Canacol signs Sabanas gas flowline agreement

Canacol announced that it has signed an agreement for the construction, operation and ownership of the 82 km long Sabanas gas flowline from its Jobo gas plant to the connection point with the Promigas S.A. gas pipeline at Bremen. Pursuant to the agreement, the US$41 million Sabanas gas flowline project will be financed through a US$30.5 million investment by a group of private investors and a US$10.5 million contribution from Canacol (the investors and Canacol, collectively the ‘owners’), with each holding its interest in the Sabanas gas flowline in separate companies. Canacol's financial contribution to the project will be almost entirely satisfied by costs incurred to date, and as such will not involve the issuance of new equity or affect its current cash position. The tariff for the Sabanas gas flowline is similar to other regulated tariffs in the region and, as customary, the tariff will be borne by the offtakers of the gas. Under the terms of the agreement, Canacol is not required to either sign a ship or pay commitment to the benefit of the owners, or place a corporate guarantee in favour of the owners. The owners engaged Horizon Capital Management Inc. as advisor for this transaction, and will pay a fee of 3.5% on the US$30.5 million of private funds raised. Two members of Canacol's board of directors have participated in the private investor financing for an aggregate amount of US$9 million. Under the terms of the agreement with Horizon, Canacol has the option, valid until the commissioning of the pipeline, to divest up to an additional US$3 million of its share of the project, thus lowering its investment to approximately US$7.5 million plus the leasing of the compression as previously announced.

Construction of the Sabanas gas flowline connecting Jobo to the Promigas connection point at Bremen is proceeding on schedule, with first gas transportation anticipated on 1 December 2017. Approximately 55% of the tubulars have arrived on location, with the remainder expected on location in September. The compression stations are anticipated to arrive in the third week of August from the Port of Houston. All forestry, archeological, and environmental permits have been obtained and 100% of the right of way has been negotiated and purchased. Civil works at the two compression station locations commenced the first week of August 2017, and digging and laying of the tubulars is anticipated to commence the last week of August 2017. Flowline laying will occur simultaneously at both Jobo and Bremen at either end of the 82 km route, with flowline laying anticipated to be completed the first week of November 2017. Commissioning of the compression stations and pressure testing of the flowline is anticipated to be completed by the third week of November 2017.

The productive capacity of the company’s current gas wells is approximately 195 million ft³/d, and that of its gas processing facilities located at Jobo approximately 200 million ft³/d, more than adequate to lift production to 130 million ft³/d in December 2017 when construction of the Sabanas gas flowline is complete. As previously announced, Canacol executed a 10 year take-or-pay contract for 40 million ft³/d of gas at contractual terms comparable to the Corporation's current US dollar denominated gas sale contracts, which is expected to be transported by the Sabanas gas flowline commencing in December 2017.

Read the article online at: https://www.worldpipelines.com/contracts-and-tenders/10082017/canacol-signs-sabanas-gas-flowline-agreement/