Canacol Energy signs agreement for Sabanas gas flowline project

Canada-based exploration and production company Canacol Energy has signed an agreement in connection with the construction of its $41m Sabanas gas flowline project.

The agreement is related to the construction, operation and ownership of the Sabanas gas flowline, which is 82km in length, from the company’s Jobo gas plant to the connection point with the Promigas gas pipeline at Bremen. 

Under the agreement, Canacol will offer $10.5m towards the Sabanas gas flowline project, while the remaining funding of $30.5m will be secured from a group of private investors.

The funding from Canacol will be used to cover expenses incurred on the project until now.

With respect to the transaction, Horizon Capital Management will serve as advisor to Canacol and the group of private investors for a fee of 3.5% on the $30.5m raised through private funding.

Meanwhile, as part of the private investor funding round, two members of Canacol's board of directors have offered an aggregate investment of $9m.

Canacol reserves the right to divest up to an additional $3m of its share of the project, which is set to reduce its investment to around $7.5m.

The company noted that construction of the gas flowline is on track as per the planned schedule and first gas transportation is expected on 1 December this year.

It has secured all forestry, archeological, and environmental permits for the project.

The company’s current gas wells have a production capacity of around 195 million cubic feet a day (ft³/d), while its Jobo gas processing facilities produce about 200 million ft³/d.

Canacol secured buyers for gas from the project that will see the sale of 40 million ft³/d of gas as part of a ten-year contract.