Solo Oil has confirmed that Kiliwani North operator Animex has now executed the gas sales agreement for the Kiliwani North-1 well with the Tanzania Petroleum Development Corporation on behalf of their joint venture partnership.
The GSA is a depletion contract allowing for the expected production of reserves from the KN-1 well over time. In each contract year TPDC is required to purchase a quantity of gas and pay whether delivery is taken or not.
The annual quantity represents 85% of the minimum daily quantity of gas to be supplied, initially set at 20 million standard cubic feet per day (“mmscfd”), and adjusted each year in accordance with the terms of the GSA.
Gas from the KN-1 well will be supplied to the newly built Songo Songo gas processing plant where it will be commingled with gas from the adjacent Songo Songo gas field before being transported, by pipeline, to the market in Dar es Salaam.
Final well preparations are currently ongoing and testing and commissioning of the new Songo Songo plant and pipeline is expected to commence shortly, with KN-1 production being tested at various rates to establish optimum conditions. During this period TPDC will be invoiced for gas produced at the end of each month and is required to pay immediately.
Gas will be sold at $3 per million BTU (approximately $3.07 per mcf), and will increase in line with an agreed US consumer price index, the price is not directly linked to the prevailing oil price.
Solo chairman Neil Ritson, said: “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.
“We also look forward to further successes in Tanzania during 2016 with the planned appraisal drilling on the Ntorya discovery in the Ruvuma PSC.”
Solo holds a 6.175% interest in the KNDL following the TPDC back in that was announced on 5 October 2015. Solo also holds an option to purchase up to a further 6.175% stake in the KNDL according to the terms previously announced.
As announced in May 2015 reserves at Kiliwani North have been independently estimated as gross mean gas initially in place of 44 billion cubic feet (“bcf”) of which gross 28 bcf are expected to be reclassified to proven producing reserves once commercial production operations are underway