1st Mar 2016 09:43
LONDON (Alliance News) - SacOil Holdings Ltd on Tuesday said it has concluded a co-operation agreement that will lead to the construction of a multi-billion dollar gas pipeline in Mozambique with numerous partners.
SacOil shares were trading up 24% to 1.40 pence per share on Tuesday morning.
In late 2014, SacOil entered into a joint development agreement with two companies to evaluate the technical and commercial feasibility of the construction of a gas pipeline and distribution facility intended to carry natural gas from Mozambique's Rovuma fields to South Africa, with added potential to sell that gas to other countries in Southern Africa.
SacOil has now signed a co-operation agreement and formed a new joint venture company to carry out the project.
The agreement and venture has been signed with Empresa Nacional de Hidrocarbonetos EP, the national oil and gas company of Mozambique, Profin Consulting Sociedade Anónima, a Mozambican private sector consortium, and the China Petroleum Pipeline Bureau, a leading Chinese and international pipeline construction company.
The co-operation agreement assures the financing commitments required for the pre-investment and engineering studies and the construction and implementation of the project.
Empresa Nacional de Hidrocarbonetos EP will represent the government's interest in the project and replaces The Instituto de Gestão das Participações do Estado, which signed the original deal with SacOil in 2014. Profin Consulting will represent the private sector of Mozambique.
The China Petroleum Pipeline Bureau will be the engineering, procurement and construction contractor for the venture and also will bring "debt and equity financing expertise" to the project, said SacOil.
All of the companies will initially focus on getting the project to a bankable level by drawing investment from China, Mozambique and South Africa.
The China Petroleum Pipeline Bureau will pre-finance the studies up to bankable feasibility stage, and be responsible for procuring the debt financing equal to 70% of the total project cost from Chinese financial institutions, said SacOil.
The project will lead to a 2,600 kilometre pipeline being constructed from northern Mozambique to South Africa, with the ability to deliver gas to key towns and settlements in all provinces in Mozambique along the way.
However, the project will not be cheap at an estimated cost of around USD6.00 billion.
In a separate statement Tuesday, SacOil said it is proposing a reorganisation of its interests in Block III in the Democratic Republic of Congo, which is currently held by SacOil's indirect subsidiary, Semliki Energy SARL.
Semliki has an 18.3% participating interest in Block III alongside its partners Total E&P RDC and the government, which hold 66.7% and 15% stakes respectively.
SacOil holds a 68% stake in Semliki through its wholly-owned subsidiary, RDK Mining Proprietary Ltd, with the other 32% being held by Divine Inspiration Group Proprietary Ltd.
Overall, SacOil's effective interest in Block III works out to be 12.5%.
"The reasons for the reorganisation of the ownership structure are to enable SacOil to represent its interest in Block III directly and to have direct line of sight to the activities of Block III," said SacOil.
The proposed reorganisation will separate the interests of SacOil and Divine Inspiration Group in Block III by changing the ownership of Semliki, which holds the asset. Under the proposition, Divine Inspiration Group will become the sole owners of Semliki, whilst SacOil's 12.5% effective interest in Block III will be transferred from Semliki to SacOil's subsidiary, SacOil DRC SARL.
Overall, it means the two companies will hold their interests in Block III through two separate companies, rather than both through Semliki.
Semliki also will transfer a portion of its future rights and obligations to SacOil's subsidiary to reflect its unchanged 12.5% effective interest in Block III. SacOil's obligations and rights remain unchanged.
SacOil said it will reimburse Divine Inspiration Group USD150,000 in "representation fees", as SacOil does not have an office or physical presence in the country.
By Joshua Warner; [email protected]; @JoshAlliance
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