Southern African gas explorer and developer Sunbird Energy Ltd has announced that all required South African Government approvals have now been received and that it has consequently finalised its acquisition of the Ibhubesi Gas Project (IGP) from Forest Oil Corporation.
The approvals conclude the acquisition by Sunbird of a 76% interest in Production Right Block 2A, which covers a 5,000km2 area within the Orange Basin and contains the IGP, South Africa’s largest undeveloped gas discovery with 2P reserves of 540 Bcf (SNY 76%: 410 Bcf). The block is located 380km northwest of Cape Town and 70 km off the coast of the Northern Cape Province.
Over US$125m has been invested in the exploration and appraisal of Block 2A since 2000, with 7 of the 11 wells drilled to date discovering commercial volumes of gas. Beyond the existing discoveries, an independent assessment determined that the block contains a Best Estimate prospective gas resources of 7.8 Tcf [SNY 76%: 5.9 Tcf).
Having executed the IGP Sale and Purchase Agreement (“SPA”) in December 2012, which provided Sunbird with control of the entities holding the IGP licence and operatorship of the licence. South African Government approvals were required in relation to two aspects of the transaction prior to completion.
Those approvals were:
– Approval under section 11 of the South African Mineral and Petroleum Resources Development Act 2002 for Sunbird to acquire its overall interest in Block 2A, which was received on 7th October 2013; and
– Verification of certain Exchange Control Approvals from the South African Government Treasury, which were received on 16th June 2014.
With all the conditions for the closure having been met the Forest Oil transaction has now been closed. Closure was also made with the release from escrow of a payment by Sunbird of US$1.029m to Forest Oil as required under the terms of the SPA.
Conditional upon Sunbird achieving the following future project milestones and commercial development success in relation to the IGP, the further amounts listed below will become payable to the vendors under the SPA:
– On execution of a Gas Sales Agreement – US$5m;
– On Final Investment Decision to develop a producing project, or First Gas Sales – US$10m; and
– Sales Enhancement Fee equal to 1% of Sunbird’s net gas sales revenues received in relation to Block 2A.
Sunbird Managing Director, Will Barker, said: “Completing the Forest Oil transaction delivers to Sunbird a highly valuable asset, with South Africa’s largest proven gas field, at a time when emergency load shedding is again in the headlines in South Africa. The South African energy market is both highly constrained and high value, creating a unique opportunity for Sunbird as the most advanced project for the supply of energy for the domestic market. We look forward to progressing our gas sales negotiations with Eskom for the supply of gas to the existing Ankerlig Power station that is currently run on expensive diesel, and further exploring Block 2A’s upside potential.”
Sunbird continues to advance the Ibhubesi Gas Project, both technically and commercially with key upcoming milestones for the IGP including:
– Negotiations with Eskom of a Heads of Agreement for gas sales to the Ankerlig Power Plant;
– Completion for the Field Development Plan and Basis of Design;
– Commencement of the Front End Engineering Design (FEED) Studies;
– Progression of Environmental approvals; and
– Advancement of the Eskom Gas Sales Agreement.