Otto Energy pushes to Remove Swala Energy as Operator in Tanzania’s Kilosa-Kilombero License

Otto Energy Ltd through its wholly-owned subsidiary, Otto Energy (Tanzania) Pty Ltd, has said  it wants current operator Pangani and Kilosa-Kilombero licenses relieved off its role after defaulting in various cash calls.

According to Otto Energy its subsidiary has issued various notices to Swala Oil and Gas (Tanzania) plc (SOGTP), pursuant to the Pangani and Kilosa-Kilombero Joint Operating Agreements.

These notices relate to:

  1. defaults in relation to non-payment by SOGTP of cash calls and associated interest accrued under the JOAs;
  2. claims by Otto Tanzania for payment of interest accruing under the JOAs as a result of SOGTP’s defaults, amounting to approximately US$360,000; and
  3. the removal of SOGTP as Operator of the Kilosa-Kilombero licence area following SOGTP’s failure to satisfy the joint venture partners that it is not insolvent.

According to Otto’s Managing Director, Matthew Allen the decision by Otto Tanzania to issue dispute notices, including a notice seeking the removal of SOGTP as Operator of the Kilosa-Kilombero licence, was not taken lightly.

” Otto Tanzania is of the view that these steps are the most appropriate course of action to ensure that joint venture operations, including the drilling of the planned Kito-1 exploration well, are undertaken by a joint venture which has the financial and technical capability to ensure the efficient and safe completion of drilling,” Allen said.

Kito Prospect Map

Allen has warned that the joint venture will be unable to progress the drilling of the Kito-1 well in 2016 until the joint venture disputes are resolved.

“Otto Tanzania remains committed to the drilling of Kito-1 and plans to work with Tanzania Petroleum Development Corporation, the Government of Tanzania and our remaining joint venture and farm-in partners to ascertain the best way forward.”

The Kito-1 prospect is set to drill at the Kilosa Kilombero license in September 2016 with already  Swala Energy having awarded the Drill Support Team contract for the 2016 drilling campaign to the Tanzanian subsidiary of AWT International (Asia) Sdn Bhd, a Singapore-headquartered firm offering subsurface, subsea and surface facilities engineering services and contracting solutions to the oil and gas industry.

A feasibility study showed the majority of roads and bridges are suitable to move a rig as two bridges are likely to be bypassed as well as improvement of one river crossing near the site.

Another dispute has been ongoing since May 2016 when Swala Energy Limited said it has been served notice by lawyers acting on behalf of Otto Energy Limited that Otto has commenced a legal action against the Company, Swala Oil and Gas (Tanzania) plc (SOGTP) and current and certain former directors of the Company seeking to recover a gross amount of approximately US$1,000,000 plus alleged damages.

“The matters raised in these notices are unrelated to the current Federal Court proceedings brought by Otto Tanzania against Swala Energy Limited (In Administration), its directors and SOGTP.” Otto said in a statement.

The four joint venture partners in the two blocks currently have a 25 percent interest each. Among the partners include the  Swala Energy (operator), Otto Energy, Tata Petrodyne, and MV Upstream a joint venture between Vegas Oil & Gas Limited, (Vegas) and Motor Oil Hellas SA (MOH).


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