Sound Energy, the Moroccan focused upstream gas company, is delighted to announce that it has entered into a binding gas sale and purchase agreement (the GSA) in respect of the ONEE Phase 2 development of the Tendrara Production Concession with Morocco’s state-owned power Company ONEE (Office National de l’Electricite et de l’Eau potable). The agreement covers the sale of natural gas from the Tendrara Concession in Eastern Morocco over a 10-year period.
The Company has entered into the GSA, which is in addition to the conditional Phase 1 micro liquified natural gas TE-5 Horst development related gas sales agreement entered into by the Company with Afriquia Gaz and announced by the Company on July 29, 2021 alongside its state-owned Tendrara Production Concession partner ONHYM (Office National des Hydrocarbures et des Mines and together with the Group the Tendrara JV Partners).
Under the GSA, the Tendrara JV Partners have conditionally committed to producing, processing and delivering gas from the Tendrara Production Concession, in accordance with required ONEE gas specifications, to the Gas Maghreb-Europe pipeline connecting Algeria to Spain and crossing Morocco (the GME Pipeline), for an annual contractual volume up to 350 million cubic meters of natural gas per year for a period of 10 years, with an annual take or pay volume of 300 million cubic meters.
The GSA includes a fixed unitary price for the annual volume of 0.3 bcm per annum (approximately 29.0 MMscf/d or a minimum amount of energy of approximatively 10.5 million MMbtu per annum to be delivered at the point of sale), which will result in annual gross revenues attributable to the Tendrara concession (100%) as envisaged in the original binding memorandum of understanding between the parties announced by the Company on 30 October 2019
The GSA is conditional upon, inter alia: (i) all necessary authorizations and permits having been granted for the construction of the Phase 2 gas installations (ii) the final investment decision, when taken, by the Tendrara JV Partners, being approved by the Moroccan Ministries of Transition Energy and Sustainable Development and Economy and Finance; and (iii) the entry by the Tendrara JV Partners of an interconnection agreement with the operator of the GME Pipeline, and the commencement of works, for the connection of the Tendrara Production Concession to the GME Pipeline. The conditions to the GSA are required to be satisfied within 90 days of signature, however an extension is allowable with the consent of all parties.
Graham Lyon, Sound Energy’s Executive Chairman, commented: “The agreement of the GSA is an important and long-awaited step which will allow the Company to progress development planning for the proposed TE-5 Horst Phase 2 development. It also underpins the ongoing discussions with potential and identified funding partners. These potential partners have expressed strong interest in participation in the proposed regional infrastructure and asset development via vendor financing, equity participation and alternate lending solutions, in order to build the long-term domestic infrastructure and gas supply in and for Morocco. Satisfying the conditions precedent within a tight 90-day timetable is challenging, however all parties have expressed support to conclude with financiers.
“We are delighted with this confirmation that the UK-Morocco, ONHYM and Sound Energy partnership is working well, and such a business partnership can enhance, with the strong support of our shareholders and our local partners, the expected 5.7% economic growth of the Kingdom of Morocco despite the COVID-19 pandemic.”