Gas exploration company Kinetiko Energy – through its subsidiary Afro Energy –, has signed a non-binding Term Sheet with South African national development finance institution, the Industrial Development Corporation (IDC), to co-develop a Joint Venture (JV) for the production of the country’s largest onshore Liquefied Natural Gas (LNG) project.
Announced on 22 August, the first phase of the project will deliver 50 MW of gas equivalent energy and is expected to be developed over two to three years.
The total cost of the project’s first phase will comprise $57.8 million in equity from the IDC and $30.8 million in debt through Afro Energy for a total of $88.6 million.
“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,” stated Nick de Blocq, CEO of Kinetiko Energy, adding, “We are beyond excited to be able to say that our journey towards a large-scale project commercialization and production has now begun.”
The project’s second phase will expand the operation to 500 MW gas equivalent energy, making use of additional onshore natural gas wells within the existing granted exploration rights, and is expected to be developed over nine to ten years. For the second phase, the IDC will participate as a 30% equity investor, while Afro Energy retains its right to introduce a third-party investor for its part of the JV.
Afro Energy holds the exploration permits for commercial LNG over gas fields situated near Secunda in the Mpumalanga Province of South Africa where – according to the Term Sheet – the company’s strategic objective is to unlock over 2 trillion cubic feet of natural gas.
Gas from the LNG project will be delivered to an offtaker to supply 50 MW of gas equivalent energy. As such, Kinetiko Energy has executed a Memorandum of Understanding with industrial fuels supplier, FFS Refiners, and a Letter of Intent with sustainable energy solutions company, Grüner Energy, for the potential offtake of LNG.
According to de Blocq, the project has been registered under the South African Government’s Strategic Infrastructural Projects management mechanism, which is poised to expediate State- and Government-related processes. Furthermore, under the current JV agreement, the IDC operates solely in the upstream sector, while the parties have agreed to develop a second JV for downstream and midstream activities.