Sound Energy said on June 7 it has signed a heads of terms with a consortium comprising Enagas, Elecnor and Fomento for FEED and conditional construction and financing of all the infrastructure required, including a 20-inch pipeline and facilities, to commercialize the company’s existing gas discovery in Eastern Morocco.

Following a competitive process and negotiation, the consortium has been awarded the FEED and exclusivity to finalize the funding, construction and operation for both a 20-inch pipeline and the central processing facility under a ‘build-own-operate-transfer’ (BOOT) structure.

"This is a hugely important milestone for our company and I am delighted that Sound Energy is playing such a pivotal role in unlocking the first significant scale indigenous gas production in Morocco,” James Parsons, Sound Energy's CEO, said.

The consortium will shortly begin FEED on a gas processing plant and a 20-inch gas pipeline intended to deliver an estimated 60 million standard cubic feet per day of gas to the Gas Maghreb-Europe pipeline system, some 120 km away.

In parallel with the FEED, the consortium will finalize plans to secure access to some $184 million of development capital that will be required to fund the project.

Subject to the completion of FEED, and conclusion of a final BOOT contract with associated debt funding put in place, the Consortium will be responsible for the construction of the project and for its operation for a period of 15 years. In exchange, Sound Energy and its partners will pay an annual fee to the consortium with effect from the commencement of commercial gas production. The fee payable by the company will be agreed post FEED but will be subject to an open book target fee calculated by reference to a target internal rate of return for the consortium and to a ‘not to exceed’ fee of $45 million per annum. At the end of a 15 year operating period, and subject to a possible extension by the parties, the ownership of the project facilities will be transferred to Sound Energy and its partners, or to another entity appointed by the partnership, at no cost.

FEED is expected to last for some six months, following which the company will be in a position to take the FID.

Upon signature of the BOOT contract, Sound Energy and its partners expect to pay a success fee to Advisory & Finance Group Investment Bank, the company’s advisor in Morocco.

The consortium has agreed to pay Sound Energy a break fee of $1.5 million, and to provide Sound Energy and its partners with the FEED at cost, in the event that the BOOT contract is not concluded to the consortium’s satisfaction. Sound Energy and its partners have agreed to buy out the FEED from the consortium for $2.2 million, should the company elect not to proceed with the consortium.

Today’s heads of agreement is subject to approvals of the company’s partners. The final BOOT contract will be subject to both parties board and regulatory approvals.