Sound Energy agrees engineering deal for Morocco gas project

Following a "competitive process and negotiation", Sound and its partners have awarded a consortium made up of Enagas, Elecnor and Fomento the FEED contract, as well exclusivity to finalise funding, construction and operation for a 20-inch pipeline and the central processing facility under a "build-own-operate-transfer" (BOOT) structure.

A gas processing plant and a 20 inch gas pipeline at the project are intended to deliver an estimated 60 mmscf/d of gas to the Gas Maghreb-Europe pipeline system, which is 120km away.

Sound has a 55% working interest in the licence, with Morocco's Office National des Hydrocarbures et des Mines owning a 25% interest and the Oil & Gas Investment Fund 20% interest and operatorship.

The consortium will begin front-end engineering and design work "shortly", starting on a gas processing plant, as well as the gas pipeline, with plans to secure access to roughly $184m of development capital required to fund the project being finalised.

James Parsons, Sound's chief executive, said, "For Sound Energy and its shareholders, this innovative BOOT structure means that the company is now firmly on the pathway to commercialising our existing and future gas resources in Eastern Morocco, all without additional equity dilution."

Upon signature of the BOOT contract, Sound Energy and its partners expect to pay a success fee to local advisors in Morocco, while the consortium has agreed to pay Sound a break fee of $1.5m and provide the FEED contract at cost, in the event that the BOOT contract is not satisfactorily concluded. Sound Energy and its partners have agreed to buy out the FEED from the consortium for $2.2m, should the company elect not to proceed with the consortium.

As of 0900 BST, Sound shares had picked up 5.04% to 42.86p.