Sunbird enters into gas sales agreement for Ibhubesi
Sunbird Energy Limited has announced that the Ibhubesi Gas Project (IGP) joint venture has entered a Gas Sales Agreement (GSA) Term Sheet with Eskom Holdings (SOC) Ltd (Eskom) for the supply of gas to the Ankerlig Power Station.
IGP joint venture comprises Sunbird (76%) and PetroSA (24%) – South Africa’s National Oil Company.
According to Sunbird, the GSA Term Sheet is a culmination of two years of work between the technical, commercial and legal teams of the respective parties and sets the key commercial terms and processes for the finalisation of a binding GSA during the course of 2015. The GSA Term Sheet includes provisions for the supply of 30 billion cubic feet (Bcf) of gas per year for up to 15 years to the Ankerlig Power Station about 40km north of Cape Town.
Sign off of the GSA Term Sheet demonstrates Eskom’s commitment to the IGP and achieves a significant milestone on the path to development of Ibhubesi by connecting South Africa’s largest proven gas field with a gas market at the Ankerlig Power Station, Sunbird said.
Sunbird’s independent experts estimate that there is a further 7.8 Tcf (SNY 76%: 5.9 Tcf) of best estimate prospective gas resources in the Company’s 5,000 km2 Production Right area.
Commenting on the completion of the GSA Term Sheet, Sunbird’s Chairman, Kerwin Rana, said: “The signing of this GSA Term Sheet with Eskom, is a significant advancement in the commercialisation of the Ibhubesi Gas Project which will have an extremely positive developmental impact while providing a tremendous opportunity for major value growth for all stakeholders including Sunbird shareholders.
“The delivery of gas from South Africa’s largest proven gas field provides for a secure, cleaner and significantly lower cost fuel to Ankerlig while assisting in the development of the Orange Basin and the creation of a new industry and much needed jobs.
“We look forward to continuing to work closely to achieve our common goal of delivering gas from the Ibhubesi Gas Project to Ankerlig Power Station.”
Rana added that the commercialisation of IGP will provide a critical foundation project for the development of an integrated gas economy on the West Coast of South Africa featuring:
– Offshore petroleum exploration and development;
– Upstream/Offshore domestic oil and gas production;
– Midstream pipeline infrastructure;
– LNG importation;
– Gasification of onshore power generation and industry;
– Diesel replacement in existing power stations;
– New build gas fired Independent Power Plants; and
– Fuel replacement for major industrial users.
Rana said the development of the IGP speaks directly to the country’s energy “War Room” priorities of bringing energy security and reducing costs through the Five-Point Plan being overseen by Deputy President, Cyril Ramaphosa. It also supports the Presidential initiative termed Operation Phakisa which has been established to unlock the economic potential of South Africa’s oceans, with a particular focus on oil and gas development. Development of the IGP will provide the critical first gas production and pipeline infrastructure on the West Coast, opening up new industries in both upstream petroleum exploration and development and a new energy supply for downstream power generation, major industry and domestic uses.
Having completed this step towards the commercialisation of the IGP, Sunbird is now focused on:
– Progressing the non-binding GSA Term Sheet to a fully termed and binding GSA in conjunction with PetroSA, and Eskom;
– Completion of further technical studies to support the subsurface and engineering aspects; and
– Delivering a robust funding plan for project development through strategic investment, partnering and/or project financing.
Critically, all necessary environmental permitting approvals are well matured and due for completion by the third quarter of 2015, said Sunbird. Success in all of these endeavours, as per the current project schedule, would anticipate first gas out of the IGP and into the Ankerlig Power Station in 2018, Sunbird concluded.
PetroSA Group CEO, Nosizwe Nokwe-Macamo, said: “PetroSA is committed to ensuring we play a critical role in seeking solutions to the power challenges that face our sister company, Eskom.”