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


Added prospectivity in South Disouq concession

Gas sold at fixed rate $2.85/Mcf to EGAS

Eyes up to 10.9 Bcf at Morocco license area

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.

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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.