(Alvopetro Energy Ltd., 21.Sep.2018) — Alvopetro Energy Ltd. announced award of the contract for the construction of its Natural Gas Treatment Facility in the state of Bahia in Northeast Brazil.
This facility is the key strategic asset underpinning the company’s natural gas development project and will be the first 100% independently owned treatment facility in Brazil capable of delivering sales specification natural gas.
Natural Gas Treatment Facility Contract
Following an extensive competitive bidding process, Alvopetro has awarded a 10-year contract to Enerflex Ltd. to build, own, operate and maintain the Facility. Enerflex is a global leader in the natural gas industry providing integrated gas compression and processing solutions with an established Brazilian operating presence.
Under the terms of our agreement, Enerflex will construct the Facility using a mechanical refrigeration unit (the MRU) as the main processing element. The MRU technology was selected by Alvopetro based on the ability to manage a broader range of inlet natural gas specifications, making it ideal for accommodating the richer Gomo natural gas and natural gas from future discoveries and projects. Enerflex will construct and own the Facility providing operations and maintenance, while warrantying the delivery schedule and on-stream availability. The Facility is scheduled to begin commissioning in November 2019 and be operational by the end of 2019. Alvopetro will pay an integrated service fee for the Facility of $2.9 million per year over the 10-year term of the agreement.
Operational Update
The execution of this agreement for construction of the natural gas treatment facility, the key strategic asset in Alvopetro’s natural gas development in Bahia State in Brazil, builds off the momentum achieved over the past five months with the finalization of the unitization agreement for the company’s Caburé natural gas field in April 2018 and its long-term gas sales agreement with Bahiagás in May 2018.
The Caburé and Gomo natural gas assets in Brazil were evaluated by GLJ Petroleum Consultants as of May 31, 2018 with total proved plus probable (2P) reserves of 5.7 MMboe assigned with a before tax value discounted at 10% of $124.0 million.
Over the next few weeks Alvopetro expects to award the turnkey contract for the construction of the 11-kilometre transfer pipeline from the Caburé unit to the Facility. Alvopetro has secured land for the Facility, completed all field survey and initial permitting work, and application for construction of the pipeline and the Facility was submitted for regulatory approval in April 2018. The company’s Gomo natural gas project will also connect to the company’s 11-kilometer transfer pipeline via an 8-km transfer pipeline to be built in 2019, following stimulation of the 183(1) well planned near the end of 2018.
Alvopetro anticipates approximately $1.4 million of capital expenditures for the Caburé and Gomo development later in 2018 and $6 million in 2019, and are in the process of securing the remainder of the project financing for this development.
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