Fully commercialised, the agreement could boost Molopo’s annual sales volumes from Mungi by 3.5 petajoules – an amount more than eight times the company’s current annualised sales.
“Should those volumes be attained, it would represent a significant step-up for Molopo’s production, sales, revenue and earnings outlook,” the company’s managing director Stephen Mitchell said yesterday.
“The Ergon MOU is in addition to our current supply agreements with Origin Energy and Queensland Cotton Corporation and goes a long way to underpinning a founding customer base.”
The MOU provides for Molopo to work towards providing gas from the Mungi field to a potential new power generation project that would be established by Ergon near the Mungi field, Mitchell said.
The agreement assumes the installation initially of one 43MW unit, with scope to explore the addition of another unit at a subsequent date.
“Baseload gas requirements are currently estimated at 3.5PJ/annum per unit over a 15 year period,” Mitchell said.
“Molopo and [Mungi partner] Helm have the opportunity to provide a significant share of the eventual gas requirement with the potential to supply the total volume subject to the adequacy of gas reserves.”
Mitchell said Molopo and Ergon would now work collaboratively on the technical and financial feasibility of the projects and were expected to negotiate a term sheet later this year for the supply of the Mungi gas.
Following successful completion of a final feasibility study, reserve certification and a detailed engineering design, final formal documentation would then be entered into.
Mitchell said all new Mungi wells drilled would prove up additional reserves to satisfy the requirements for Ergon, with the gas produced from these interim wells being sold into existing infrastructure through contracts in place with other parties with strong financial credentials.
“This considerably enhances the returns from the Mungi project,” he said.
The partners in these fields are Oil Company of Australia (Moura) Pty Limited (50%), Molopo (25%) and Helm Energy-Australia LLC (25%).