Sound strikes Moroccan LNG sales deal
London-listed Sound Energy has struck a 10-year LNG sales and purchase agreement with Morocco's leading liquid petroleum gas distributor Afriquia Gaz for supplies from a micro-scale liquefaction plant it plans to build at its TE-5 Horst development, the company announced in a stock filing on July 29.
The deal annually covers at least 171,000 m3 of LNG, or 100mn m3 in gaseous form, to be supplied on a take-or-pay basis. The deal includes a price floor of $6/mn Btu and an initial price ceiling of $8/mn Btu, which will increase over the contract's duration to $8.346/mn Btu, determined using a formula based on rates at the Henry Hub gas hub in the US and the TTF platform in the Netherlands.
In order to close the agreement, the partners need to reach a loan note agreement, under which Afriquia will lend Sound $18mn at a 6% coupon rate with a 12-year repayment term. Sound will also need to get approval from its concession partners at TE-5 Horst, and finalise a contract with Italy's Italfluid Geoenergy to build the liquefaction facility.
Sound has a 47.5% stake in the project, while US oilfield services giant Schlumberger has 27.5% and Morocco's state-owned ONHYM has 25%. But it struck a deal in June to acquire Schlumberger's share for a $1.
In addition, Afriquia will need to secure regulatory approvals for transporting LNG via tankers and selling the supplies. And it needs to reach agreements in principle with downstream buyers covering at least 60% of the take-or-pay volumes under the contract.
All these conditions must be satisfied by October 29, Sound said.
Construction of the liquefaction plant will represent the first phase of TE-5 Horst's development. The company wants to build a 120-km pipeline from the site to handle gas from the second phase.