Octant Energy To acquire Assest In Tanzania and Kenya

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Octant Energy Corp. (TSX VENTURE:OEL) (the “Corporation” or “Octant”) announces that it has entered into three agreements with subsidiary companies of Afren PLC to acquire assets in the Republic of Kenya and the United Republic of Tanzania (the “Proposed Transaction”).
The assets include Kenya Block L17/L18, Kenya Block 1, and in Tanzania, the Tanga Block.
The acquisition is important in the development of these assets for the region as it ensures that a team with extensive regional knowledge progresses the respective Production Sharing Contracts forward and raising the profile of the region through the continued delivery of near term actionable items on these assets.
The Octant team is lead by Richard Schmitt, President & CEO, and Christopher McLean, Executive Chairman. Both men have a long term history in the region with experiences going back to the initial acquisition and finance of the current discoveries in Kenya and select assets in Tanzania over the last 7-10 years.

Richard Schmitt, President and CEO of Octant says, “I am encouraged to be working with assets I know well from my past experiences.

This portfolio that Octant has secured is pivotal in the future development of Kenya and Tanzania as they further movement towards energy security and domestic growth in the countries. For me, being a part of East African growth and development again is a great opportunity and privilege.”

The acquisition of the PSC’s’ by Octant remains conditional on customary approvals from the respective governments. Once approval is received Octant will complete the acquisition of the PSC’s from Afren within 7 days.

At this time Octant is evaluating its future capital requirements with respect to these PSC’ and will provide future updates with respect the Proposed Transaction in due course.

Swala Oil Will Continue Exploration In Tanzania Despite Low Oil Prices

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, Tanzania - Swala Oil and Gas Tanzania will continue with its exploration programs across the country despite a drastic fall in global oil prices which has affected oil share prices globally including Tanzania.

 Tanzania – Swala Oil and Gas Tanzania will continue with its exploration programs across the country despite a drastic fall in global oil prices which has affected oil share prices globally including Tanzania.

 

Speaking shortly after the Annual General Meeting a year since its listing on the Dar es Salaam Stock Exchange (DSE), Swala Chief Executive Officer, David Ridge told reporters that for the past twelve months oil has come down from $130 to $50 a barrel adding that the situation has affected oil share prices everywhere in the world.

Dr Ridge said Swala Tanzania Initial Public Offer (IPO) price of Tsh 500 was the price still in existence since the company listed on DSE stressing that it has maintained the value over the last twelve months.

Read:3 surprising advantages and-disadvantages of oil and gas career

He however noted that, the company has lost 18% to 16% of its share value in the last twelve months explaining that the movement in share prices is global and partly driven by the fluctuating oil prices. “In case oil prices change just like other commodities do that will be reflected in the line share pricing” he said

Ridge noted that, if the market is difficult and share prices are going down investors are obliged to look for other ways of financing and the deal that Swala entered with Tata Petrodyne was one such way of alternatively financing Swala developments.

“Despite the fall of oil prices, Tata was willing to seal the deal that ensured that we will be able to sell some equity to a new participant. In our agreement, Tata will pay us a portion of past costs that will enable us to get an additional $6 million from $7.5 million which will go a long way in financing our operational costs”, said Dr Ridge.

“Tata Petrodyne will also pay part of our drilling costs up to about $4 million to $4.5 million and if we are successful in Kilombero they will pay another $1 million to work on exploration which brings the total value of the deal to stand at $12.5 million. In this regard, we do not have to raisemore equity at the time when the share prices have not come to its ideal prices,” he added.

Swala is the first oil and gas company to list on an East African stock exchange. It is an affiliated company to Swala Energy Limited, a company that is listed on the Australian Securities Exchange (ASX).

Swala holds assets in the world-class East African Rift System with a total net land package in excess of 17,500km2. Swala has an active operational and business development programme to continue to grow its presence in the hydrocarbon provinces of East Africa.

