“Sales of gas under the JV will substantially assist KKO’s target of converting its established 4.9 trillion cubic feet (TcF) contingent gas resource into first reserves,” says executive chair.
Targeted for sale within the high-voltage private sector network, the JV will initially use a one-megawatt (MW) gas reticulation engine provided by Vutomi to utilise gas from Afro Energy’s wells.
This agreement represents the company’s first offtake from its project in South Africa and comes as the company is transitioning from explorer to gas producer. It has also seen shares rise by more than 11% to A$0.10.
The terms sheet will be formalised as an incorporated joint venture once the terms and conditions have been met.
Transitioning to producer status
Kinetiko executive chair Adam Sierakowski said: “The creation of the JV with Vutomi Energy is an important development for Kinetiko in its transition from gas explorer to gas producer.
“This JV illustrates the potential of how the company can scale commercial gas production to a variety of domestic customers.
“Sales of gas under the JV will substantially assist KKO’s target of converting its established 4.9 trillion cubic feet (TcF) contingent gas resource into first reserves.”
Key commercial JV terms
The following terms are included (but not limited to):
- Vutomi Energy shall supply the 1MW gas reticulation engine to the JV on a loan basis at no cost;
- Afro Energy shall provide the joint venture with gas from wells located on the Korhaan Project;
- The JV will be responsible for the payment of all costs associated with the transportation and connection of the 1MW gas reticulation engine to the electricity network;
- The JV will be responsible for the payment of all costs associated with the costs of transporting and connecting the gas produced to the 1MW gas reticulation engine;
- Vutomi Energy shall negotiate and enter into a sale agreement for Energy with third-party off-takers on behalf of the JV, such terms to be agreed by the joint venturers;
- The parties agree that should this JV be successful a further extensive joint venture may be undertaken whereby Vutomi Energy provides larger cogeneration electricity plants and Afro Energy develops more gas-producing wells to support a large electricity power generation capacity; and
- The parties to the JV will negotiate in good faith to enter into a formal and binding joint venture agreement within 90 days of the execution date of the JV on terms consistent with the terms, rights and conditions set out in the terms sheet.
About the companies
Vutomi Energy is a Level 1 BBEEE Independent Power Producer (IPP) based in Mbombela, South Africa. The company is 100% black-owned and was formed in 2019 with the acquisition of the existing 18.5MW co-generation plant in Newcastle, KwaZulu Natal.
Vutomi’s vision is to be a leading independent energy supplier in Sub-Saharan Africa and to develop clean, renewable energy projects in emerging markets and empower developing country populations with sustainable power.
Kinetiko Energy is in the energy exploration business, solely focused on sandstone gas and coal bed methane exploration and commercialisation in South Africa.
The company has an extensive exploration area, of which about 7,000 square kilometres is granted and being explored.
Kinetiko’s flagship Amersfoort Project and adjacent exploration rights are held through a South African joint venture company Afro Energy in which Kinetiko holds a 49% economic interest and a 50% controlling interest.
Read More: Kinetiko Energy Ltd secures first offtake in transition to South African gas producer