Kinetiko Energy’s (ASX:KKO) goal of becoming a major gas producer in South Africa has hit a key milestone with the grant of bulk gas production and removal for its advanced Amersfoort project.

The approval from the Department of Mineral Resources and Energy allows for the production of up to 500 million standard cubic feet (MMscf) of gas per annum for a two-year period.

Notably, the grant paves the way for Kinetiko to generate first revenues and to certify its first gas reserves as it advances pilot production field investment and existing pilot well workovers for production.

At current South African domestic gas prices of between $US7 and $US10 per gigajoule (GJ), this could deliver revenue of between $US3.5m and $US5m given that 500MMscf is equivalent to 500,000GJ.

“Kinetiko, through its 49% economic interest in Afro Energy, has accomplished another major milestone towards achieving its vision of becoming the largest on shore gas producer in South Africa,” chairman Adam Sierakowski said.

“The approval to produce and sell gas enables the company to fast track pilot field gas production which has the potential to deliver first certified gas reserves and revenues.”

Kinetiko plans to apply for a full production right following the completion of successful pilot gas production and commercialisation testing enabled from the current approval.

It noted that short term gas production could be achieved through re-opening existing gas producing wells.

Gas production progress

Kinetiko recently identified a further 20 gas compartments across the Amersfoort project from recently completed and interpreted aeromagnetic surveys.

10 of these were identified on the ER38 licence of the project and are up to 22sqkm in size and cover a total area of 124sqkm while another 10 compartments were identified in September at the ER56 licence.

Existing pilot production wells and each of these gas compartments have the potential to host production wells, providing the company with extensive alternatives to target pilot production wells adjacent to existing energy Infrastructure and markets.