Upstream gas company Sound Energy has signed an agreement with a consortium comprising Enagas, Elecnor and Fomento under which the latter will take up the front-end engineering and design (FEED) and construction and financing of the infrastructure to commercialise the company’s existing gas discovery in Eastern Morocco.
The infrastructure work includes a 20-inch pipeline and facilities.
The consortium will finalise the funding, construction and operation for both a 20-inch pipeline and the central processing facility under a build-own-operate-transfer (BOOT) model.
Sound Energy CEO James Parsons said: “This is a hugely important milestone for our company and I am delighted that Sound Energy is playing such a pivotal role in unlocking the first significant scale indigenous gas production in Morocco.
“For Sound Energy and its shareholders, this innovative BOOT structure means that the company is now firmly on the pathway to commercialising our existing and future gas resources in Eastern Morocco, all without additional equity dilution.”
The consortium will begin FEED on a gas processing plant and a 20-inch gas pipeline intended to deliver 60 million standard cubic feet of gas per day (mmscfd) to the Gas Maghreb-Europe pipeline system, 120km away.
It will also finalise plans to secure $184m of development capital for the project.
After the completion of FEED and conclusion of a final BOOT contract with debt funding in place, the consortium will construct the project and operate it for a period of 15 years.
In exchange, Sound Energy will pay an annual fee to the consortium from the date of commencement of commercial gas production.
The fee will be decided after the completion of FEED, but will be subject to an open book target fee calculated by reference to a target internal rate of return for the consortium and to not exceed $45m per annum.
At the end the 15-year operating period, and subject to a possible extension, the ownership of the project facilities will be transferred to Sound Energy and its partners at no cost.
FEED is expected to be completed over a six-month period. Advisory & Finance Group Investment Bank is Sound Energy’s advisor in Morocco.
The consortium will pay a break fee of $1.5m to Sound Energy. and provide Sound Energy and its partners with the FEED at cost in case the BOOT contract is not concluded to the satisfaction of the consortium.
Sound Energy and its partners have agreed to buy the FEED from the consortium for $2.2m in case the company decides not to proceed with the consortium.