The Egyptian oil and gas sector is set to grow over the next five years, exploration and production company SDX Energy Inc.’s president and CEO Paul Welch said.
“It will grow. Businesses will grow, employment will grow,” Welch told Rigzone.
Supporting his prediction, Welch stated that ENI S.p.A’s giant Zohr discovery in Egypt still needs to be developed, as does BP plc’s Nile project, both of which will significantly increase production in Egypt’s gas sector. Additionally, Welch revealed that SDX itself expects to grow its production in the country.
“I think overall we’re going to see increased production in both oil and gas in Egypt – to the point where hopefully they can [become] a net exporter of at least LNG. They’ll probably still be an importer of oil but a net exporter of gas [is] what we anticipate,” he added.
SDX holds interests in four concessions in Egypt, including two onshore producing assets – North West Gemsa and Meseda. These two assets are located in the Eastern Desert, adjacent to the Gulf of Suez, and have a combined daily average gross production of 11,500 barrels of oil equivalent per day and 2P reserves of 7.34 million barrels of oil equivalent, according to SDX’s website.
After recently finishing a workover program in North West Gemsa, which saw production rise to almost 7,000 barrels of oil per day (bopd) from around 5,500 bopd, SDX plans to complete another workover development in Meseda by the end of the year. In addition to doubling the rate of the field to around 8,000 bopd, Welch expects the company’s Meseda plans to help employment among service companies operating in the region.
“I don’t know if it will add more jobs, but we’ll definitely have more people in our fields doing more work,” said Welch.
Drilling in Egypt
Following the completion of SDX’s Meseda workover scheme, the company plans to drill an exploration well within its operated South Disouq asset in the Nile Delta. SDX completed acquiring 3D seismic in the region June 12 and is currently processing the data and interpreting it with the hope of pinning down a location to drill by mid to late third quarter this year, with a spud anticipated late in the fourth quarter.
Should this well prove successful, it will lead to a “significant uptick” in employment in Egypt, according to Welch.
“The discovery that we’re chasing is roughly 200 million barrels equivalent, it’s about 1.3 to 1.4 trillion cubic feet of gas, so you’re talking 15 to 20 wells, a gas plant and people,” Welch told Rigzone.
SDX’s upcoming and planned work will be funded by the company’s $11 million capital raise that was carried out when it first listed on AIM [Alternative Investment Market] May 20. Around $6 million of this will be spent on the Meseda workover program with exploration activities at South Disouq taking up approximately $4 million, according to SDX’s Chief Financial Officer Mark Reid. The remaining $1 million was spent on placing and AIM listing fees.
“This is sufficient funding to execute all of our work plans in Egypt,” Reid told Rigzone.
“The workover and drilling activity in North West Gemsa was financed by existing cash flow. We do not need and have no plans to raise additional equity for our operations in Egypt,” he added.
Regulatory Structure, Safety Not Limiting Factors in Egypt
Welch touts Egypt as being a good place to do business for a number of reasons, including its low operating costs. Within its producing assets in the country, SDX’s operating expenditure is less than $10 per barrel. The local currency, the Egyptian pound, is another contributing factor to these low costs as it depreciates against the dollar.
“We think we’re in a very good position and Egypt is one of the reasons why,” said Welch.
Although Egypt’s oil and gas regulatory structure may “bog down” at times due to issues of bureaucracy, navigating these regulations is not a limiting factor when conducting business in the country’s energy industry, Welch said.
“The regulatory structure is there, it’s been in place for a long time and it’s well understood … Fiscal terms are well understood, [and] there’s a good civil service that has a lot of well-trained technical professionals,” the SDX CEO said.
“You have to be persistent and ultimately they do come good but it takes some time. Having said that, since president [Abdel Fattah el-Sisi] came to power things have improved dramatically. So, it is a bit slow when compared to say Texas, however, on a global scale, particularly in African terms, it’s pretty speedy,” he added.
The level of safety surrounding oil and gas operations in Egypt is another plus, according to Welch.
“Safety is fantastic. We’ve never, throughout all the period of Arab Spring and prior to that, we’ve never ever had a down day due to security nor have we ever had a security incident at our offices or in any of the fields we work in,” said Welch.