Orca Exploration announces closing of US$60 million financing of Tanzania natural gas field development with International Finance Corporation

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Orca Exploration Group Inc. (“Orca” or the “Company”) announces that it has entered into a loan agreement with International Finance Corporation (“IFC”), a member of the World Bank Group, for a US$60 million investment (the “Loan”) in the Company’s operating subsidiary, PanAfrican Energy Tanzania Limited (“PAET”).

Proceeds of the Loan will be used to fund part of an estimated US$120 million first phase of a Songo Songo Main Field development programme (the “Off-Shore Programme”) currently being undertaken using the Paragon M826 drilling rig (commenced in September 2015). The Off-Shore Programme is designed to (i) put safe existing suspended and operating production wells; (ii) restore and increase the current productive capacity of the Songo Songo Main Field to ensure the continued delivery of Protected and Additional gas into the existing Songas infrastructure; and (iii) provide additional operational redundancy and deliverability for future additional gas sales, by way of the workover and recompletion, abandonment or sidetrack drilling of three existing offshore wells, and/or the drilling of additional production gas wells at locations to be determined in the region of the existing offshore wells depending  on the outcome of the workovers. Since programme commencement, previously suspended production wells SS-5 and SS-9 have been successfully worked over and recompleted, and have been restored to full productive capacity estimated to be approximately 35 MMscfd per well.

The Off-Shore Programme is intended to restore and expand field productive capacity from approximately 83 million standard cubic feet per day (“MMscfd”) prior to the programme to approximately 190 MMscfd on completion of the programme. When completed, the field is expected to be capable of both filling the existing Songas infrastructure to capacity of approximately 102 MMscfd, as well as providing additional gas volumes to the newly commissioned National Natural Gas Infrastructure Project (“NNGIP”) as and when contracted.

The term of the Loan is 10-years, with no repayment of principal for the first seven years, followed by a three-year amortization period.  The Loan is an unsecured subordinated obligation of PAET and is guaranteed by Orca to a maximum of US$30 million.  The guarantee may only be called upon by IFC at maturity in 2025 and, subject to (among others) IFC approval, Orca may issue shares in fulfillment of all or part of the guarantee obligation in 2025, subject to receipt of all required regulatory approvals.

Base interest on the Loan is payable quarterly at 10% per annum on a ‘pay-if-you-can-basis’ using a formula to calculate the net cash available for such payments as at any given interest payment date.  In addition, an annual variable participatory interest equating to 7% of the cash flow of PAET net of capital expenditures is payable in respect of any given year, commencing with 2016.  Such participatory interest survives the repayment and/or maturity of the Loan until 15 October 2026.  It is also detachable from the Loan and accordingly can be transferred independently.  Dividends and distributions from PAET to Orca are restricted during the term of the Off-Shore Programme and at any time that any amounts of unpaid interest, principal or participating interest are outstanding.

The Loan is available subject to the fulfilment of certain conditions, which include attending to the registration of the Loan with the Bank of Tanzania and W. David Lyons entering into arrangements, satisfactory to IFC, whereby he will commit (directly or indirectly) not to reduce his beneficial ownership in Orca in a way that would result in him having less than 51% of the voting rights therein.

“The conclusion of the IFC financing is a significant achievement for Orca and an important endorsement of the Company’s continuing commitment to Tanzania,” commented W. David Lyons, Orca Chairman and Chief Executive Officer. “It allows us to raise finance and manage risk in the face of a challenging business environment, and to undertake urgently needed development of the Songo Songo field. It further safeguards Songo Songo’s future as an important part of Tanzania’s energy security.  The World Bank was instrumental in bringing the Songo Songo gas-to-electricity project to reality some 20 years ago and Orca is pleased to continue this long-term relationship, now directly with IFC, in support of the sustainable development of Tanzania’s energy resources.”

“The Songo Songo field is Tanzania’s most important source of proven natural gas production, and is the largest supplier of energy to the Dar es Salaam region” said Lance Crist, IFC Global Head of Natural Resources. “Through this investment, IFC is working to help to alleviate electricity shortages in Tanzania, which are an impediment to the country’s continued economic growth and development.”

