Prospex Energy (PXEN) said an application made by its joint venture firm Tarba Energía S.L. ("Tarba") to convert the Tesorillo exploration permit into an exploitation concession is now under consideration ‘at a time of significantly rising prices for gas and LNG imports in Spain.’
The Tesorillo Project in Southern Spain comprises two petroleum exploration permits, the Tesorillo and Ruedalabola Permits that were approved as a joint investigation programme. Tesorillo covers 94,000 acres and includes a known gas discovery at the Almarchal-1 well.
The investment company, which is focused on developing European gas and power projects, said Tarba had submitted its application to the relevant authorities before Spain's Act 7/2021 on Climate Change and Energy Transition (the "Climate Change Act") had come into force.
The new legislation under the Climate Change Act states that no new hydrocarbon permits or licences will be granted in Spain. The new act has specifically excluded existing permits, including applications from existing permits to convert into an exploitation concession.
Specialist legal advice received by Tarba confirmed that applications from existing permits prior to the Climate Change Act coming into force maintain their validity under the new law.
Tarba's application is being considered by the regulators at a time of significantly rising prices for gas and LNG imports in Spain, which the Board believes should work in its favour, it noted.
The Company highlighted to investors that the El Romeral exploitation concessions at which Tarba operates its gas to power plant are in force and unaffected by the Climate Change Act.
According to the latest recorded data, Tesorillo contains 831 Bcf gross unrisked prospective resources on a best estimate basis and has excellent proximity to pipelines and infrastructure.
To date, the Company noted that Tarba continues to liaise with various government agencies to progress drilling and environmental approvals for both El Romeral and for Tesorillo.
Currently, Tarba is targeting conventional sandstone gas reservoirs. There are no financial or drilling commitments attached to the Tesorillo Project Exploitation Concession application.
Mark Routh, Prospex's CEO, said: "In communicating with shareholders over the past few months, we felt the need to clarify our position with Tesorillo in light of the recent legislative changes taking place in Spain and offer reassurance on the steady progress being made.
He said this comes as a result of a successful collaboration between the existing JV parties in Tarba “during an ongoing delicate application process with local and national authorities.
He added: "We are ever mindful of the environmental impact of our activities in the region and the need to balance this against the current economic situation where gas is in short supply. To put things in context, local indigenous onshore gas production in Spain has a carbon footprint which is ten times lower than the importation of LNG from the USA and at a substantially lower delivered cost. With this in mind, the Tesorillo Project has the potential to become a world class gas production asset and a model for the energy transition process."
View from Vox
In June 2021 in its results for the year to 31 December 2020, Prospex said it had emerged from a “challenging” year with strong asset backing and a focused portfolio of investments.
Despite the disruption caused by the global pandemic, the Company said it saw ‘major progress towards building Prospex into a European focused gas and power business.’
In particular, Prospex hailed the successful acquisition of a 49.9% interest in the El Romeral Integrated gas and power project in Spain, which it said had added an interest in three producing gas wells as well as an operational power plant to Prospex's portfolio.
At full capacity, El Romeral will become a second material revenue generator for Prospex. The Group stated that it has the potential to deliver indicative project level annual revenues and profit before tax of €4.2m and €2.4m respectively (€1.8m profit after tax). It said this level of revenues and profits would put El Romeral on a par with the firm’s Selva gas field in Italy.
Addressing its shareholders at the time, Prospex Energy stated that both of its gas-focused projects based in Spain and Italy are either ‘already or soon to be producing’ and that both hold ‘multiple and significant low risk follow-up exploration / development opportunities.’
The company said ‘the building blocks are in place to transform Prospex into a highly cash generative gas and power producer that is fit for purpose for the energy transition.’
Looking ahead, Prospex said, ‘With Selva expected to commence production in mid-2022 and with the application process now commenced for a multi-well drilling programme at El Romeral, potentially in 2022, the year ahead promises to see major progress made.’
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