Stream Signs Gas Sales Agreement for Delvina Production
Tuesday, February 19, 2013 02:00:00 PM (GMT)
CALGARY, Feb. 19, 2013 /CNW/ - Stream Oil & Gas Ltd. (TSX-V: SKO) ("Stream" or the "Company") is pleased to announce that it has signed a gas sales agreement (the "Agreement") to sell gas production from its Delvina field to Thermo Energy Albania Shpk ("Thermo Energy"). Thermo Energy intends to develop and build a 24 megawatt ("MW") thermal power plant in Delvina, Albania, utilize Stream's gas production and sell the generated electricity to KESH (an Albanian power company) and other clients. The Agreement is key to Stream's plans to develop the potential of its substantial gas resource, which is expected to result in future growth in production and reserves.
The Agreement provides for the delivery of sufficient gas to power the 24 MW facility at 100% capacity. The initial start-up unit of 2.2 MW of the plant will require approximately 0.5 MMcf/d of gas from Stream, increasing to 6.5 MMcf/d when the plant is fully operational. Gas delivery is expected to commence in the second quarter of 2013. The Agreement has a term of one year, at which time the parties will meet to negotiate a longer term agreement based on market pricing and corresponding quantities. Stream will receive US$8.90/mcf for its gas in the first year; once the Agreement is extended, the new price will be negotiated based on European indexed natural gas prices.
Stream currently has the capacity to produce approximately 2.5 MMcf/d from its Delvina field from two vertical wells, Delvina 12 and 4. In order to increase productive capacity to 6.5 MMcf/d, detailed preparations for the drilling of the first horizontal well continues with the commencement of field activities expected in 2013. The Delvina field is estimated to hold approximately 184 BCF, with another 431 BCF from the adjacent structures, of gas initially-in-place ("GIIP") according to Stream's 2011 independent resource evaluation report.
"The signing of this agreement is a major step forward in the development of the Delvina field," said Dr. Sotirios Kapotas, President and Chief Executive Officer. "In addition to providing benefit to Stream in terms of revenue and justifying the drilling of the horizontal well, the construction of the plant will assist in creating in-country electricity generation for Albania and its people."
This is the first natural gas fired thermal power plant to be constructed in Albania. The local Ministry of Environment welcomes green power and the stable delivery of electrical power to the country. With a growing demand for power, Albania currently relies on approximately 95% of its electricity from existing hydropower plants with additional power imported to balance the country's power demand and backup production during dry and drought periods. As a result, Albania is extremely dependent on externally generated power and experiences blackouts or loss of power from time to time.
Stream's activities in Delvina are expected to provide significant reserve additions for the Company as reserves and resources are converted to proved and probable reserves. With this conversion Management anticipates growth in production and cash flow resulting in increased shareholder value.