Savannah’s Accugas subsidiary has announced that it has entered into a revised Gas Sales Agreement (GSA) with Lafarge Africa PLC (Lafarge, formerly known as United Cement Company of Nigeria Limited) for the supply of gas to its Mfamosing cement plant in Cross River State, Nigeria.

The revised GSA establishes a more sustainable long-term contractual position for the benefit of both parties.

The revised GSA sees the contract term with Lafarge extended for a further five years to January 2037, given a remaining contract life of 17 years.  The new agreement also allows for an increase in the gas sales price from 2027, with additional US-Consumer Price Index indexation from 1 January 2029.

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The revised GSA has a reduction in the daily contracted quantity (DCQ) of gas from 38.7 MMscfpd to 24.2 MMscfpd.  The reduction in the DCQ will allow Accugas to release approximately 12 MMscfpd of currently reserved gas processing capacity at the CPF, enabling Accugas to enter into additional long-term GSAs for these volumes, which will increase the business’ future revenues and cashflow potential.

To compensate Accugas for this reduction in DCQ, the revised GSA includes an advance payment of $20million and a prepayment structure over the period to 2027, which effectively results in a gas price of $7.50/Mscf on take-or-pay volumes during this period.