South Africa – The Ibhubesi Gas Project (IGP) joint venture, comprising Sunbird Energy (76%) and PetroSA (24%), has entered a Gas Sales Agreement (GSA) term sheet for new Eskom energy supply of gas to the Ankerlig power station.

Sunbird Energy is an ASX-listed gas explorer and developer focused on projects in Southern Africa. PetroSA is South Africa’s national oil company.

The GSA Term Sheet is a culmination of two years of work between the technical, commercial and legal teams of the respective parties and sets the key commercial terms and processes for the finalisation of a binding GSA during the course of 2015.

The GSA Term Sheet includes provisions for the supply of 30 billion cubic feet (Bcf) of gas per year for up to 15 years to Ankerlig about 40 km north of Cape Town.

The supply of Ibhubesi gas to Ankerlig will allow Eskom to realise significant fuel cost savings, while providing a new and cleaner burning energy supply to South Africa

Sign off of the GSA Term Sheet demonstrates Eskom’s commitment to the IGP and achieves a significant milestone on the path to development of Ibhubesi by connecting South Africa’s largest proven gas field with a gas market at the Ankerlig power station. The supply of Ibhubesi gas to Ankerlig will allow Eskom to realise significant fuel cost savings, while providing a new and cleaner burning energy supply to South Africa.

The success of this development in providing a route to market for IGP’s existing 2P reserves of 540 Bcf will also encourage further exploration and development in the Orange Basin. Sunbird’s independent experts estimate that there is a further 7.8 trillion cubic feet (Tcf) best estimate prospective gas resources in the company’s 5 000 km² production right area.

The development of the IGP with Sunbird adds more secure electricity generation capacity and provides a vital new fuel source for the diversification of the country’s energy mix. Critically, all necessary environmental permitting approvals are well matured and due for completion by the third quarter of 2015. Success in all of these endeavours, as per the current project schedule, would anticipate first gas out of the IGP and into the Ankerlig power station in 2018.

Commenting on the completion of the GSA Term Sheet, Sunbird’s Chairman, Kerwin Rana, says: “The signing of this GSA Term Sheet with Eskom is a significant advancement in the commercialisation of the Ibhubesi Gas Project which will have an extremely positive developmental impact while providing a tremendous opportunity for major value growth for all stakeholders including Sunbird shareholders.

“The delivery of gas from South Africa’s largest proven gas field provides for a secure, cleaner and significantly lower cost fuel to Ankerlig while assisting in the development of the Orange Basin and the creation of a new industry and much needed jobs.

“We look forward to continuing to work closely to achieve our common goal of delivering gas from the Ibhubesi Gas Project to Ankerlig power station.”

Rana sys the development of the IGP speaks directly to the country’s energy “War Room” priorities of bringing energy security and reducing costs through the Five-Point Plan being overseen by Deputy President, Cyril Ramaphosa. It also supports the Presidential initiative termed Operation Phakisa which has been established to unlock the economic potential of South Africa’s oceans, with a particular focus on oil and gas development.

Development of the IGP will provide the critical first gas production and pipeline infrastructure on the West Coast, opening up new industries in both upstream petroleum exploration and development and a new energy supply for downstream power generation, major industry and domestic uses.

Having completed this important step towards the commercialisation of the IGP, Sunbird is now focused on:

  • Progressing the non-binding GSA Term Sheet to a fully termed and binding GSA in conjunction with PetroSA, and Eskom;
  • Completion of further technical studies to support the subsurface and engineering aspects; and
  • Delivering a robust funding plan for project development through strategic investment, partnering and/or project financing.

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