Kinetiko Energy Ltd (ASX:KKO, OTC:KKOEF) has received funding from the Industrial Development Corporation of South Africa (IDC), which it will put towards the development of gas fields and gas production for industrial, commercial, transportation or power generation applications.
The IDC, which is owned by the South African Government, has advanced R16,300,000 ($1,346,132.80) as part of its R70,000,000 commitment into its joint venture with Afro Energy (Pty) Ltd, the proposed 100% subsidiary of Kinetiko.
The proposed gas field comprises approximately 20 wells to produce gas and IDC has a first right to participate in up to 45% of the next 60 wells developed by Afro Energy.
The company notes that it already has approvals in place for the joint venture and field commencement which is expected to begin in late 2023.
”The involvement of the IDC in our project at an asset level is a manifestation of the Government’s confidence in the viability of our transition energy vision,” Kinetiko CEO, Nick de Blocq said.
“Our current intention is to focus the joint venture we have created with the IDC on the development of producing fields in the southern part of Block ER271, for which we have begun the process of converting to a multi-decade Production Right.
“With the ability, via this agreement, to expand the IDC’s interest in our production plans going forward beyond this initial LNG development phase, the joint venture has become a launch pad to much larger field development,” de Blocq added.
Commercial gas production in the pipeline
The joint development agreement and supporting agreements between Afro Energy and the IDC will see the pair work together to develop commercial gas production in the Amersfoort region within Exploration Right 12/3/271.
The pair will work together under a special purpose vehicle named Afro Gas Development SA Pty Ltd (AGDSA).
There will be two phases to the gas field development.
Firstly, the JV will turn its attention to the development of approximately 10 wells and the construction of a gas terminal with gas treatment and processing plant, metering station and pipeline gathering system.
The second phase will see the start of gas production from existing wells and the development of a further approximately 10 wells along with the maintenance and expansion of facilities as required.
Gas production does not seem far away.
Having returned substantial gas results from well near South Africa’s largest gas pipeline, Kinetiko is buoyed by the growing potential of core well 270-03C to deliver commercial gas supply in energy-hungry South Africa
The finances
The ADGSA Project is budgeted to cost approximately R155 million which will be contributed 45% (R70m) by the IDC and 55% (R85m) by Afro Energy.
Contributions are to be made by shareholder loans repayable from ADGSA Project gas production revenues.
Afro Energy has advanced R20,000,000 as part of its contribution for its 55% ownership of the joint venture.
The IDC has the first right to participate for up to 45% equity investment in any further special purpose vehicles relating to further gas production blocks up to a total of 60 wells.