About IFC

IFC, a member of the World Bank Group, is the largest global development institution focused on the private sector in emerging markets. Working with more than 2,000 businesses worldwide, IFC uses its capital, expertise, and influence to create opportunity where it’s needed most. In FY15, IFC’s long-term investments in developing countries rose to nearly $18 billion, helping the private sector play an essential role in the global effort to end extreme poverty and boost shared prosperity. For more information, visit www.ifc.org.

About Orca Exploration Group Inc.

Orca is an international public company engaged in natural gas exploration, development and supply in Tanzania through its wholly-owned subsidiary PanAfrican Energy Tanzania Limited, as well as oil and gas appraisal in Italy. Orca trades on the TSX Venture Exchange under the trading symbols ORC.A and ORC.B.

Neither the TSX Venture Exchange nor its Regulation Service Provider (as that term is defined in the policies of the TSX Venture Exchange) accepts responsibility for the adequacy or accuracy of this release.

Price of Oil has now stabilised- Tullow Oil chief executive

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Oil prices have stabilised and a gradual increase is now possible, according to Tullow Oil chief executive Aidan Heavey

Oil prices have stabilised and a gradual increase is now possible, according to Tullow Oil chief executive Aidan Heavey

 

Prices have plunged to historic lows over the past 12 months, a boon to consumers but heaping pressure on Tullow and other producers.

In an interview at an industry event in Cape Town, South Africa, Mr Heavey, inset, said his company won’t change strategy until prices recover.

Tullow “reset” its business early on to weather the price collapse, he said. That included signing up so called “farm-in partners” to help cover costs and reducing outgoings.

The company reduced its oil exploration budget to $200m a year in 2015 but sees that potentially doubling in future.

Its annual exploration spend was $800m in 2014 and more than $1bn in 2013.

Meanwhile, in relation to one of its biggest projects in Uganada, Mr Heavey plans to take a final investment decision (FID) in early 2017, later than planned.

Tullow discovered oil in Uganda in 2006 and had planned to make an FID on its oilfield by the end of 2016.

“You need a pipeline route firmed down and then you need to get FID. So FID probably in early 2017 and then three years later, you would have first oil,” Mr Heavey said at the Africa Oil Week conference organised by Global Pacific & Partners.

Tullow expects to obtain a production licence this year in Uganda and to start oil output there in 2020, he said.

Uganda has been pushing for an earlier production date around 2018, citing work by other investors. But previous targets have slipped.

“If Tullow is talking of 2020, that’s their business,” said Ugandan Energy Ministry spokesman Bukenya-Matovu Yusuf.

“CNOOC which has a production licence has been doing a lot of work toward production and our 2018 target still stands.”

Any investment decision will hinge on a route for an export pipeline out of land-locked Uganda to a port on the Indian Ocean.

That’s also true for China’s CNOOC and France’s Total, both also investing in Uganda.

A proposed northern Kenyan route has raised security concerns as it lies near war-torn Somalia. Total is considering a pipeline through Tanzania. Shares in Tullow closed down 4.65pc at 195pence in London

Uganda’s Change of Mind On Oil Pipeline and the headache it is giving Kenya

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The idea is for this pipeline to become the export conduit for Uganda’s oil once drilling starts.

Trouble is, Kenya had earlier signed an MoU with the same Uganda to build a pipeline to route their oil through northern Kenya to Lamu.

The new tango with Tanzania comes as bad news for the $29 billion Lamu Port-South Sudan-Ethiopia Transport (Lapsset) corridor.

The prime mover in the change of plan from Lamu to Tanga reportedly is the French oil giant Total.

Its beef with the Kenyan route is about “insecurity” along the so-called northern corridor, where banditry and cattle raiding among the Turkana, Pokot and Samburu is a way of life.

In Total Oil’s assessment, the Tanzania option means lower unit transportation costs.

Originally, the hinterland Lapsset had in mind at conception was South Sudan and Ethiopia.

