Australia's Kinetiko to develop onshore LNG project in South Africa

Afro Energy, a subsidiary of Australia-listed Kinetiko Energy, has executed a non-binding term sheet with the Industrial Development Corporation of South Africa (IDC) to co-develop a new joint venture focused on the appraisal and production of LNG, Kinetiko said on August 22.

The initiative's initial phase aims to establish a 50MW equivalent project, requiring an estimated investment of approximately A$138mn. This financial commitment is expected to be divided into A$90mn ($57.8mn) in equity and A$48mn in debt.

Under the terms of the agreement, IDC is slated to contribute approximately A$52mn in equity funding, securing a 30% stake in the joint venture. Afro Energy will invest around A$38mn in equity funding, earning the company a 70% stake.

Moreover, Afro Energy is empowered with the prerogative to introduce third-party investors to the joint venture, offering the flexibility to share either a part or the entirety of its 70% interest, thus establishing versatile payment structures, as stated by Kinetiko.

The second phase of the venture envisions an expansion to a 500MW LNG gas equivalent, potentially making it the largest onshore LNG endeavor in South Africa, Kinetiko said. IDC plans to fund 30% of the development for this phase.

IDC has also secured the option to actively participate in the co-development of future 1,000MW LNG gas equivalent projects, thereby contributing to a total energy capacity of 1.5GW.

Kinetiko is focused on advanced shallow conventional gas and coalbed methane opportunities in Southern Africa. It signed an agreement in December 2021 to acquire 100% of Afro Energy from Badimo Gas. Kinetiko originally owned 49% of Afro, which holds the South African exploration rights and production approvals linked to its assets. 

Earlier this year, IDC had extended financial support to Afro Energy for the development of gas assets in the Amersfoort region of South Africa.