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Sa­sol is plan­ning to spend about $260 mil­lion (R4 bil­lion) to drill 13 on­shore ex­plo­ration wells as part of the ex­pan­sion of its Mozambique nat­u­ral gas op­er­a­tions. John Sichinga, Sa­sol Ex­plo­ration and Pro­duc­tion In­ter­na­tional se­nior vice-pres­i­dent, said this week in Vi­lankulo dur­ing a tour of Sa­sol’s nat­u­ral gas op­er­a­tions that on­shore wells cost about $20 mil­lion each, which would in­di­cate that 13 wells would cost $260 mil­lion.

The drilling work on the first of the 13 wells started on May 26 and it could take up to 50 days to com­plete it.

The wells are drilled to a depth of 2 000m. The drilling of all of them could con­tinue un­til the third quar­ter of 2018.

“It is quite a com­plex reser­voir, so we are de­vel­op­ing it in tranches. So, the first tranche is the 12 wells, plus a wa­ter well,” Sichinga said.

This is all part of the $1.4 bil­lion first phase of the pro­duc­tion share agree­ment, which is an oil, liq­ue­fied pe­tro­leum gas (LPG) and gas project next to Mozambique’s ex­ist­ing pe­tro­leum pro­duc­tion agree­ment area at the Pande and Te­mane gas fields.

The $1.4 bil­lion in pro­duc­tion share agree­ment ex­pen­di­ture will be spent in tranches, in­clud­ing build­ing a 20 000-tons-a-year LPG fa­cil­ity, the cost of drilling the wells and the ex­pan­sion of the cen­tral pro­cess­ing fa­cil­ity in Te­mane. The first phase of agree­ment will also in­clude the build­ing of a fa­cil­ity to process 15 000 bar­rels of oil a day.

Sub­se­quent phases of the pro­duc­tion share agree­ment are de­pen­dent on the out­come of ge­o­log­i­cal and geo­phys­i­cal in­for­ma­tion ob­tained dur­ing the drilling cam­paign.

The first phase of the pro­duc­tion share agree­ment project is ex­pected to take sev­eral years to com­plete.

Con­struc­tion of the liq­uid process fa­cil­ity, which will pro­duce the LPG and oil, will start in the first quar­ter of next year.

The first pro­duc­tion of oil is ex­pected to take place from mid-2019 and the first out­put of gas will follow soon there­after.

The Mozambique gov­ern­ment ap­proved the pro­duc­tion share agree­ment in Jan­uary, af­ter which Sa­sol com­mis­sioned a drilling rig from French drilling con­trac­tor So­ciété de Main­te­nance Pétrolière.

Sa­sol first spent $1.2 bil­lion on the nat­u­ral gas op­er­a­tion and that in­vest­ment grew to $2 bil­lion be­fore the pro­duc­tion share agree­ment in­vest­ment.

Dur­ing the first in­vest­ment, Sa­sol’s nat­u­ral gas op­er­a­tions pro­duced 122 mil­lion gi­ga­joules a year.

Sa­sol started pro­duc­ing nat­u­ral gas in 2004 and to­day it de­liv­ers gas to 320 cus­tomers, mainly in South Africa, and five re­sellers.

The nat­u­ral gas out­put is de­liv­ered to South Africa though an 865km pipe­line.

By the end of June next year, the com­pany’s nat­u­ral gas out­put will have grown to 197 mil­lion gi­ga­joules, up nearly 8% from 183 mil­lion gi­ga­joules-a-year ca­pac­ity.

Sichinga said adding an ex­tra 60 mil­lion gi­ga­joules of an­nual pro­duc­tion could cost about $100 mil­lion, based on the pre­vi­ous ex­pan­sion in 2012.

Af­ter the next pro­duc­tion share agree­ment phase is com­plete, Sa­sol’s nat­u­ral gas pro­duc­tion will rise to 236 mil­lion gi­ga­joules.

The early work for the new pro­duc­tion share agree­ment has cost $50 mil­lion.

The ex­tra pro­duc­tion is ex­pected to be sold to a planned 400 megawatt gas-to-power plant based in Mozambique. How­ever, for this project to go ahead, trans­mis­sion lines need to be built.

Sichinga said that if this 400MW plant didn’t go ahead,

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