Kinetiko Energy Ltd (ASX:KKO, OTC:KKOEF), which has trained its sights on advanced shallow conventional gas and coal bed methane in South Africa, has signed a non-binding Memorandum of Understanding (MoU) with FFS Refiners Proprietary Ltd to finalise a gas supply agreement (GSA).
Industrial fuels business
FFS Refiners, a leading supplier of industrial heating fuels in South Africa, is seeking to supplement its industrial fuels business with the supply of liquified natural gas (LNG).
Kinetiko and FFS Refiners intend to develop a proof-of-concept gas production trial that, if successful, can be scaled into a long-term supply arrangement.
The MoU provides for the potential of FFS Refiners to purchase natural gas produced pursuant to a binding GSA.
Kinetiko believes its reserves have the potential to grow with the interest and investment of offtake partners for its gas.
Such commercial relationships are integral to the company’s business model, which involves teaming with local joint venture partners to co-develop and co-fund gas production fields in South Africa.
These relationships have the potential of accelerating the exploration vision with funding support.
In addition, FFS has the capacity to be an offtaker for gas produced, strengthening the market opportunities for Kinetiko’s significant contingent gas resource.
Finally, the independent certification of gas reserves and the ability of Kinetiko to increase its gas reserves will depend on the ability of the company to establish that there is a credible market for gas produced in what is projected to be a number of producing gas fields.
Fundamental approach
“This MoU describes a fundamental approach to our eventual large-scale production plans,” Kinetiko CEO Nick de Blocq said.
“FFS brings with them internationally tried-and-tested midstream infrastructure for the production of LNG, as well as the ability to finance and operate the infield assets.
“Similarly to our recent announcement of an LOI with Gruner Energy, we will be targeting the southern areas of our Block ER271 for this project due to deeper, higher pressured wells with optimum flow rates.
“This MoU is therefore the second in our plans to develop multiple joint ventures with expertise in the provision of mid-stream infrastructure, and with a focus on those who bring an existing market along with them in urgent need of high-quality gas.“
FFS CEO Andrew Canning said: “FFS is committed to meeting the indisputable imperative facing not only the petroleum industry but all consumers of fossil fuels – to prioritise a cleaner environment for generations to come through the use of alternative energy sources in industry.
“Natural gas is a crucial transition fuel essential for a responsible and successful migration to lower carbon fuels in South Africa. FFS will use its national footprint and close to 50 years of experience in thermal energy to commercialise indigenous stranded gas resources such as those being developed by Kinetiko.
Building sustainable gas market
“FFS has been built with a strong R&D focus and the company successfully completed a pilot project in 2020 when it imported multiple LNG iso-containers for internal use and testing at its Cape Town terminal facility.
“We have partnered with Galileo Technologies, a pioneer in the decarbonisation of the energy value chain, developing modular solutions for LNG, Biogas, Hydrogen and smart compression sectors, to offer the local market small-scale liquefaction options.
“FFS aims to produce LNG from other local gas sources in 2024 and to commence the proof-of-concept trial with Kinetiko soon thereafter.
"We are proud to work with Kinetiko in developing our first-class local gas resources to build a sustainable natural gas market not beholden to imported energy supplies,” Canning added.