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To: Snowshoe who wrote (63645)	5/8/2005 4:54:56 AM
From: Snowshoe	Read Replies (1) \| Respond to of 74559

Egypt-to-Israel gas pipeline planned. Will wonders never cease? ... A Pyramid Scheme That Should Pay Off Big biz.yahoo.com Friday May 6, 7:00 pm ET Investor's Business Daily BY ALAN R. ELLIOTT This month Egypt and Israel are scheduled to sign an agreement, four years in the making, that would permit a gas pipeline between the two countries. The pipeline would provide Israel Electric Corp. with a 15-year supply of Egyptian natural gas, according to reports in the Jerusalem Post and Al-Ahram. If signed, the $2.5 billion agreement would give Jerusalem much needed fuel for power generation --without the cost of long-distance transport. It also would give Egypt a boost in its effort to lead the rise of northern African gas exporters. Houston-based Apache Corp. (NYSE:APA - News) is rapidly expanding its production in Egypt to play a key role in that effort. Over the past several years, Apache discoveries in a region called the Western Desert, along the Egypt-Libya border, have returned attention to what was long considered a played-out territory. That desert is now the centerpiece of Apache's 8.5 million acres in lease agreements in Egypt. Apache, one of the largest independent U.S. exploration and production firms, operates under agreements with the Egyptian national oil and gas companies and receives a minority share of production returns. The agreements extend into the Mediterranean, offshore from Egypt's Western Desert. Apache drills in the U.S., Australia, the North Sea and several other regions. Its outsized holdings in Egypt produced 24% of total output last year. The company plans to increase that output, following what company spokesman Tony Lantini says is a pretty basic game plan. "What we try to do everywhere is get a large acreage position with a lot of running room, and then just go after it like crazy," Lantini said. In Egypt, that means spending $500 million this year to drill at least 130 new wells. Apache doesn't offer guidance on how much gas it expects to produce from the wells, but a couple of years ago, an Apache drill bit found a pocket of gas estimated at 2 trillion cubic feet at a field called Qasr in Egypt. That's more than the amount used by France in a year. A year earlier, a discovery in the Mediterranean, part of Apache's offshore Western Desert field, produced a find of similar size. In an era when exploration around the world yields smaller pockets of gas and oil, the once written-off desert already has produced the two largest finds in Apache history. "The impact those discoveries had on the company's reserves are really foretelling," said analyst Mark Friesen of Alberta-based First Energy Capital Corp. "Apache is one of the only companies of its size making exploration discoveries that are material to the overall company." Apache began working in Egypt in 1995, just before the country's oil production peaked and the focus turned to gas. Egypt has since converted 86% of its electric generation from oil to gas. The other 14% is hydraulic generation. The country exports through a pipeline to Jordan and has plans to extend that line to Syria, Lebanon and possibly Turkey. Gas drawn from Apache's wells are more likely to go into one of Egypt's new, state-of-the art liquefied natural gas plants instead of pipelines. The first of those plants came on line in January, and began exporting to Italy, France, Spain and the U.S. Those plants indicate Egypt is serious -- to the tune of hundreds of millions of dollars in infrastucture spending -- about exporting natural gas. That spending has also produced a booming domestic market for gas lifted from Apache's Western Desert wells. "Egypt is great in that it has a market for its natural gas with strong prices," Friesen said. Strong prices aren't confined to Egypt. In the U.S., growing demand and declining production moved current gas prices to $6.60 per thousand cubic feet, up from $3 in March 2002. Higher prices helped push Apache's first quarter revenue up 46% from the prior year to $1.7 billion. Earnings rose 58% to $1.67 a share. Analysts polled by First Call expect full-year earnings to move up 31% to $6.66 a share. Apache's production is about 60% oil, 40% gas. Its reserves are closer to an even 50/50 split. The company is one of the largest leaseholders and producers in the Gulf of Mexico. Last year it acquired leases to an additional 660,000 acres from Anadarko Petroleum (NYSE:APC - News) for $525 million. Apache is investing $600 million to increase production in the Gulf this year, primarily from the new Anadarko properties. It will spend another $300 million to squeeze new production from properties in Louisiana, western Texas, New Mexico and Canada, acquired from Exxon Mobil Corp.XOM in 2004. The firm's U.S. and Australian production declined two of the last three years. But production at its North Sea properties, acquired in 2003, gained 40% last year and accounted for 16% of total company output. Egypt is both the gem and the wild card moving forward. Last year exploratory wells expanded by 42% the estimated proved reserves at Apache's Egyptian properties, to 12% of the company total. "In Egypt, we've got a hell of a lot to do," Lantini said. "Khalda is probably the best property in our inventory anywhere. We just keep finding stuff."