Shona to supply gas for Colombia LNG project

Oct. 22, 2012
Shona Energy Co. Inc., Calgary, said its Geoproduction Oil & Gas Co. of Colombia will supply gas from the company's Esperanza block in Colombia's Lower Magdalena basin to the planned Altenesol Nataly I LNG project in Cordoba Province.

Shona Energy Co. Inc., Calgary, said its Geoproduction Oil & Gas Co. of Colombia will supply 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 at $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.

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.