Sound Energy said it has signed a deal to supply liquefied natural gas from its planned small-scale LNG facility in Morocco to LPG distributor Afriquia Gaz.
The London-listed and Morocco-focused upstream gas company has entered into a binding LNG sale and purchase agreement with Afriquia Gaz for a period of ten years.
According to a Sound Energy statement on Thursday, Afriquia Gaz would buy not less than 171,000 cubic metres of LNG per year.
This equals about 100 million cubic metres a year of gas from the first phase of the LNG project which would receive gas from the TE-5 Horst field in the Tendrara production concession.
Moreover, pricing under the LNG SPA would be determined using an indexed formula which applies a combination of the European Title Transfer Facility and the US Henry Hub benchmark indices, it said.
Sound Energy said the floor price would start from $6 per MMBtu while the ceiling price would begin at $8 per MMBtu and increase during the course of the deal to $8.346 per MMBtu.
The point of sale to Afriquia will be at the Tendrara (TE-5) field location following processing and liquefaction. Afriquia will take over transportation and delivery to its downstream customers.
Sound Energy said the deal is subject to several conditions including approvals from the concession joint venture, and the execution of a loan note agreement between the duo.
The conditions also include awarding Italfluid Geoenergy to build a gas processing and liquefaction facility and Afriquia receiving regulatory approvals for the transportation of LNG by tankers and the sale of LNG.
In addition to the sales and purchase deal, Sound Energy and Afriquia also entered in an equity subscription deal.
Under this deal, Afriquia has made a £2 million ($2.79 million) equity placing.
“This is a key milestone in moving forward towards the final investment decision and notice to proceed for the Tendrara Phase 1 Development,” Graham Lyon, Sound Energy’s executive chairman, said.
“By establishing clear paths both to market for our gas and to our financing of Phase 1 Development, today’s announcement together with the recently announced Schlumberger Silk Route Service acquisition not only mark critical milestones for the company but underscore our commitment to Sound Energy shareholders to deliver upon our objectives and to create value through innovative commercial arrangements,” he said.