Oil Field. Wired.Com
The MOU terms include both parties contributing pro rata of equity participation to achieve commercial production. Pic credit: Wired.com

In South Africa, White Rivers Exploration (WRE), a mineral explorer and developer, has signed a memorandum of understanding (MOU) with Windfall Energy to facilitate the joint exploration and development of WRE’s Helibron and Kroonstad gas resources, the companies announced on Monday.

Methane gas resources have been discovered on the Helibron and Kroonstad tenements where WRE has been granted technical cooperation permits. Windfall, which last year bought South African gas assets from ASX-listed Molopo Australia, will test the potential for gas resources of some of White Rivers’ holdings under the deal.

MOU terms to explore gas resources

  • Windfall will fund all costs associated with the exploration and development of the two gas resources to the point of the granting of a Production Right on each asset.
  • Upon achieving an Exploration Right for either asset, Windfall will earn a 30% interest in the gas rights of the respective asset.
  • Upon achieving a Production Right for either asset, Windfall will earn a 51% interest in the Production Right and first right of refusal to procure any gas resource produced on normal commercial terms.
  • Once a Production Right has been granted both companies will contribute pro rata of equity participation to achieve commercial production.

Neil Warburton, Executive Chairman of WRE said: “We look forward to working with Windfall Energy to fast-track the development of the Helibron and Kroonstad gas resources at a time when alternative energy supplies in South Africa are being sought.”

Gas-to-power

In further news, the South African Department of Energy (DOE) is currently receiving preliminary proposals in an open Request for Information (RFI) process, which will close on 20 July.

The purpose of the RFI is to determine the market’s appetite for a bundled or unbundled project, capable of delivering combined power generating capacity of 3,126MW from 2020.

According to international petrochemical market research company, ICIS, this will equate to approximately 2mtpa of LNG in energy terms.

Bundled or unbundled

A bundled project would see the entire value chain revolve around one key procurement contract; the power purchase agreement – with state-owned utility, Eskom, named as the expected sole buyer of power capacity and output.

Whereas, an unbundled project would see up to three separate procurement contracts; one for LNG supply, one for LNG regasification, and one for gas-to-power production. Therefore, respondents are required to clarify their intention to bid as part of a bundled or unbundled project.

ICIS states that, in the event of a bundled approach following an Request for Proposals bid deadline in Q1 or Q2 of 2016, the DOE would normally award a preferred bidder 12 months to finalise its offer before signing a binding contract.

However, ICIS advises that the period that would be given to a preferred bidder for an LNG project – bundled or unbundled – remains to be determined.