14 January 2015, News Wires – Australia’s Bounty Oil & Gas NL announced Thursday that the Gas Sales Agreement (GSA) with the Tanzanian Petroleum Development Corporation (TPDC) for its Kiliwani North gas field in Tanzania has been signed.
Bounty will start its first African gas production in Tanzania.
- Milestone agreement moves Bounty into an African producing phase
- Take-or-pay depletion contract with gas revenues payable in US Dollars
- Initial gas price of $3.00 per million British thermal unit (MMBtu) approximately $3.07 per thousand cubic feet (Mcf)
- Annual indexation of gas price from Jan. 1
- Agreed payment security mechanism
Participants in the Kiliwani North Development License are:
- Ndovu Resources Ltd. (Aminex) – 55.575 percent (Operator)
- RAK Gas LLC – 23.75 percent
- Bounty Oil & Gas NL – 9.5 percent
- Solo Oil plc – 6.175 percent
- TPDC – 5 percent
The Kiliwani North GSA is a “take or pay” type agreememnt and allows for the expected depletion of production from the well over time. In each contract year TPDC will be required to purchase, take delivery of or pay for a pre-determined volume of gas. In the event that TPDC elects not to take delivery of or pay a pre-determined volume, it will pay for the equivalent of 85 percent of the minumum daily quantity of gas to be supplied, initially set at 20 million standard cubic feet per day (MMscf/d) and adjusted each year in accordance with the terms of the GSA. Gas from Kiliwani North will be supplied to the recently completed Songo Songo gas processing plant.
Testing and commissioning of the new plant and pipeline is expected to commence during January 2016, with production being tested at varying rates. During the testing and commissioning phase, the TPDC will be invoiced for gas produced at the end of each month and required to pay on invoice.
The start of commercial operations will be mutually agreed by the TPDC and the Operator after testing and commissioning has been completed. Each month, the TPDC will be required to pay an estimate of one month’s revenues in advance, secured with a letter of credit by the Tanzanian Investment Bank. Monthly revenues will be calculated based on actual production and adjustments will be made at the end of each month for any discrepancy between estimated and actual throughput.
Gas will be sold at $3.00 per MMBtu (approximately $3.00 per Mcf) and the price will be adjusted annually by applying an agreed U.S. Consumer Price Index. Gas revenues will be invoiced and payable in U.S. dollars and the gas delivery point will be the inlet flange at the Kiliwani North wellhead. By selling the gas at wellhead, the joint venture partners will not be responsible for pipeline transportation and processing fees.