Kinetiko Energy Ltd (ASX:KKO) has taken another step in its mission to supply much-needed energy to South Africa by executing a Letter of Intent (LoI) with Grüner Energy Proprietary Limited to conclude a gas development and supply agreement.
The non-binding LoI with the South African owner and operator of energy assets in Africa is considered material by Kinetiko’s board as it demonstrates the nature of commercial relationships that the company is negotiating.
These are integral to the company’s business model of establishing interest in local JV partners to co-develop and co-fund gas fields in Africa.
Such relationships have the potential of accelerating Kinetiko’s exploration vision with funding support.
“Step change in approach”
Kinetiko CEO Nick de Blocq said: “The co-signing of a Letter of Intent with an international partner in the mid- and down-stream energy sector, especially one with substantial experience on the continent of Africa, is a step change in our approach to eventual commercial production.
"We are targeting the southernmost areas of our Block ER271 for this project due to deeper terminal depths of those wells and the expected concurrent increase in pressures and flow rates.”
Shares up
Investors have also welcomed the LoI, sending shares 14.94% higher in the first hour of ASX trading to $0.10.
Grüner also has the capacity to be an offtaker for gas produced and strengthens the market opportunities for KKO’s significant contingent gas resource.
The independent certification of gas reserves and the ability of KKO to increase its gas reserves will depend on the company’s ability to establish that there is a credible market for gas produced in what is projected to be a number of producing gas fields.
“Eagerly awaiting our product”
"This LOI is but the first in our plans to develop multiple joint ventures with expertise in mid-stream infrastructure groups, who bring a market along with them that is eagerly awaiting our product,” de Blocq said.
"We are especially attracted to Grüner’s heightened sense of social responsibility and upliftment of local communities where they work, so we are well aligned with their approach to ESG.“
LoI details
Kinetiko and Grüner have executed the LOI with the purpose of ultimately negotiating and concluding within six months a formal, binding Gas Development and Supply Agreement.
Through this Kinetiko agrees to explore, drill and extract natural gas within South Africa and Grüner intends to assist develop production of natural gas and purchase such natural gas.
Such an agreement shall consider but not be limited to the following:
- Natural gas specification;
- Dry natural gas volumes;
- Parties’ funding commitments;
- Gas supply period;
- Dry natural gas price; and
- Gas delivery.
About Grüner
Grüner is a South African incorporated company and a developer, builder, owner and operator of sustainable energy assets in emerging African markets.
Its focus is the African continent - monetising regional gas resources using natural and biogas as a transitional fuel – while its mission statement is ‘On-site, off-grid, uninterrupted, cost-effective clean energy’.
Grüner manages various modalities in providing energy solutions from natural resource to end-user. These include distributing energy generation systems and energy supply and modular LNG processing, production and supply.