Read:Tanzania signs oil pipeline  Mou with uganda

NEIGHBOURHOOD GOLIATH

That was well before oil was discovered in northern Kenya, and before Uganda was officially brought on board.

Aside from the question of when Kenya will be ready to drill, the projected volumes will not offset those from the Ugandan oilfields.

Sure, South Sudan has plenty of oil, and a pipeline through northern Kenya was primarily for this reason.

But there are good grounds to question the reliability of this country for Lapsset, at least in the short term.

Instability and civil war have become the norm there.

The existing pipeline through Sudan to the Red Sea, and even the oilfields themselves, have had to remain shut for long periods.

The more serious concern, though, should be Ethiopia.

Lapsset without it is like New York City without Wall Street.

Ethiopia is the neighbourhood Goliath – the most populous country in our region (90 million people), with the second biggest economy (after Kenya’s), and the fastest growing.

But it has the misfortune of being landlocked since it separated with Eritrea in 1993.

Presently, it relies on Djibouti port for its exports and imports.

Lapsset’s biggest desire is to lure this traffic through Lamu, hence the fast-tracking of the tarmacking of the Isiolo-Moyale highway as a first step.

However, by the time Lapsset is up and running, it may find the situation has greatly changed.

Read:Tanzania-and-uganda-agree-to-build-crude-oil-pipeline/

HUGE DEVELOPMENTS

Currently the Addis Ababa-Djibouti rail link (which Ethiopia co-owns) is being upgraded.

The existing metre-gauge railway will be replaced by a spanking $3 billion electrified SGR being built by (who else?) the Chinese. It could be operational as early as next year.

It is unlikely Ethiopia will want to shift its business south to Kenya after undertaking all this capital investment.

Of course, Djibouti will do anything to ensure the booming commerce from Ethiopia does not go away.

It is working as hard as anybody to modernise and upgrade its port, among other initiatives.

The little Muslim country is careful to also let its big and powerful neighbour into certain delicate arrangements.

It so happens that Djibouti hosts two big French and American military bases.

Since its society won’t allow its women to fraternise with the foreign soldiers, it discreetly lets in scores of Ethiopian girls to come over and do their thing.

Not to be left out, Tanzania is building its own huge $11 billion port at Bagamoyo.

Funded by China and Oman, it aims to eclipse Mombasa as the premier port in East Africa.

Yet in this rush for mega projects, we could be creating too much overcapacity that may condemn these projects to white elephants.

Kenya hosts regional Oil and Gas Summit

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This follows the success of last year’s event which saw over 2,300 participants from 380 companies gain invaluable insight into the projects and latest opportunities in the region.

EAOGS is endorsed by the Ministry of Energy and Petroleum, Kenya and attracts a senior level audience of international and regional companies, ministries, NOCs, IOCS, service companies, leading consulting and contracting companies, financial and legal institutions and government authorities.
Read:Time is now to invest in-oil and-gas sector

Following the success of licensing rounds, the advancement of the crucial port and refinery developments and all the pipeline issues; there is a lot to look forward to throughout the region and EAOGS will present major projects from key countries including; Ethiopia, Kenya, Mozambique, South Sudan, Tanzania and Uganda.

The Conference Programme for EAOGS 2016 is currently in development by expert steering committee of industry and government experts and will once again provide a cutting edge agenda covering all of the key issues and success stories.

Alongside the Conference EAOGS 2016 will be increasing its exhibition space to allow for even more companies to demonstrate their products and services to thousands of decision makers from across the industry

Southern Africa Oil & Gas Market 2015-2025:

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Visiongain has calculated that the Southern African oil and gas market will see capex of $18.55bn in 2015, including spending on both upstream exploration & development (E&D) and midstream infrastructure.

Southern Africa is the single largest region of Africa, a region that includes a diverse range of economies all at varying stages in terms of oil and gas industry development. OPEC member Angola and newcomer Namibia on the West coast are set to increase oil and gas production over the coming years with the continuing exploitation of pre-salt reserves.

