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LONDON (Alliance News) - Aminex PLC and Solo Oil PLC on Wednesday said they finalised the gas sales agreement for the Kiliwani North development project in Tanzania.
Aminex operates the Kiliwani North development licence, holding a 55.575% interest whilst Solo Oil holds a 6.175% stake. Those stakes come after Tanzania Petroleum Development Corp exercised an option back in October to take a 5% stake in the licence. The other partners are RAK Gas LLC and Bounty Oil and Gas NL.
Importantly, fellow AIM-listed BowLeven PLC agreed to acquire a 25% stake in the licence from Aminex back in November, which when completed will push Aminex's holding down to 30.575%. Solo Oil also has the option to acquire a further 6.5% stake in the licence from Aminex, which if exercised would push Aminex's stake down even further.
Solo Oil would have to exercise that option within 30 days of the gas sales agreement being finalised.
Solo and Aminex released separate statements on Wednesday announcing the gas sales agreement for the licence, signed with Tanzania Petroleum Development.
The take-or-pay agreement has an initial gas price of USD3.0 per million British thermal units, roughly equal to USD3.07 per million cubic feet of gas. Importantly, the gas price is independent of the oil price - which hit its lowest price since April 2004 on Tuesday.
Brent was trading at only USD31.67 on Wednesday morning, a 73% fall from the USD115 price back in the middle of 2014.
The agreement allows for the expected depletion of production from the field over time. In each contract year, Tanzanian Petroleum Development will be required to purchase, take delivery of, or pay for a pre-determined volume of gas. In the event that the company elects not to take delivery of the pre-determined volume, it will pay for the equivalent of 85% of the agreed commercial rate of gas to be supplied, adjusted each year in accordance with the terms of the agreement.
Gas from Kiliwani North will be supplied to the recently completed Songo Songo gas processing plant. Significantly, by selling the gas at the wellhead, the joint venture partners will not be responsible for pipeline transportation and processing fees.
Final well preparations, which are currently ongoing, are being completed prior to testing and commissioning of the new plant. During this phase, production rates will be varied to optimise well life and establish commercial rates. During the testing and commissioning phase, Tanzanian Petroleum Development will be invoiced for gas produced at the end of each month and will be required to pay on invoice.
Back in May, the gross mean gas initially in place in the licence was declared at 44.0 billion cubic feet of gas , of which the partners expect 28.0 billion cubic feet to be reclassified and proven up once commercial production begins.
"We are delighted to start 2016 with the milestone signing of the Kiliwani North Gas Sales Agreement. Gas production can now start, leading to the first revenues from our investments in Tanzania," said Solo Chairman Neil Ritson.
"Aminex has operated in Tanzania for over 13 years, always working closely with the Tanzanian authorities, and the Kiliwani North gas sales agreement represents a major milestone as the company's first commercial production in Tanzania," said Aminex Chief Executive Jay Bhattacherjee.
The good news builds on Solo Oil and Aminex's other partnership on the Ruvuma basin in Tanzania, where the pair are planning appraisal and development drilling. BowLeven also struck a deal to acquire a stake in that project under the agreement that could lead to it acquiring that considerable stake in Kiliwani North.
Aminex shares were up 6.7% to 1.60 pence per share on Wednesday morning whilst Solo Oil shares were trading up 11% to 0.356p. BowLeven shares were trading down 1.9% to 19.62p.
By Joshua Warner; joshuawarner@alliancenews.com; @JoshAlliance
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