LONDON (Alliance News) - Northcote Energy Ltd Wednesday said it has formed a new joint venture entity with its Mexican partner to develop the Tabasco remediation facility which will recycle oil cuttings and provide other oil field services to both onshore and offshore wells in the country.
The news follows on from an announcement earlier in July that the company had secured a property for the development of the company's first scalable waste remediation facility in Mexico.
Northcote, along with its partner Gaia Ecologica SA DE CV, have set up the joint venture company called Mayan Drilling Fluids SAPI de CV which will develop the facility on the new 22 acre property in the state of Tabasco in Mexico.
The facility will provide services to surrounding oil and gas fields, which is significant as Mexico has recently opened up its energy market through a licensing round open to foreign companies after 76 years of state monopoly.
The first phase build of the plant will cost the joint venture company less than USD1.0 million and take around six months to complete. It will be capable of running for 24 hours a day, seven days a week and handle 700 tonnes per day with the opportunity to expand over time.
Northcote said the plant will operate a pricing model in line with similar plants in South Texas where prices can range from USD60 to USD100 per ton of waste processed, demonstrating "significant revenue potential".
Northcote will wholly fund the facility and hold a 51% controlling stake in the joint venture company, but will be entitled to 85% of distributable cash flow until pay-out plus a 9.0% internal rate of return on its investment, before profits return to being divided by each company's shareholding in the project.
Juan Osmon, the president of Gaia Ecologica, will serve as the president of Mayan Drilling Fluids.
"In this environment of low oil prices I really like the fact that this plant will serve to increase and diversify Northcote's revenue not only because the revenue is not directly linked to oil price but also because the platform can remediate waste from a wide range of sources not just oil and gas," said Northcote Managing Director Randall Connally.
Northcote shares were up 1.4% to 0.147 pence per share on Wednesday morning.
By Joshua Warner; joshuawarner@alliancenews.com; @JoshAlliance
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