Mozambique and Tanzania are set to rapidly increase gas production to cater for burgeoning domestic and regional demand for gas-to-power facilities, as well as a desire to supply the resource-hungry economies of Southern Asia via LNG exports. South Africa is looking to expand its offshore operations, boosted by successes off its Western coast, as well as hoping to expand onshore shale gas development in the Karoo Basin to supply the needs of the region’s economies.

Read:Tanzania oil and gas market insight and outlook report h2 2015-2025

Lastly, Madagascar is set to become one of the world’s most exciting emerging oil producers, and is currently vying for foreign capital along with other countries in the region to develop its large onshore, heavy oil and oil sands reserves over the coming decade.

The report will answer questions such as:
– What are the prospects for upstream oil and gas markets in Southern Africa?
– What are the prospects for midstream oil and gas markets in Southern Africa?
– How are oil prices affecting the Southern African oil and gas market?
– Who are the leading companies in Southern Africa?
– Which Southern African countries are currently attracting the most upstream and midstream spending and how will this change over the coming decade?

How will you benefit from this report?
– Over 280 pages of analysis, including 153 charts and tables, which provide the perfect accompaniment to high-end business presentations
– Details on upstream exploration and development activity across 226 active license blocks in the region
– Information on 24 current and future midstream projects
– Up-to-date oil price forecasting and analysis
– Sections on Economy and Energy Sector Development by country
– Sections on Political Risk Analysis by country
– In-depth interviews with industry experts, providing exclusive insights into oil and gas developments across the region

Five reasons why you must order and read this report today:

1. The report provides forecasts and analyses for the main categories of oil and gas upstream and midstream spending in Southern Africa

Upstream
– Geophysical studies
– 2D studies
– 3D studies
– Onshore wells
– Offshore wells and subsea development
– Floating Production Systems (FPS)

Midstream
– Pipelines
– LNG facilities
– GTL facilities
– Refineries
– Storage

2. The above upstream & midstream submarkets and spending categories are broken down for the six largest national markets in Southern Africa
– Angola
– Madagascar
– Mozambique
– Namibia
– South Africa
– Tanzania
– ‘Rest of Southern Africa’ (Botswana, Lesotho, Swaziland, Zambia and Zimbabwe)

3. Tables and analysis detailing the latest activity within each Southern African licence block

4. The analysis is also underpinned by our exclusive interviews with leading experts:
– James Baban, Managing Director of Tanzania Ltd
– Dr David Mestres Ridge, CEO of Swala Energy

5. Comprehensive accompanying analysis on each country:
– Economy and Energy Sector Development
– Political Risk Analysis

Who should read this report?
– Companies currently investing in, or thinking of investing in, any Southern African countries
– Anyone within the upstream and midstream oil and gas industry
– CEOs
– COOs
– CIOs
– Business development managers
– Marketing managers
– Suppliers
– Investors
– Contractors
– Government agencies
– Onshore/offshore drilling engineers
– Geologists

Read the full report: http://www.reportlinker.com/p03337066-summary/view-report.html

Swala Energy cashes up with new JV ahead of Tanzanian drilling

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imagesSwala Energy (ASX:SWE) has marked significant progress in its plan to unlock Tanzania’s prospective onshore oil acreage in recent weeks with fresh joint venture funding poised to prove up an exciting tenement portfolio.

The Perth-based explorer – which became the first oil and gas company to list a subsidiary on Tanzania’s Dar es Salaam Stock Exchange (DSE) last year –  secured US$5.7 million (A$7.8 million) in development funding earlier this month via a farm-in deal with Indian multinational conglomerate Tata Sons Limited (“Tata”).

The deal with Tata energy subsidiary Tata Petrodyne Limited (“TPL”) covers the Kilosa-Kilombero and Pangani licences in Tanzania, both located on a proven oil trend called the East African Rift System (“EARS”).

The transaction establishes an ownership structure whereby Swala controls 25% of both projects, with TPL controlling equal 25% stakes and Otto Energy (ASX:OEL) controlling the balance.

