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Canacol announces LNG sales contract

LNG Industry,

Canacol Energy announced that its Colombian subsidiary, CNE Oil & Gas, in its capacity as operator of the VIM 5 E&P contract in Colombia, has signed a new 15-year take or pay contract for the sale of 35 million ft3/d of gas, to Altenesol LNG Colombia.

The sale of gas will commence in the fourth quarter of 2016. Under the terms of the new take or pay gas sales agreement, Altenesol will pay US$4.90/million Btu, escalated at 2% per year across the term of the contract. In addition, Canacol and Altenesol signed an agreement pursuant to which Canacol has the option to participate in the revenues generated by the sale of the LNG through an equity ownership position in Altenesol of approximately 26% in exchange for investing US$13 million in the project.

Liquefaction facility

Altenesol will use the gas to produce approximately 360 000 gal./d of LNG at a dedicated liquefaction facility that will be composed of two LNG trains, to be located close to Canacol's operated Jobo gas processing facility.

The second LNG train will start operation within 12 - 16 months after the first. Altenesol has recently executed a 15-year take or pay contract to sell the LNG to be produced by the facility to Adventus Fuel Inc. (AFC), a distributor for export to markets in South America, Central America and the Caribbean at a sales price of approximately US$11/million Btu.

LNG revenues

Canacol will also derive revenues from the sale of the LNG of approximately US$1.25/million Btu. As such, total revenues from the gas sales contract and Canacol's ownership in Altenesol are expected to be approximately US$6.25/million Btu, escalated at 2% per year across the 15-year period.

The gas for the contract will come from the recently discovered Clarinete gas field located on the VIM 5 E&P Contract.


Charle Gamba, President and CEO of Canacol

"This new sales contract demonstrates the Corporation's ability to quickly commercialise its gas finds in Colombia, in this case the significant gas discovery we recently made at Clarinete on the VIM 5 contract. Our beneficial ownership of Altenesol exposes Canacol to revenues from the full value chain of the LNG project, from gas sales through to the sale of the LNG product itself.

“Additionally, this new contract and our beneficial ownership in Altenesol will provide us with a direct route to the growing South America, Central America and the Caribbean gas market for Canacol's gas as we continue to make new discoveries."

Nelson De La Nuez, CEO of Altenesol/IAHL

"We look forward to a mutually beneficial relationship with Canacol and a shared vision of the global LNG market. We have a solid foundation in place and a blueprint to accelerate expansion. Canacol's option to participate in the equity of the project opens greater expectations to Altenesol's vision as well as having a solid company supporting the proliferation of LNG through South America, Central America and the Caribbean. We thank the many team members that have made this possible and our shareholders for their patient support as we build a solid corporation for the future. Many company developments are nearing completion and will add to our value."

Adapted from press release by Katie Woodward

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