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Sound Energy signs FEED contract with Enagas consortium

Jun 07, 2018
2 min read
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Sound Energy signed a heads of terms deal with an Enagas, Elecnor and Fomento consortium for building and operating a pipeline and processing facility at its gas discovery in Eastern Morocco.

The agreement includes the financing worth US$184 million of the project that will deliver an estimated 60 mmscf/d of gas to the Gas Maghreb-Europe pipeline system 120 km away, Sound Energy said in a statement.

The consortium will be handling the front end engineering and design (FEED, construction and operation for 15 years for both a 20 inch pipeline and the central processing facility under a 'build-own-operate-transfer' (BOOT) structure.

"This is a hugely important milestone for our company and I am delighted that Sound Energy is playing such a pivotal role in unlocking the first significant scale indigenous gas production in Morocco,” said Sound Energy's CEO James Parsons.

“For Sound Energy and its shareholders, this innovative BOOT structure means that the company is now firmly on the pathway to commercialising our existing and future gas resources in Eastern Morocco, all without additional equity dilution."

The consortium will shortly begin front end engineering and design (FEED) on a gas processing plant and a 20 inch gas pipeline.

In exchange for the consortium FEED and BOOT contract, Sound Energy and its partners will pay an annual fee to the consortium with effect from the start of commercial gas production.

The fee will be agreed post FEED but be subject to an open book target fee calculated by reference to a target internal rate of return for the consortium and not exceed $45 million per annum.

At the end of a 15 year operating period, and subject to a possible extension by the parties, the ownership of the project facilities will be transferred to Sound Energy and its partners, or to another entity appointed by the partnership, at no cost, the upstream company said.

FEED is expected to last for some six months, following which the company will be in a position to take the final investment decision.

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