Intra Energy Corporation Limited (IEC) is pleased to announce a variation of the Joint Venture agreement dated 17 November 2011 between Tancoal Energy Limited (Tancoal) and NuEnergy Gas (Tanzania) Limited (NuEnergy), a wholly owned subsidiary of NuEnergy Gas Limited. Tancoal is a Joint Venture and a public private partnership between IEC (70%) and the National Development Corporation of Tanzania (30%). The Unconventional Gas Joint Venture Variation Agreement (JVVA) captures all unconventional gas, which includes coal bed methane and shale gas. The JVVA is attractive for IEC as it benefits from potential gains from unconventional gas which is extracted from deep non-economic coal resources, and additional revenue for AAA Drilling Limited, a wholly owned subsidiary of IEC, whilst remaining focused on developing a commercial coal group in East Africa.
Key terms of JVVA:
* Tancoal will hold 30% and NuEnergy will hold 70% of the venture. Tancoal’s 30% share to be carried by NuEnergy until any unconventional gas extracted reaches a revenue stage, or for a period of 5 years from commencement, whichever comes first.
* NGY has the right to explore for gas at uneconomical coal depths of over 600 metres and Tancoal may also allow NuEnergy to drill and test for unconventional gas at depths of less than 600 metres where Tancoal have each decided not to conduct coal mining below this level.
* Upon identification by NuEnergy of any unconventional gas resources that are economically viable, Tancoal shall allow NuEnergy to extract and sell any gas produced.
* Tancoal will receive a 5% royalty from NuEnergy’s revenues from the sale of unconventional gas resources extracted from Tancoal’s concessions.
* The parties shall agree on work programs for exploration and extraction works that show the areas, sequences, use of shared equipment and expenditure required to enable NuEnergy to complete its activities.
* Full details of the rights and duties of NuEnergy as operator of the work programs are to be set out in a Joint Operating Agreement to be agreed between the parties within 3 months of the execution of the JVVA.
* NuEnergy shall commit to a work program consisting of at least 2 core holes and 1 G&G study on Tancoal’s areas within the first 2 years of commencement.
* NuEnergy shall fully fund and bear all costs of any exploration, development or extraction works in respect of unconventional gas in Tancoal’s areas with the parties using best efforts to cooperate and share drilling resources.
* NuEnergy may lease equipment and/or personal services from Tancoal and NuEnergy agrees to give AAA Drilling Limited (a drilling company wholly owned by IEC) first right of refusal in case it does not elect to procure equipment and/or personal services from Tancoal.
* NuEnergy commits to a minimum spend of USD $1 million over the initial 2 years for expenditure on unconventional gas activities on the areas. After this 2 year period the parties may terminate if the areas are not considered economically viable, or proceed, whereby NuEnergy commits to a further USD $1 million over the remaining 3 year period.