Sound Energy lets contract to commercialize Moroccan gas

June 7, 2018
Sound Energy has signed a heads-of-terms agreement with a consortium of Enagas, Elecnor, and Spain's Fomento for front-end engineering and design and conditional construction and financing of all the infrastructure required—including a pipeline and central gas processing plant—to commercialize Sound Energy’s existing gas discovery in eastern Morocco.

UK-based Sound Energy PLC has signed a heads-of-terms agreement (HOTA) with a consortium of Enagas SA, Elecnor SA, and Fomento—Spain’s ministry of public works and transport—for front-end engineering and design and conditional construction and financing of all the infrastructure required—including a pipeline and central gas processing plant—to commercialize Sound Energy’s existing gas discovery in eastern Morocco (OGJ Online, Aug. 10, 2016).

Alongside the FEED contract, Sound Energy also awarded the consortium exclusivity to finalize the funding, construction, and operation for both the pipeline and gas processing plant under a build-own-operate-transfer (BOOT) structure, the company said.

Scheduled to begin shortly, FEED will cover the gas processing plant and a 20-in. gas pipeline designed to deliver an estimated 60 MMcfd of gas to the Gas Maghreb-Europe pipeline system, some 120 km away.

In parallel with FEED, the consortium also will finalize plans to secure access to about $184 million of development capital required to fund the project, Sound Energy said.

The company said it will take final investment decision on the project following conclusion of FEED activities, which are scheduled to last about 6 months.

Agreement details

Subject to completion of FEED and conclusion of a final BOOT contract with associated debt funding put in place, the consortium will be responsible for construction of the project as well as its operation for a period of 15 years.

In exchange, Sound Energy and its partners will pay a fee not to exceed $45 million/year to the consortium beginning with the start of commercial gas production.

At the end of a 15-year operating period, and subject to a possible extension by the parties, ownership of the project installations will be transferred to Sound Energy and its partners, or to another entity appointed by the partnership, at no cost.

As part of the agreement, the consortium has agreed to pay Sound Energy a break fee of $1.5 million and to provide the company and its partners with the FEED at cost should the BOOT contract not be concluded to the consortium's satisfaction.

Alternatively, Sound Energy and its partners have agreed to buy out the FEED from the consortium for $2.2 million should the company elect not to proceed further with the consortium.

Signed on June 7, the HOTA remains subject to approvals of Sound Energy’s partners, while the final BOOT contract will be subject both to the boards of involved parties as well as to regulatory approvals.

Contact Robert Brelsford at [email protected].