The company announced yesterday that it has signed a memorandum of understanding to supply an unnamed leading South African industrial gases company with LNG generated from its Free State gas field.

It described the potential buyer as "a major gas distributor with a presence throughout sub-Saharan Africa."

Under the MOU, Molopo may supply up to 80,000 gallons per day (about 303,000 litres) of LNG, in a bid to replace high priced imported LPG, from its Free State gas field where methane is currently venting from old mineral exploration boreholes.

Currently the field produces over 1 million cubic feet of gas per day, but Molopo is looking to increase these volumes with a program that includes well workovers, new wells and the identification of additional gas emitting boreholes.

Molopo said the existing 1mmcfd should support an initial plant of 10,000 gallon per day and added the LNG plant could be scaled up as more gas becomes available.

Discussions are also underway between Molopo and several other groups for the supply of small-scale LNG plants.

"Apart from the sale of LNG, the project may also qualify for carbon credits which would add to the value of gas produced," it said.

Molopo now plans to undertake a full feasibility study, seek reserves certification and apply to convert its exploration rights into a production right.