Kinetiko JV gets new energy

PEACE has broken out in the dispute between Perth-based gas chaser Kinetiko Energy and its South African black economic empowerment partner Badimo Gas.

Haydn Black

The parties have agreed to set aside their differences and establish a new joint venture holding company, Afro Energy, to host the pair’s advanced Amersfoort conventional gas and CSG interests and the surrounding applications.

Afro will be owned 51% by Badimo and 49% by Kinetiko.

The agreement, facilitated by a company called AC2 Solutions, resolved the issue of all alleged outstanding cash calls made against Badimo.

Kinetiko has withdrawn a demand that Badimo’s 51% right in the Amersfoort project be transferred to it.

AC2 has also been granted a mandate to secure funding for the next round of work at Amersfoort, which is expected to include pilot production, maiden reserves certification and further exploration.

The pair have withdrawn all counter-claims, and the original joint venture has been terminated,

“The resolution of this dispute provides a golden opportunity to monetise the Amersfoort project and to achieve proof of concept,” Badimo chairman Don Ncube said.

“The successful commercialisation of the project will encourage us to accelerate the development of a clean gas resource play and enable us to move up the value curve. Above all this is an opportunity to demonstrate that we are a true first mover in the production of on-shore natural gas in South Africa.

“This is a potential game changer at a crucial point in time when South Africa is facing enormous energy challenges and constraints.”

Ncube will take on the role of Afro’s chairman, with a nominee appointed by Kinetiko to fill the second board spot.

Kinetiko chairman Adam Sierakowski said he hoped the new structure would induce further investment and expedite development.

Kinetiko originally slugged Badimo with a notice of deemed withdrawal in mid-2014 after the African company failed to meet cash calls totalling $A1.4 million.

The dispute has slowed work at the project, where Kinetiko had just completed a 3555 line kilometre survey, over the potential pilot location, hoping to resolve some of the geological questions over Amersfoort.

Processing and interpretation of the data defined the extensive dolerite sills that form seals over the gas prone sandstones above the already gassy coal measures in the Karoo Basin.

Gas from the project has come from the inter-bedded sandstones within the coals, and not the coal seems as originally believed.

The next five pilot wells are expected to focus on evaluation the conventional coal resource.

Amersfoort has a contingent CSG resource of 1.5 trillion cubic feet, but there is no inkling of the size of the conventional prize, although flow rates have been as high as 350,000 cubic feet per day from the sandstone reservoir, well above the commercial threshold of just 48mcfpd.

Given the high prevailing South African gas prices of $8-$10 per gigajoule payback should be rapid once off-take is secured.

In November 2013 the state-owned power utility Eskom declared a power emergency for the first time since 2008, and asked major industrial clients to reduce their energy consumption by 10% to prevent widespread blackouts. It has since accelerated assessment of its gas supply options.

There are almost a dozen 10 power stations within a 300km radius of Amersfoort.

Kinetiko has the rights to around 19, of South Africa surrounding Amersfoort which it can transform into up to 12, of additional exploration licences.

Badimo has additional exploration licences covering 7, over which Kinetiko had an agreement to acquire the rights.

Kinetiko also has applications for 10, of the Permian Kalahari Coal Basin in Botswana.

Badimo also has a stake in African unconventional player Challenger Energy’s shale project.