta Block in which it holds a 72.5% working interest. It is also acquiring geologic and 2D seismic data on the Cap Serrat and Bechateur blocks in which it obtained a 33.33% working interest in January 2006. These two offshore blocks cover around 15,000 km
. The company has preferential rights to convert each permit into an exploration licence. Anadarko is a partner on both blocks along with Etap. Minimum work commitments for Bechateur amount to US $2.835 million and US $1.165 million for Cap Serrat.
Last August Canada's Grove Energy won government approval to acquire two permits: Kerkouane, 6,720 km
, offshore; and Chorbane, 2,428 km
, onshore. The former is contiguous with Grove's 100%-owned Pantelleria permits in Italian waters and contains the undeveloped Dougga gas condensate discovery made by Shell in the early 1980s; it is also adjacent to the producing Tazerka oil field.
Grove plans to evaluate the discovery and its development potential. Chorbane is situated west of several producing onshore oil fields and is on trend with Ashtart which contains one billion barrels of oil in place. Grove has committed to drilling one well to a depth of 2,700 metres at Kerkouane and to acquire 200 km of 2D seismic at Chorbane.
Grove is working as contractor on the permits. Under the terms of its contract, it will not pay income tax, customs duties or value-added tax on oil and gas equipment. It is also allowed to recover all of its capital and operating costs and share profits during the cost recovery period. This kind of incentive package compares favourably with other regions around the world. It also explains the higher-than-expected level of IOC interest in Tunisia given the size of its hydrocarbon potential.
Meanwhile, encouraging results from two Tunisian farm-ins were announced in January by another Canadian firm, Madalena Ventures. It has identified several prospective locations and leads both on- and offshore. Both 2D and 3D seismic programmes are being carried out at the sites this year to further delineate optimal drilling locations. A seismic programme for the onshore Remada South prospect is to get under way in the first quarter, with at least one well to be drilled before the end of the year. On the Hammamet prospect, an ‘extensive' 3D programme will begin in the third or fourth quarter.
Madalena is also evaluating the reactivation and redevelopment potential of the Tazerka field on Hammamet which, prior to its mothballing, had produced 21 million barrels. Located within it is the Oudna block which Sweden's Lundin Petroleum said in December was now producing over 20,000 bpd.
While keen to encourage IOC interest, Tunisia is also turning to its neighbours for help in sourcing energy. In January it and Libya announced plans for a joint project to build oil and gas pipelines between the two countries as well as building a new refinery near Al-Skira. Libya's oil reserves dwarf those if its neighbour - estimated at 39.1 billion barrels at the end of 2005.
At present, Tunisia has just one 30,000-bpd oil refinery, in the northern city of Bezirte. The new refinery in Al-Skira is planned to have a capacity of 120,000 bpd. Tunisia has chosen Qatar Petroleum and Petrofac of the UK as pre-qualified interested investors to build the plant. Both companies had to submit their plans by the end of January. The project will require the assistance of international investors, according to Libya's trade and investment minister.
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