Swala Energy Pushes Tanzania’s Kito 1 Drilling Pushed to 2017

Swala Oil & Gas (Tanzania) plc has announced that it will not be drilling the Kito-1 exploration well in the Kilosa-Kilombero licence during 2016 as originally envisaged in part because of the delays imposed by the timing of the necessary permits.

Despite planning for the well proceeded within time and within budget through to the end of July 2016 the Joint Venture says it has missed the weather window that would have allowed it to drill safely in 2016.

Going forward the Company says it will now seek a licence extension to allow drilling in 2017.

Earlier OilNewsKenya had reported the drilling had been in doubt following a corporate presentation by JV partner Otto Energy in September and was likely to be pushed to Q4 of 2017 from Q3 of 2016.

A JV is also embroiled in dispute due to:

  • defaults in relation to non-payment by SOGTP of cash calls and associated interest accrued under the JOAs;
  • 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

Otto has also been calling for the removal of SOGTP as Operator of the Kilosa-Kilombero licence area following SOGTP’s failure to satisfy the joint venture partners and claims that it is not insolvent.

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 Kito-1 prospect was set to drill at the Kilosa Kilombero license in September 2016 with the contract 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.

According to Swala Energy CEO Dr. David Mestres Ridge delays imposed by the timing of the necessary permits is the only reason behind the postponement.

“We are disappointed that events caused us to miss the weather window within which we could have drilled the Kito-1 well but all parties agreed that health and safety considerations were paramount in deciding to postpone the well to 2017. We look forward to securing the licence extension that will allow Swala to test this promising prospect,” he says.

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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