In October 2008, CanArgo Energy announced that it had signed a non-binding letter of intent (LOI) with a Swedish oil company to enter into a farm-out and option agreement covering the Norio production sharing agreement in Georgia subject to execution of a formal agreement and to governmental and other approvals. Due to the global financial crisis, the prospective farmee has not been able to progress these negotiations and the LOI has now lapsed.
Ongoing attempts by the company to find investors for the Norio project and other opportunities within its acreage have been unsuccessful so far. In October 2008, Ninotsminda Oil Company Limited (NOC), a wholly owned indirect subsidiary company of CanArgo Energy and the holder of the Company’s participating interest in the Ninotsminda Field, executed a gas sales agreement with Sagaredjo Gas Company (SGC) a local firm in Georgia for a contract term of one year with a price of $2.83 per thousand cubic feet (Mcf) ($110 per MCM) up to May 2009 when it would rise to $4.73 per Mcf ($167 per MCM).
In February 2009, SGC became a wholly owned subsidiary of the State Oil Company of Azerbaijan Republic (SOCAR), following the privatization of the regional gas infrastructure in Georgia. NOC has not received payment for any gas delivered under this sales agreement and the agreement has now been terminated. NOC subsequently has entered into a new gas sales agreement with Energy Trading Company Limited (a company introduced to NOC by SOCAR) for its pro rata share of gas produced from the Field estimated to be about 1.13 MMscf (32 MCM) daily at a price of $3.96 per Mcf ($140 per MCM) with a contract term of two years.
