Petroleum explorer Molopo Energy Ltd (ASX:MPO) has signed a gas sales agreement with privately owned South African company, Novo Energy.
The agreement is initially for Molopo to supply, on an ‘as available’ basis, around 600,000 cubic feet per day from four existing wells in Molopo’s Virginia gas field.
The gas sale agreement is for 10 years from the date on which initial supply commences.
Under the agreement Novo has a right to purchase gas from an additional four existing wells which, if exercised, would increase the volume of gas supplied to 1 million cubic feet a day.
Molopo says it will now submit a Production Right application over a portion of the Virginia Field in coming weeks, with gas sales expected to commence by March 2011.
Managing director Stephen Mitchell says the gas sales agreement is a significant milestone for Molopo, providing an early opportunity for the commercialisation of the Virginia Gas Field.
Mr Mitchell says that while the initial contract volumes are modest, the agreement paves the way for a possible larger scale commercialisation of the Virginia Gas Field should the company’s future work program generate additional quantities of gas.
Molopo posted a $72.59 million profit for the 2009 financial year.