Shona to supply gas for Colombia LNG project

Shona Energy Co. Inc., Calgary, said its Geoproduction Oil & Gas Co. of Colombia will supply natural gas from the company’s Esperanza block in Colombia’s Lower Magdalena basin to the planned Altenesol Nataly I LNG project in Cordoba Province.

Under a letter of intent signed with Altenesol LNG Colombia SAS, Geoproduction will begin negotiating to sell 17 MMcfd of gas for 10 years. Based on initial discussions, the starting price will be negotiated in a range of $4.50-5.25/Mcf with annual price escalation. The contract will be on a take-or-pay basis for both parties.

The parties have an option to extend the contract 5 years dependent on the results of the four to five-well drilling program that Geoproduction will commence in mid-2013.

Milestones to be completed by Altenesol over the next 6 months include executing a definitive agreement with Geoproduction by Dec. 1, converting existing end-user letters of intent to definitive agreements, ordering equipment, and starting construction of an LNG plant.

Altenesol estimates that it will require 17 MMcfd for Nataly I and intends to build the plant near Geoproduction’s Jobo Station that processes Esperanza gas. Altenesol anticipates the plant will be completed in 2 years. The Nataly I project would more than double Shona Energy’s gas sales.

James L. Payne, Shona Energy chairman and chief executive officer, said, “Based on the encouraging results of the recently completed 3D seismic survey of Esperanza and our existing development and exploration project inventory, we believe that our reserves exceed those required to meet the commitments of the potential agreement. Shona is proactively planning a four to five-well drilling program in 2013 to establish additional reserves in order to fully commit to the proposed 5-year term extension and establish a basis for other gas contracts.”

A consulting reserves report in January assigned Esperanza proved and probable gas reserves of 95 bcf and possible reserves of 78 bcf. In June, Shona completed its fourth seismic program with the acquisition and processing of 103 sq km of 3D seismic and 14 line-km of 2D seismic on Esperanza.

Shona Energy also has nonoperated interests in the Serrania, Los Picachos, and Macaya blocks in Colombia’s Caguan basin and Block 102 in Peru’s Maranon basin.

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