Orca Exploration Group has confirmed that it is in discussions with Swala Oil & Gas (Tanzania) plc regarding a possible minority investment in PAE PanAfrican Energy Corporation (PAEM), a Mauritius-registered company that is a wholly-owned subsidiary of the Company.
Orca which is the operator of the 879 Bcf Songo Songo natural gas field is however quick to state that there are no assurances that these discussions will lead to a definitive agreement and any such agreement is expected to be subject to Swala securing necessary financing as well as a number of other conditions.
And with Swala still seeking ways to raise finances which include a bond in Uganda and Tanzania market there are no assurances that such conditions will be satisfied. According to Orca any investment by Swala, once concluded, is not expected to affect the management or operation of the Company’s operating subsidiary, PanAfrican Energy Tanzania Limited (PAET) (which will continue to be a wholly-owned subsidiary of PAEM), and the many benefits accruing to Tanzania from the Orca Group’s involvement in the Songo Songo Project.
“We would welcome Swala’s minority participation in the Orca Group. Orca has for some time sought the right partner for a minority stake in the Orca Group and we welcome Swala’s ability to attract and engage Tanzanian investors. Such an investment is strategic to Orca in underpinning the intrinsic value of our business and providing a platform from which to grow and diversify our company,” says Orca Chairman and Chief Executive Officer, W. David Lyons commented.
Orca Exploration operates the first gas-to-power project in Sub-Saharan Africa, the Songo Songo Project was initiated by the Government of Tanzania, with the technical and financial support of the World Bank and private sector investors, including the predecessor to Orca. Just last month Orca announced the approval of the Second Additional Gas Plan (AGP-2) by the Government of Tanzania, more than doubling the available volume of Additional Gas for sale from the Songo Songo Field.
The PSC under its Project Agreements the Company is required to prepare and submit for approval an Additional Gas Plan that demonstrates how such demand for Additional Gas can be met to the end of the existing licence in 2026, while assuring the continued and reliable supply of up to 45 MMscfd of Protected Gas to 2024. Preservation of Protected Gas is vital to the economics of the overall Songo Songo project. Protected Gas enables Songas to generate and sell electricity to TANESCO at approximately US$0.05 per kWh, making Songas the lowest cost supplier of gas-fired power generation in Tanzania.
Beyond ensuring the supply of Protected Gas to 2024, and the increased sale of Additional Gas to 2026, AGP-2 also contemplates additional field development to support and optimize the Songo Songo production profile through the life of the field.