Besides funding exploration, the farm-in has allowed Swala the flexibility to redeem outstanding convertible notes worth $598,000. This stabilises the issued share capital of the company ahead of its planned corporate and asset activity in 2016.

The strategic benefits of the farm-in have made a dramatic impression on investors, resulting in Swala’s share price marking about a 77% increase since the first week of October.

 Dr. David Mestres Ridge, Swala CEO, said:

“Knowing that reimbursement of the past costs incurred by the Company is being made and having an international exploration company such as TPL as a participant in an exciting location in the East Africa Rift system allows us to now focus on preparations for the 2016 drilling campaign.”

Read:   Swala oil selects  Tanzania drilling site 

Projects of promise

The upcoming Joint Venture drilling will aim to improve confidence in two EARS projects, geologically related to structures which host at least 2 billion barrels of oil.

The Kilosa-Kilombero licence has three deep basins – Kidatu, Kilosa and Kilombero.  The Pangani licence has one – the Moshi basin.

Seismic work carried out in 2013 identified a large-scale structure in the Kilosa basin, measuring some 40-50km2 in extent. More importantly, it identified the “Kito” prospect in the Kilombero basin, where initial analysis suggested structural trapping analogous to that seen in Uganda (where more than 4 billion barrels of oil have been discovered to date) and Kenya (more than 600 million barrels).

A second seismic survey in 2014, concentrating on the Kilombero basin, slightly increased the size of the Kito prospect and identified a further six leads and prospects that contribute to the basin’s potential upside.

The 17,156-square-kilometre Pangani licence, meanwhile, has demonstrated the existence of in Moshi of a fault-bounded basin some 25 kilometres wide with sedimentary fill of between 2,000 -3,000 metres.  The Company is still reviewing the 2014 seismic data and focusing on the Kikuletwa lead, to the west of the basin.

Initial studies carried out by Swala earlier this year have clarified the operational issues associated with drilling in Tanzanianand confirmed estimated drilling costs below US$10 million (gross).

In Kenya, the company owns a 50% working interest in Block 12B, operated by Tullow Oil (LON:TLW).  The Operator is currently reviewing the seismic work acquired in 2014, which have already identified a number of leads and prospects.

Drilling is largely funded, with key partners including Tullow Oil (LON:TLW) and three wells slated for drilling on three licences in early 2016.

Ownership model

Swala’s listing on the DSE and relations with Tanzanian regulators represent part of a broader strategy of local integration which is at odds with the less inclusive business models of foreign listings practiced by some of the region’s large oil and gas operators.

This approach is based on a premise that early ownership brings value to local investors and further reinforces development prospects for the assets concerned.

Engagement with this strategy has encompassed a number of locally-focused marketing and communications efforts on the part of Swala, including:

• Commitment to local ownership, especially at the early seed stages.

– 2012 roadshows in Nairobi and Dar es Salaam

– 2013 roadshow in Dar es Salaam

• Commitment to local listing and close cooperation with the market authorities – many are very early-stage.

– Swala Tanzania listed in August 2014

– 2,000 Tanzanian shareholders

• Commitment to the communities in a meaningful manner (the trust concept).

– 7.5 million shares placed in trust

– Shares will be sold as appropriate and proceeds invested into the communities in which we operate

– ‘win-win’ with local communities: the more valuable the company, the more valuable the trust company tasked with investing locally.

Analysis

Swala’s 77% share market turnaround in recent weeks despite the environment of a generally struggling oil and gas market is noteworthy and a solid indicator of the company’s potential versus its peers.

These catalysts most notably include the 2016 drilling campaign for the EARS projects.

Swala’s listing on the DSE shows that there is both the appetite and the ability to participate – at least in the early stages.

Swala’s holdings are predominantly in the world-class EARS area with a total net land package in excess of 9,000 square kilometres after the farm-in over Tanzania and Kenya.

New discoveries have been announced in a number of licences along this trend, including Ngamia, Twiga and Etuko, which extend the multi-billion barrel Albert Graben play into the eastern arm of the rift system. Swala has an active operational and business development programme to continue to grow its presence in the promising hydrocarbon provinces of Africa.

