Sound Energy Morocco East Limited, the Company’s wholly owned subsidiary, has ‘entered into a letter of exclusivity with Italfluid Geoenergy S.r.l. pursuant to which the parties have agreed to use their reasonable endeavours to negotiate and enter into a binding project contract which will on entry commit Italfluid to design, construct, commission, operate, maintain and let to SEMEL a mLNG Plant which can produce LNG. The mLNG Plant, which will also treat and process raw gas from the Phase 1 Development prior to liquefaction, is a substantial part of the surface facilities required to be built and operated as part of the Phase 1 Development.

Map source: Sound Energy

There will now be a period of exclusivity until 31st March 2021 in order to conclude the project contract which means that the mLNG Plant shall be ‘designed, constructed, commissioned, operated and maintained by Italfluid for SEMEL in consideration for the Initial Payments and the Daily Rental Payments. The initial contract term will be for 5 years.

An initial Payment of five million US Dollars (US$5,000,000) due from SEMEL to Italfluid within 30 days of issuance of the notice to proceed with the Phase 1 Development and two million US Dollars (US$2,000,000) due from SEMEL to Italfluid within 30 days of notification from the SEMEL to Italfluid of the successful commissioning (including production build-up) of the mLNG Plant.

During each day of each contract year in which Italfluid has evidenced to the satisfaction of SEMEL, that the mLNG Plant can deliver a guaranteed daily volume, a daily rental payment of thirty-six thousand US Dollars (US$36,000) per day shall be payable to Italfluid from SEMEL.

Mohammed Seghiri, Sound Energy’s Chief Operating Officer, commented:
“We are very pleased to announce the signature of this Letter of Exclusivity with Italfluid for the proposed provision and leasing of the mLNG Plant. The Company has worked with Italfluid in Morocco in the past and I am pleased to continue developing our partnership with such a technically assured contractor in support of the Phase 1 Development of the TE-5 Horst.

The mLNG Plant is the most complex element and most significant capital requirement of the proposed Phase 1 Development therefore today’s announcement of a proposed leasing structure, which when combined with the financing proposed to be provided by the Gas Offtaker, would secure the balance of funding required by Sound Energy for the Phase 1 Development, is a key milestone for the Company as we move towards FID.”