Armour Energy said it has entered a non-binding Memorandum of Understanding with MMG Century to work together towards gas supply arrangements from Armour’s exploration tenements in North West Queensland to MMG’s Queensland operations.
The initial stages of the MOU will involve a scoping study by the two companies to evaluate project feasibility and economics of gas supply for potentially expanded on-site power generation at MMG’s Lawn Hill site, or development of new power generation facilities either on the Century mine lease or at greenfield sites between the mine and Mount Isa. Scenarios to be evaluated will include for MMG’s current and possible future needs and potential third party customer’ requirements.
The study will evaluate gas supply volumes of up to 7-9 Petajoules per annum plus an overlay for potential third party requirements. Pricing will be determined so as to achieve a minimum return on invested capital for both Armour and MMG while providing “most favourable” price status to MMG compared with other gas sales contracts signed by Armour (other than contracts with upstream equity participants). Should Armour farm-out interests in its tenement to third parties, gas supply to MMG would relate to Armour’s equity gas only, unless a future upstream partner elects to participate pro rata in the sale of gas to MMG.
Commenting on the signing of the MOU with MMG, Armour’s CEO Robbert de Weijer said “Armour and MMG have recognised the potential for mutual and significant value creation through the supply of gas from Armour’s exploration acreage in North West Queensland to MMG’s potential future operations in the region. This MOU is an important first step towards early monetisation and proof of concept for Armour’s potentially enormous shale gas resources in the region.”
Press Release, July 23, 2014