To date, over 2 billion barrels of oil have been discovered in the Albertine Graben of Uganda. More recently, there have been oil discoveries in the Ngamia -1 and Twiga-1 wells in Kenya.

These discoveries have provided compelling evidence that the presence of oil in the rift systems is geographically more extensive than previously thought.

Work to date by Swala has identified key prospects with strong similarities to the recent EARS discoveries.

Tanzania’s gas reserves have been estimated to total between 50-53Tcf.

Swala’s business model is to have ownership from the get go. With this strategy, it is seeking to emulate proven African energy company success stories from the likes of African Oil (ASX:AOI), Cove Energy and Tullow Oil.

Swala has adopted a prudent farm-out strategy, whilst retaining interests that provide leverage to any drilling success.

The uptick in share price provides a counter to participate in the 2016 exploration well to be drilled on the Kito prospect in the Kilosa-Kilombero licence. We would expect to see ongoing interest and further investor participation in the lead up to this very exciting exploration and drill program commencing.

With the redemption of outstanding convertible notes, this will remove an overhang of shares that should provide clearer air for the stock and potential to track considerably higher than current share price of $0.077 in 2016.

Tanzania signs oil pipeline MoU with Uganda

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KAMPALA, Uganda – Governments of Tanzania, Uganda,  French firm, Total E&P (Uganda) and the Tanzania Petroleum Development Corporation (TPDC) have signed  a Memorandum of Understanding for a crude oil export pipeline framework writes SAM OKWAKOL.

“If we can be able to get a least cost pipeline route to the East African coast, our crude oil will be exported cheaply,’’ Dr Fred Kabagambe-Kaliisa, the Permanent Secretary of Uganda’s Ministry of Energy and Mineral Development, said last week.

According to a Ministry statement, the MoU creates a working framework for the potential development of a crude export pipeline from Hoima to Tanga Port in Tanzania.

The objective is to select a route that will result in the lowest unit transportation cost that constitutes the most viable option for the crude export pipeline.

The MOU also provides for other participants to join in the process of assessing and developing this option.

Ngosi Mwihava, the acting Permanent Secretary in Tanzania’s Ministry of Energy and Minerals said: “This infrastructure will stand the test of time in our regional cooperation. Tanzania is carrying out exploration work along the proposed route where any potential discovery will further enhance the economics of the project.”

Also Read:Tanzania and Uganda agree to build crude oil pipeline

He said: “The due diligence is a valid exercise, because you have to justify the route you are going to consider to justify the least cost option.”

Dr Kabagambe-Kaliisa, said the MoU also enables the signatories to continue working together to fine tune studies and field work on the Tanga route.

This is in order to further appraise the merits of a crude export pipeline option through Tanzania with a view to achieving the lowest unit transportation cost for crude oil from Uganda.

Adewale Fayemi, the General Manager Total E & P (Uganda), described the MoU as a key milestone of achieving the least cost option to transport Uganda’s crude oil to the Indian Ocean. “We look forward to fine tune the process.”

He sadi Total E&P is committed to supporting the route and collaborating with all the partners involved.

James Mataragio, the TPDC Managing Director said: “This a great project, which if executed, it will create opportunities for the people of Tanzania

“This project is going to open new investment opportunities, and create jobs for citizens of both countries. We have that experience required to build and manage pipelines. I want to assure Ugandans that they have got all the support from TPDC and Government of United Republic of Tanzania,” Mataragio said.

The Uganda government has signed MoUs with oil companies licensed in the country for the commercialization of the oil and gas resources.

It was agreed that the crude oil discovered in Uganda is commercialized through crude to power, refining and export of crude oil.

In this regard efforts to establish a least cost pipeline route to the East African coast are being undertaken in partnership with industry and the respective Partner States where the crude export pipeline is likely to pass.

