Africa-Press – South-Africa. On the back of a major gas find near Secunda, Kinetiko Energy and the Industrial Development Corporation have joined forces to develop a Liquefied Natural Gas (LNG) project which will ultimately deliver 500MW of gas-powered energy – making it South Africa’s largest onshore gas project.
Afro Energy, a Kinetiko subsidiary, on Tuesday announced it had executed a non-binding term sheet with the state-owned development financier to co-develop a new joint venture for the appraisal and production of LNG to deliver 50MW – growing to 500MW – gas equivalent energy.
Afro Energy holds the exploration rights for commercial LNG over gas fields located near Secunda in Mpumalanga, where gas has been flowing from boreholes at relatively high production rates for decades.
The unconventional gas is found in both the sandstone and coal formations and a recent independent gas reserves and resources report from Sproule B.V confirmed “positive economics and enormous scalability” of the contingent resource.
Kinetiko is an Australian-listed company which is developing an energy transition solution for South Africa focused on commercialising advanced shallow conventional gas and coal bed methane projects. It said the term sheet underpins Kinetiko and Afro Energy’s strategic objectives to unlock over 2 trillion cubic feet (tcf) in gas reserves and become a sustainable cleaner energy solution for the South African economy.
For comparison, fuel production from PetroSA’s Mossel Bay refinery was sustained over 28 years with 1.5 tcf of gas.
The first-stage 50MW-equivalent project is estimated to cost approximately AUD138 million (R1.67 billion), comprising AUD90 million equity and AUD48 million debt.
The IDC will equity fund approximately AUD52 million for 30% interest in the JV. Afro Energy will equity fund around AUD38 million for 70% interest.
The second stage intends the parties to expand the JV to 500MW LNG-gas-equivalent, which would be the largest on-shore LNG project in South Africa. The IDC intends to fund 30% of the second-stage development.
The corporation has also been granted the option to participate in the co-development of further 1 000MW LNG-gas-equivalent projects, totalling 1.5GW.
The parties estimate that Block 1 for 50MW-equivalent of LNG will be developed over two to three years and further blocks for 450MW-equivalent of LNG will be developed over nine to 10 years.
“This is a step change in the scale of the company’s development and represents a national project to support South Africa’s transition to cleaner, reliable, affordable energy,” said Kinetiko CEO Nick de Blocq. “I cannot overstate the importance of this massive step we have taken in collaboration with our IDC joint venture partners, as it represents a level of confidence in our project from high layers of government.”
Blocq said the project has been registered under the Strategic Infrastructural Projects management mechanism that operates from the Office of the President and which is expected to expedite all state and government-related processes in terms of permitting and licensing and minimising of red tape.
“We are beyond delighted to be able to say that our journey towards a large-scale project commercialisation and production has now begun,” he said.
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