Molopo Energy Limited announced Friday that a production right has been awarded to Molopo South Africa Exploration over an area of approximately 494,210 acres (200,000 hectares) in the Free State province.
This is the first onshore production right to be awarded in South Africa, and commenting on the award, Molopo Manager for South Africa Peter Price said, "We are very pleased to have secured this first onshore production right, which represents an exciting development for both South Africa and for Molopo. We and our Black Economic Empowerment (BEE) partners are looking forward to contributing to the enhancement of the local community."
An estimate of Molopo SA’s reserves and resources in the Virginia License area was performed during the exploration phase in 2010. At that time, the P1 reserves were estimated at approximately 9.2 Bcf and P2 reserves of approximately 23.0 Bcf, and the production right application was based on this exploration work. Molopo’s overall net interest in the project is 80 percent after BEE and government participation.
The initial phase of development of this project will be the tie-in of 4 of the 11 pilot production wells where gas flow of approximately 1.2 Million cubic feet per day (MMcf/d) continues. Commercialisation of initial volumes of ~600 Thousand cubic feet per day of natural gas is anticipated to be through the provision of Compressed Natural Gas for transportation. The timing and detailed scope of these development plans will be finalised over the coming months. However, the capital investment outlined in the production right is approximately $2.5 million (AUD$2.4 million) in the first year, $4.1 million (AUD$3.9 million) in the second year, and $9 million (AUD$8.6 million) in the third year; totalling $15.3 million (AUD$14.9 million) over the three year period.
In the longer term, the full field development could result in the development of more than 200 wells, depending on success in further delineation of the resource as well as progress on gas commercialisation opportunities.
These reserves were independently certified by Tim Hower of MHA Petroleum Consultants, LLC, Denver USA who has consented to the inclusion of the reserves information in the form and context in which it appears.
Molopo SA has committed to the implementation of a social and labour plan to be reviewed after two years to ensure that it remains in line with local economic development programme developed for the region. Molopo will continue to contribute to the Upstream Training Trust to assist with the development of local skills to the benefit of the onshore gas industry. Molopo SA was assisted by Bowman Gilfillan in the preparation of the production right application.
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