Uganda is currently undertaking a process to identify and assess the comparative merits of three pipeline routing options, two via Kenya to Mombasa and Lamu, and one via Tanzania to Tanga, in respect of the export of crude oil from Uganda to the international market. The objective is to select a route that will result in the lowest unit transportation cost and constitutes the most viable option for the pipeline project.

credit:busiweek

Is East Africa’s gas asset boom about to go bust?

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Recent oil and gas discoveries across East Africa, most notably in Mozambique and Tanzania, have seen the region emerge as a new player in the global oil and gas industry. As exciting as the huge gas fields of East Africa are, however, the strong decline in oil prices and expectations for an L-shaped recovery with low prices over the coming years are increasingly challenging the economic viability of the industry in this region.

The discoveries were expected to drive billions of dollars in annual investment to the region over the next decade. According to BMI estimates, the finds in the last few years are more than that of any other region in the world, and the discoveries are expected to continue for the next few years.  However, falling global oil prices are threatening the commercial viability of many of these gas prospects.

The Indian Ocean, off the coast of Mozambique and Tanzania, is proving to be a rich hunting ground for natural gas exploration. According to US Geological Survey estimates, the combined gas reserves of Mozambique and Tanzania could be as high as 250 trillion cubic feet. In Mozambique alone, proven gas reserves have increased dramatically from a mere 4.6 trillion cubic feet in 2013 to 98.8 trillion cubic feet as of mid-2015. Given continued offshore discoveries and the size of discoveries to date, continued growth in proven gas reserves is likely to continue into the foreseeable future.

New exploration on more frontier blocks, however, will likely be slowed as oil and gas prices fall and companies apply increasing caution to investing in frontier markets with nascent industries, poor infrastructure and long lead times.

As liquefied natural gas (“LNG”) contracts remain heavily indexed to oil, the fall in global oil prices poses significant downside risk to gas production projects. Persistent oversupply in the oil market continues to put downward pressure on oil prices. This trend of lower prices is unlikely to reverse in the near future with futures prices estimating the average Brent crude oil price to range between USD50-65/bbl over the next five years. Industry research estimates that an oil price of USD70-80/bbl would be needed for the LNG gas projects just to break even.

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Sustained lower oil prices are likely to take a heavy toll on the development of upstream gas production and downstream refining projects in the region, as pricing uncertainties affect the commercial viability of LNG projects, delaying investment in the region. This will likely see companies hold off on Final Investment Decisions (“FID”) as they attempt to overhaul projects to cut costs and wait for more certainty on the direction of prices.

In Mozambique, for example, both Eni and Andarko have yet to reach a FID on their respective LNG projects. The lower price environment will likely force these companies to secure more off-take agreements before reaching FID. Furthermore, it is unclear whether these projects would be economically viable at current pricing levels, and given expectations for a slow recovery in oil prices over the coming years, we could see further uncertainty and delays in reaching FID.

The free fall of global oil prices is forcing companies to re-evaluate their growth strategy in the region. Anadarko CEO, Al Walker told investors that it is “unlikely that we will have the kind of margins that we have seen historically that would encourage us to go back into a growth mode.”

In Tanzania, the situation is just as precarious. Gas output will depend on construction of an LNG export terminal; however the project partners – BG Group, Ophir Energy, Statoil and ExxonMobil – have yet to reach FID, due to pricing uncertainties and a range of legal and regulatory hurdles.

Downstream refining projects are also in jeopardy. According to a Sasol report, Sasol, Eni and ENH have announced a partnership to look into a feasibility study for a large-scale gas-to-liquids (GTL) facility in Mozambique. However, key to the progression of a GTL project in Mozambique will be the cost of the gas feedstock and the long-term outlook for oil prices. Central to GTL economics is the price spread between natural gas and oil.

On a positive note, both Mozambique and Tanzania are expected to experience positive gas consumption growth as their respective governments look to increase the use of natural gas in domestic power generation. However, as in the case of Nigeria, there is a risk that each government may fix domestic gas prices, which could hinder investment in the region. Interestingly, Nigeria recently raised local gas prices to stimulate investment and plug persistent local shortages.