Sound in Talks for LNG Deal in Morocco
London-listed Sound Energy has entered exclusive talks with a Moroccan conglomerate for the sale of LNG from a small-sized plant it wants to build in the country, it said on June 29.
The pair signed a heads of terms agreement granting an exclusivity period until the end of 2020, in which time they aim to finalise a gas sales contract. This contract will cover the delivery of 100mn m3/yr of gas over a 10-year period, with Sound's unnamed partner committing to take or pay for at least 90mn m3/yr. The price will range between $7 and $9/mn Btu.
Sound plans to erect the LNG plant as part of the TE-5 Horst gas project at the Tendrara concession in eastern Morocco. It intends to develop most of Tendrara's gas by building a 120-km pipeline to markets, but it also wants to start producing LNG in 2021 to generate cash flow sooner.
In order to fast-track the first phase of Tendrara's development, Sound's Moroccan partner will provide partial financing, by subscribing for more than 159.7mn new shares in Sound for £2mn ($2.5mn) and supplying a $13.5mn commercial loan with a 11.5% coupon and 12-year term.
Regardless of Covid-19 restrictions, Sound said it aimed to take a final investment decision on Tendrara's first phase in the second half of this year, provided it can get the support of its partners. Sound has a 47.5% stake in the project, while US oilfield services giant Schlumberger has 27.5% and Morocco's state-owned ONHYM has 25%.
"In spite of challenging current market conditions we have made significant progress, and these heads of terms mark an important step forward toward the delivery of the company's phase one production development plan for the TE-5 Horst at the Tendrara concession," Sound's chief operating officer Mohammed Seghiri said.