Savannah Energy (SAVE ) said its Accugas subsidiary has entered into a new gas sales agreement ("GSA") with Mulak Energy.
Mulak Energy is a member of the Mansour Group, the Egyptian based multinational conglomerate across more than 100 countries with annual revenues exceeding $7.5bn.
The GSA, which begins initially for a seven-year term, envisages the supply of gas produced by Savannah's majority-owned Uquo field, which is located in Nigeria, for an initial two-year period on an interruptible basis and the subsequent five years on a firm contract basis.
During the Interruptible Gas Delivery Period, Mulak is able to nominate a maximum daily quantity of up to 2.5 million standard cubic feet per day, while volumes in the Firm Delivery Period will be agreed by the parties before the end of the Interruptible Gas Delivery Period.
The GSA is priced to reflect Mulak's status as an industrial customer; Accugas, therefore, expects to see its weighted average gas sales price realisation increase as a result of this contract, without the need for any incremental capital expenditure beyond existing plans.
The supply of gas to Mulak's Compressed Natural Gas ("CNG") Nigerian project represents the first Gas-to-CNG sales agreement for Savannah, an African-focused energy company focused on sustainably developing high potential energy projects in Nigeria and Niger.
Mulak initially plans to distribute CNG to its industrial customers in Rivers State, substituting diesel for CNG in generators supplied by the Mantrac Group, also a member of the Mansour Group and a large global dealer in Caterpillar machinery, power systems and equipment.
Mulak said it is in ‘a unique position’ to exploit the synergies with Mantrac's business in Nigeria by converting Mantrac's existing customer base of around 400MW of diesel-fuelled generators to CNG-fuelled generators. This is expected to provide Mantrac’s customers with up to a 40% saving in energy costs as well as a 30% reduction in their carbon footprint.
GSA sales are expected to start in 2022 and, following the initial two-year period, Mulak has said it is seeking to expand its CNG sales on a pan-Nigeria basis to Mantrac customers.
Meanwhile, Accugas informed investors that it continues to make ‘good progress’ in relation to agreeing further potential new gas sales agreements with new customers.
"This recognises Accugas' status as the most reliable supplier of natural gas in Nigeria. Our first Gas-to-CNG agreement is hugely exciting as it represents Savannah's entry into the compressed natural gas market, which we see as offering strong growth potential for our business over the course of the next decade,” said Savannah’s CEO, Andrew Knott.
He added, “The CNG market significantly extends the reach of our existing 260km pipeline network into light industrial and even domestic power generation without the need for further investment in pipelines. For example, the Mansour Group subsidiary, Mantrac, currently has an installed customer base of approximately 400MW of diesel-fuelled power generation, which has grown every year for the last decade.”
"As part of the Mansour Group, Mulak Energy strongly believes in Nigeria's potential and future. Moreover, we are certain that gas will play a central role in fuelling Nigeria's growth and prosperity for the foreseeable future and are proud to be participants in this important development,” commented Omar Hassan, Chief Executive of Mulak Energy of the GSA.
He added that, “We foresee potential that this agreement with Accugas-Savannah will serve as a platform for increased cooperation between our two companies as we work to achieve our shared vision of bringing ever larger volumes of gas to the Nigerian market creating value for our shareholders and ultimately the industries and people of Nigeria.”
Both industry recognition of the leading position Accugas has developed and the future repeatable revenue from gas sales is positive news for shareholders. Shares in Savannah Energy have increased by over 125% in value since the beginning of November 2020 to open 7.62% higher this morning at 17.55p following the announcement.
Reasons to Follow SAVE
Savannah Energy is a British independent oil and gas company focused on oil and gas activities in Niger and Nigeria with a focus on delivering material long-term returns.
In Nigeria, the Company has controlling interests in the cash flow generative Uquo and Stubb Creek oil and gas fields, and the Accugas midstream business in South East Nigeria, which provides gas to over 10% of Nigeria's available power generation capacity.
In Niger, it has interests in two large PSC areas located in the highly oil prolific Agadem Rift Basin of South East Niger, where the group has made five oil discoveries and seismically identified a large exploration prospect inventory, consisting of 146 exploration targets to be considered for potential future drilling activity.
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