UK's SDX sees potential to extend Egypt gas output plateau to 2026

London — UK-listed upstream junior SDX Energy said June 23 it hopes to be able to extend the plateau gas production rate at its flagship South Disouq block onshore Egypt until 2026.

SDX -- which started production at South Disouq in November last year -- said a new discovery at the block with the Sobhi well and hopes for more drilling success would help prolong the current output rate of 50 MMcf/d (1.5 million cu m/d).

"With Sobhi, we expect to extend our gross 50 MMcf/d plateau production by 18-24 months to 2023 and, with some follow on drilling success, this could be extended further into 2026," CEO Mark Reid said in a statement.

"Sobhi has also helped us identify approximately 100 Bcf of follow on, de-risked, incremental prospectivity in the South Disouq concession," Reid said.

All of SDX's Egyptian gas production is sold to the Egyptian national gas company, EGAS, at a fixed price of $2.85/Mcf, with the government of Egypt's entitlement share of gross production equating to around 51%.

Morocco resources

SDX is also active in Morocco, and Reid said that there was potential for a fast-track monetization of its Lalla Mimouna concession following a new discovery with the LMS-2 well in March.

Post-drill analysis of the LMS-2 well identified similarities with the LAM-1 discovery made by the previous operator of the concession which flowed gas and condensate in 2015, the company said.

Subject to successful testing, SDX said it estimates that LMS-2 could contain some 1.5 Bcf of gas and had the potential to de-risk a further 6 Bcf.

A further 3.4 Bcf of close-by prospective resources will also be de-risked if LMS-2 tests successfully, increasing the overall prospective resource potential to 10.9 Bcf, it said.

"LMS-2 will be tested after the COVID-19 restrictions in Morocco enable perforation and testing crews to re-enter the country," it said.

"The company hopes that this will be late Q3/early Q4 2020."

SDX already produces some 7 MMcf/d of gas from its portfolio of onshore gas assets in Morocco.

SDX's gas in Morocco is sold under five- and 10-year fixed priced contracts at an average gas price of around $11/Mcf to customers that include Peugeot, Extralait, and GPC Kenitra.

Its average sales price -- which is the equivalent of around $10.70/MMBtu -- is well above current gas prices in Europe, with the day-ahead contract on the Dutch TTF hub currently trading at just $1.75/MMBtu, according to S&P Global Platts price assessments.