Accugas signs first gas sales agreement with firm replacing diesel generators

Savannah Energy PLC, the African-focused British independent energy company, through its subsidiary Accugas, has entered into a new gas sales agreement with Mulak Energy Limited, replacing diesel generators with Compressed Natural Gas (CNG).

The GSA is initially for a seven-year term. It envisages the supply of gas produced by Savannah’s majority-owned Uquo field for an initial two-year period on an interruptible basis and the subsequent five years on a firm contract basis.

“This recognises, Accugas’ status as the most reliable supplier of natural gas in Nigeria,” said Andrew Knott, CEO of Savannah Energy.

Knott called the company’s first Gas-to-CNG agreement ‘hugely exciting’ as it represents its entry into the compressed natural gas market, “which we see as offering strong growth potential for our business over the course of the next decade.”

Mulak is a member of the Mansour Group, the leading Egyptian multinational conglomerate with operations in more than 100 countries and annual revenues exceeding US$7.5 billion. The agreement for the supply of gas to Mulak’s Compressed Natural Gas Nigerian project represents Savannah’s first Gas-to-CNG sales agreement.

Mulak initially plans to distribute CNG to its industrial customers in Rivers State with the CNG to be substituted for diesel in generators supplied by the Mantrac Group, also a member of the Mansour Group and one of the world’s largest dealers in Caterpillar machinery, power systems, and equipment.

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Mulak can exploit the synergies with Mantrac’s business in Nigeria through the conversion of Mantrac’s existing customer base of approximately 400MW of diesel-fuelled generators to CNG-fuelled generators.

This is expected to provide Mantrac customers with up to a 40 percent saving in energy costs and a 30 percent reduction in their carbon footprint. Sales under the GSA are expected to commence in 2022 and, following the initial two-year period, Mulak has indicated that it is seeking to expand its CNG sales on a pan-Nigeria basis to Mantrac customers.

During the Interruptible Gas Delivery Period, Mulak is able to nominate a maximum daily quantity of up to 2.5 MMscfpd. Volumes in the Firm Delivery Period will be agreed by the parties before the end of the Interruptible Gas Delivery Period.

According to Savannah Energy, the GSA is priced to reflect Mulak’s status as an industrial customer hence Accugas, expects to see its weighted average gas sales price realisation increase as a result of this contract, without the need for any incremental capital expenditure beyond our previously announced plans, the company said.

Sales under the GSA benefit from a bank guarantee arrangement from an investment-grade credit-rated international bank.

Accugas continues to make good progress in relation to agreeing to further potential new gas sales agreements with new customers, further updates of which will be provided as appropriate in due course.