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Tanzania to rake in capital gains from $55b buyout of BG Group by rival Shell


Tanzania is set to collect millions of dollars in capital gains tax following Shell’s acquisition of BG Group, barely two years after banking $258 million in similar payments over the same gas resources.

On Monday, Shell officially acquired BG Group and its assets in a $55 billion deal, touted as the biggest energy deal in more than a decade — positioning Tanzania as one of the continents’ top supplier of gas.

Tanzania is expected to endorse the transaction and change of shareholding once the capital gains tax payment has been effected.

The takeover now gives Shell a 16 per cent controlling stake in the world’s liquefied natural gas (LNG) business, with Tanzania and Egypt as its anchor operation areas on the African continent. Tanzania has proven reserves of 55 trillion cubic feet of natural gas, which is expected to generate almost $5 billion annually.

The country is expected to construct an LNG plant at the start of next year, with a target completion date of 2024, depending on Shell’s strategies.


BG Group Tanzania, with its partner Ophir Energy, has invested over $1 billion in a fast-track exploration appraisal programme. BG owned 16 wells for blocks 1, 2 and 3, which contain an estimated one-third of Tanzania’s gas reserves.

BG Group declined to discuss the transaction details and the amount payable to Tanzania.

Three years ago, Tanzania received a capital gains tax of $258 million on the proposed $1.3 billion asset sale of Ophir Energy’s natural gas fields in the country to a unit of Singapore’s Temasek Holdings.

Tanzania:Hopes rise for Aminex gas deal in Tanzania


The Kiliwani field is on the landward side of the Songo Songo island.

The Kiliwani field is on the landward side of the Songo Songo island.


The long awaited gas pipeline that runs from Mtwara to Tanzania’s capital , Dar es Salaam, was officially declared open last Saturday (October 10) amid great fanfare in Mtwara.

A clutch of ministers and officials from the TanzanianPetroleum Development Corporation (TPDC) heard President Jakaya Kikwete tell a large crowd and the country that he was optimistic that the current power outages will end.

He added he hoped the country will enjoy reliable power supply from now on by exploiting various sources of energy including natural gas that has been discovered onshore Tanzania.

Read:Aminex  Ceo “Tpdc investment great sign of support

Foreign oil and gas companies, including Aminex (LON: AEX) and Solo Oil (LON:SOLO), will be quietly but fervently wishing that the opening of the pipeline will herald, at long last , the signing of a gas sales agreement (GSA).

Tanzania is not a rich country but as an emerging economy it is actually has economic growth rates that have been running at 7% a year.

There is a huge demand for energy. Estimated 2016 demand from existing and new power plants is around 120mln standard cubic feet of gas (mmscfd). Gas demand is expected to grow to 475mmscfd by 2018.

Some Tanzania business executives have argued that power shortages have acted as a brake on economic development .

A consortium, operated by Aminex (58.5% interest)) and in which Solo Oil (LON:SOLO) holds currently holds a 6.5% stake, has what the Tanzania government wants. It has discovered a lot of gas onshore.

The Kiliwani field is on the landward side of the Songo Songo island.

The KN-1 gas well tested at 40 mmscfd.  It has been completed and ready to produce for quite a while. The consortium could supply well over 20mmscfd, it is believed.
However, the pipeline (a spur from the main 540km, 36 inch Mnazi Bay to Dar es Salaam pipeline) together with processing facilities has now been completed with Chinese loan financing and is ready to be used.

The sales agreement has been sorted in just about every aspect, it seems. But it still has not been signed off.

A clue to why there have been such long delays in signing a GSA came in September when another foreign companyWentworth Resources (LON:WRL) managed to get a GSA signed.

The problem with these deals has been payment protection guarantees.

Orca, the company that runs the Songo Songo gas field, Tanzania’s only current producer, had outstanding payment issues with the TPDC.

Companies now, usually, want to ensure that some kind of third party, such as the World Bank, will underwrite payments from the TPDC.

Wentworth, together with operator, French group Maurel & Prom operates the Manzi Bay field in the south of Tanzania. It is the only other foreign consortium, apart from theAminex partnership, which has been ready to produce new gas for Tanzania internal consumption.

Solo’s chief executive Neil Ritson told Proactive that his company could end up signing the long awaited gas sales agreement before the Tanzanian general election in two weeks’ time. This could mean for first gas for the partners, which are in the right place at the right time.

Getting KN-1 into production is very important for Solo because it would establish first output for the company and therefore first meaningful revenue.

Also, a GSA would unlock a further investment from Solo which has said it would pay US$3.5mln for a further 6.5% stake in the Kiliwani concession. 

Not only would this help alleviate the company’s debt burden, which has been such a drag on the  share price these last two years, it would also allow progress on another of Aminex’s Tanzania assets, the Ruvuma production sharing agreement (PSA), which could be company-making.

Kenya could have opportunities for small foreign oil companies

Kenya could have opportunities for small foreign oil companies

Wildcat explorers have turned to east Africa as one of the last frontiers for oil and gas.
 The Mombasa refinery always runs below capacity

Wildcat explorers have turned to east Africa as one of the last frontiers for oil and gas.

In the region, Tanzania and Mozambique have found large quantities of gas and Uganda has established substantial oil reserves. Kenya is now getting into the act – and exports could flow soon.

Kenya is the youngest among East Africa’s nascent resource prospects, but one of the most promising. Tullow Oil (LON: TLW), with sometimes partner Africa Oil (TSX: AOI), has been the most successful wildcatter so far.

