The FTA, run for an initial term of 10 years, will implement the commercial terms stipulated by the agreement in advance of the production phase of the project. The agreement, and subsequent execution of the FTA, is subject to the satisfaction of certain conditions precedent including, inter alia receipt of all necessary licenses, permits, concessions and approvals required to produce, transport and deliver natural gas into the Polish gas transmission systems; and confirmation that the test results from wells to be drilled in 2010 and other feasibility studies justify development of the project.
The agreement provides for all necessary terms and conditions for the sale of natural gas during the six-month Start Up Phase at the best price available for such gas on the Polish market less a small discount. Furthermore, the agreement provides for a detailed scheme for pricing of relevant gas products to be offered by EZ to KI in subsequent phases of development of the Siekierki field and includes Take or Pay provisions that help underpin the project cash flows.
Under the agreement prices will be set by reference to the published PGNiG S.A tariff price for system high methane gas fuel (E-39,5 MJ/m3 ) which is currently PLN0.91/cm. At today’s exchange rate of $0.35825 = PLN1.00, a tariff of PLN0.91/cm converts to a Polish Market Gas price of $9.328/mcf.
Rowen Bainbridge, chief executive officer of Aurelian Oil & Gas said “The conclusion of an agreement for the sale of our gas from Siekierki is a major milestone in the development of one of our most important assets and will enable us to proceed with the initial drilling program and to finalise our options for financing the full development. We are now focused on delivering first gas to our customer under the agreement in 2011”.
Dariusz Mioduski, chief executive officer of KI said “The Agreement is one of the key elements in the strategy underlying our investment in Aurelian. In the broader context, our presence in Aurelian Oil and Gas is consistent with Kulczyk Investments long-term strategy which assumes strengthening our position in the oil and gas sector, both in Poland and on international markets.”
