Kinetiko Energy signs deal to develop proof-of-concept gas production trial in South Africa
A new deal will see Kinetiko drill and extract gas in South Africa with partner Grüner Energy agreeing to develop, produce and purchase the gas.
Perth-based explorer Kinetiko Energy (ASX: KKO) has secured a deal with South African operator Grüner Energy to co-fund the development of a proof-of-concept gas production trial in the Mpumalanga province.
Under the terms of the deal, Kinetiko will explore, drill and extract natural gas in the southern parts of Block ER271 while Grüner will develop, produce and purchase the gas.
Grüner builds, owns and operates sustainable energy assets in emerging African markets.
It has the capacity to be an offtake customer for gas produced by Kinetiko and could potentially strengthen market opportunities for Kinetiko’s other contingent gas resources.
Leveraging experience
Kinetiko chief executive officer Nick de Blocq said the agreement will leverage Grüner’s experience in the region.
“The co-signing of a letter of intent with an international partner in the midstream and downstream energy sectors — especially one with substantial experience on the African continent — is a step change in our approach to eventual commercial production,” he said.
“We are targeting the southernmost areas of Block ER271 due to deeper terminal depths of those wells and the expected concurrent increase in pressure and flow rates.”
Mr de Blocq said the agreement is expected to spark future joint ventures with midstream infrastructure groups which have existing gas markets.
Advanced opportunities
Kinetiko Energy is focused on advanced shallow conventional gas and coal bed methane opportunities in rapidly developing markets in Africa.
The company has 4.9 trillion cubic feet of contingent resources and a large potential exploration area, of which approximately 7,000 square kilometres has been granted and is being explored.
Recent capital raising
During the December quarter, Kinetiko received firm commitments from strategic South African investors — including energy investment institution Phefo Power — to raise $8 million (before costs).
The funds will be used to accelerate exploration and growth of the company’s gas resources.
“We have been focused on ensuring the next substantial equity investment would come from indigenous sources, and this placement continues our strong momentum shown throughout the past year,” Mr de Blocq said.