Orca has reported that on August 3, 2020 signed a contract with China Petroleum and Technology Development Company (CPTDC) for the design, supply, installation and commissioning of natural gas compressors within the Songas gas processing facility on Songo Songo Island. Orca says the compressors will work in harmony with the previously installed refrigeration to address declining reservoir pressure and ensure maximum production levels can be sustained, subject to demand, through to the end of the Production Sharing Agreement in 2026. The compressors are scheduled to be operational by the end of Q2 2022.
The company reports Additional Gas sales averaged 50.6 million standard cubic feet a day (MMcfd) for Q2 2020 down from 56.6 MMcfd in Q2 2019 and 53.5 MMcfd for the six months ended June 30, 2020 (six months ended June 30, 2019: 59.5 MMcfd). Orca says gas sales were impacted by sustained and significant rainfalls that enabled the Tanzania Electricity Supply Company (TANESCO) to operate its hydro facilities at high utilization rates. Tanzania is now entering the dry season and gas demand is expected to increase for the remainder of the year. Despite the lower demand for gas from the power sector, TANESCO has continued to pay back its arrears during the first six months of the year. Orca continues to benefit from a strong balance sheet, with cash and short-term bonds of $106.1 million as at June 30, 2020.
Further, Orca adds it is preparing for the workover of onshore well SS-10 in early 2021 with a decision on whether to conduct remedial work on two of the older onshore wells, SS-3 and SS-4 to be taken on completion of a major subsurface review of the Songo Songo gas field that will be finalized during Q4 2020. This review, which includes a re-build of the static and dynamic reservoir models, will enable the Company to assess whether the workover of SS-3 and SS-4, or the drilling of new infill wells will be preferable over the remainder of the license period. The review will also incorporate the latest trends in pressure measurements to allow a full re-assessment on the contingent and prospective resource potential and associated economics of drilling and developing the natural gas in the areas known as Songo Songo North and Songo Songo West.
Nigel Friend, CEO of Orca commented:
“Despite the challenging macro backdrop, we are very pleased with Orca’s performance in the first six months of 2020. We are well placed to finance and deliver a number of essential capital projects which are critical to sustaining gas production in Tanzania through to the end of the license period. The Government of Tanzania has shown a long-term commitment to natural gas through its investment in gas infrastructure and we will continue to develop the Songo Songo field with our partner, the Tanzania Petroleum Development Corporation, to fuel economic growth and prosperity in country.
We are delighted to have engaged Canaccord and Investec who are expected to help the Company expand its institutional investor bases in Europe and Africa. They will also assist us with communicating the success of our project in Tanzania and the long-term investment case of the Company. I look forward to keeping our shareholders appraised of developments over the coming months.”