Republic of Georgia-focused Block Energy (LSE:BLOE) revealed an offtake deal for its prospective West Rustavi gas permit this morning, sending shares 3.7pc higher to 3.1p.
The firm, which now has a £7.2m market cap, has signed a memorandum of understanding with Bago, one of the biggest private gas suppliers and purchasers in Georgia. This covers a proposed offtake agreement for gas produced at Block’s West Rustavi permit, which contains proven reserves and gross, 2C resources of 608Bcf gas and 37.9MMBbls oil.
Under the proposed terms, Bago will acquire the total amount of gas produced at the permit, subject to a minimum of 1,000 cubic metres per day. Bago is also looking at whether to finance – wholly or in part – required gas infrastructure at the permit. The work would include a pipeline tie back to local infrastructure and a processing plant solution.
The final offtake agreement will be subject to additional price negotiations, which are expected to be in line with Block’s internal forecasts. It will also be subject to successful gas appraisal work on existing discoveries in West Rustavi and the acquisition of all relevant government permits.
Block currently had a 25pc interest in West Rustavi, but it can increase this to up to 75pc by meeting various drilling requirements.
The business also holds a 100pc interest in Georgia’s Norio licence and a 90pc stake in the Satskhenisi field. It expects to begin a multi-well workover programme at the groundsshortly as part of its goal of increasing net oil production to 900bopd within 18-24 months. Last month saw the company secure two rigs to carry out the programme.
On today’s new, Paul Haywood, director of Block Energy, said: ‘I am highly encouraged by progress we have made towards securing a final offtake agreement with Bago, one of Georgia’s largest domestic private gas traders with extensive infrastructure capable of handling large volumes of gas. West Rustavi offers huge value potential for Block and with rig contracts now in place, we are all set to commence work programmes to unlock this potential and upgrade resources to proven reserves. With multiple gas discoveries having already been made within the Licence which lie on trend to the same play currently being targeted by Schlumberger on a neighbouring licence, Block XIb, I look forward to commencing our imminent work programme with optimism as well as to updating the market when a final offtake agreement has been putin place.’