Tullow made its first discovery in Kenya in mid-2012. This came after a long time of disappointing exploration activities. And it became commercially viable after it was confirmed that there were around 300mln barrels worth of reserves.

Tullow-led joint ventures subsequently made a further six discoveries and as of January 2014, Tullow said Kenya’s Northern Basin could have an excess of 1 billion barrels of oil.

Drillers estimate the Rift Valley, which runs through Kenya from north to south, could yield 10bn barrels of oil and explorers are accelerating activities.

A connected Kenya-Uganda pipeline could pipe 500,000 barrels of oil per day (bopd).

Tullow has said Kenya could envisage exporting oil as early as 2016 and ramp up quickly to 100,000 bopd.

Kenya’s oil hunting grounds are parcelled out in more than 50 blocks over three main areas – offshore; along the coast reaching north towards Somalia; and in the north-western Turkana area.

Besides Tullow operators include Anadarko Petroleum (NYSE:APC), BG Group (LON:BG. and Statoil (OSX: STL) . A number of smaller groups are also involved in Kenya. They include Ophir (LON:OPHR), Simba Energy (TSXV:SMB),Bowleven (LON:BLVN) and the delisted Afren.

With all this hydrocarbon activity and its buzzing ports like Mombasa, trading with the Middle East and Far East, Kenya’s consumer-driven economy has become buoyant. GDP growth this year is expected to be 5.7%.

But buoyancy can have its side-effects. In some ways Kenya has become what you might call a bottleneck economy.

The refinery in Mombasa is a case in point. Kenya has one of the largest crude oil refineries in East Africa, a 90,000-barrels-per-day (bbl/d) facility in the country’s second city. This imports and processes Murban heavy crude from Abu Dhabi and other heavy Middle-Eastern crude grades.

Most of the imported and/or domestically refined products are sold in Kenya’s major cities and the remainder is sent to neighbouring countries via trucks.

But the refinery typically operates below capacity and needs investment to realise its full potential. Part of this investment needs to be spent on de-clogging the roads.

The thousands of lorries which snarl the traffic badly effect the efficiency of the refinery. But the situation should be alleviated when the Chinese sponsored railway from Nairobi to Mombasa is completed.

 Another bottleneck is the shortage of power. Kenya is in the middle of a programme to expand from 1,664 MegaWatts (MW) available in 2013 to 5,500 MW by 2017. This is to meet growing electricity demand. These projects do not come cheap. The power expansion plan is costed at US$1.83bn.

Kenya is tapping foreign investors through a hard currency sovereign bond as well as dipping into the pot of aid from multilateral donors like the World Bank and individual countries like the US (the US agreed to give Kenya US$1bn following the visit of President Barack Obama earlier this year.)

Kenya might also take a leaf out of its southern neighbour Tanzania’s book.

Like Kenya, Tanzania is an emerging economy that is actually emerging with economic growth rates that have been running at 7% a year. There is a huge demand for energy. Estimated 2016 demand from existing and new power plants is around 120mln standard cubic feet of gas a day (mmscfd). Gas demand is expected to grow to 475mmscfd by 2018.

Helping to fill this growth in demand are three small UK based oil and gas companies Aminex (LON:AEX), Solo Oil(LON:SOLO) and Wentworth Resources (LON: WRL), which are signing long-term gas sales agreements (GSAs) with the Tanzanian authorities to transport from newly built pipelines to the capital Dar es Salaam.

In the case of the Aminex/Solo grouping the deal is to move 20mmcsfd from its Kiliwani North field south of Dar es Salaam. Wentworth has separate arrangements.

Kenya is different to Tanzania in that it derives most of its energy for power stations from hydro-electric and geothermal plants. Its gas resources are not as developed as Tanzania

But that could to start to change sooner rather than later; and change in a way that could benefit small foreign groups operating in Kenya.

Back in 2010, Afren agreed to buy Canada’s Black Marlin for US$101mln (£69m) in a deal that would have given the West Africa-focused oil explorer a significant foothold in the east of the continent and greatly increase its resource base.

Then listed on the Toronto Venture Exchange, Black Marlin operated in Kenya, Ethiopia, the Seychelles and Madagascar, with 1.2bn barrels of oil equivalent (boe) in net resources. The preponderance of these resources are thought to be in Kenya.

Afren is now in administration and is forced to dispose of former Black Marlin assets (imminently it is thought) in what can only be called a fire sale.

Any deal for the Kenya assets is subject to government approval, but the price would almost certainly be lower thanAfren paid.

A small foreign company with the wherewithal to bring the Black Marlin assets on-stream could then possibly do a deal with the Tanzania operators and help bridge Kenya’s power gap.

This is conjecture at this stage. Nothing is written in stone in these matters. But it is an interesting idea.  

Iss Awarded Paragon Offshore Project In Tanzania




Inchcape Shipping Services (ISS) has been appointed by Paragon Offshore in Houston as marine and logistic services provider for a new drilling campaign off the Songo Songo Islands, Tanzania – the first new commercial drilling project in Tanzania in a number of years.

ISS is providing a range of services for Paragon Offshore including full husbandry, crew logistics, visa assistance and arranging marine and air charters.

Paragon Offshore is deploying jack-up rig M826 on the nine month campaign for PanAfrican Energy Tanzania – the country’s first natural gas producer.

M826 arrived at the field on board semi-submersible vessel, OHT Falcon, to be floated off and pinned to the drilling location.

During the campaign, M826 will clear actively producing wells to enhance output and will drill several new wells in the same field