Orca Exploration creates infrastructure division to expand natural gas pipeline in East Africa

Jul 15, 2010  (Source: Scandanavian Oil and Gas Magazine

Orca Exploration Group Inc has reported the creation of EastCoast Transmission and Marketing as the new infrastructure division of the Company. Orca is currently in discussion with potential pipeline expansion partners and is keen to have a significant East Africa finance component as part of the infrastructure project.

EastCoast Transmission will initially focus on expanding the onshore natural gas pipeline system transporting Songo Songo gas to Dar es Salaam. This will require the twinning of the existing 207 kilometer pipeline from Somanga Funga, where the marine pipeline from the Songo Songo gas field connects to the mainland, to the pipeline’s current terminus at Dar es Salaam. Orca has undertaken some preliminary engineering studies for this section. Ultimately it is envisioned that the pipeline could be extended along the coast – north to Mombasa and south to Mtwara near the border with Mozambique near the Mnazi Bay gas discovery.

“The time is right to move on this expansion.” said David Lyons, Orca Exploration’s Chairman and CEO. “The markets for natural gas are opening up in East Africa and there is significant potential demand from the power sector. However infrastructure remains a bottleneck that urgently needs to be addressed. We are looking forward to working with partners to increase throughput and extend the pipeline network to reach new markets. This will benefit not just Orca but also others who can then develop their gas discoveries in Tanzania.”

There has been significant interest in recent months by the larger energy companies in drilling offshore Tanzania and Orca has already announced that it intends to drill its Songo Songo West prospect in 2011. With a history of 16 years working in Tanzania, Orca is in a unique position to lead this infrastructure development. The Company is well established and has positive working relationships with the Government of Tanzania, Tanzanian Petroleum Development Corporation (TDPC) and the energy regulator, EWURA.

Orca plans Tanzanian natural gas pipeline expansion

Jul 14, 2010 (Source: Oil and Gas Journal)

– Christopher E. Smith , OGJ Pipeline Editor

HOUSTON, July 14 — Orca Exploration Group announced July 13 the creation of EastCoast Transmission & Marketing as its new infrastructure division in Tanzania. ECTM will initially focus on expanding the onshore natural gas pipeline system transporting Songo Songo field gas to Dar es Salaam.

Expansion would involve twinning the existing 207-km pipeline from Somanga Funga, where the marine pipeline from the offshore Songo Songo gas field makes landfall, to its terminus at Dar es Salaam. Orca has undertaken preliminary engineering studies for the project and envisions future extension of the pipeline along the coast: north to Mombasa and south to Mtwara near the border with Mozambique and the 756 sq km Mnazi Bay gas discovery, operated by Maurel & Prom, Paris.

Orca cited the recent growth of gas markets in East Africa and potential demand from the electric power sector as driving the expansion project, describing midstream systems as the bottleneck to further development of the region’s gas resources.

Capacity of the current pipeline carrying Songo Songo gas to Dar es Salaam is 90 MMcfd. Pipeline owner Songas Ltd. plans to expand throughput to a peak of 140 MMcfd by January 2013. Orca’s planned expansion would be required shortly afterwards, the company said.

Orca intends to drill its Songo Songo West prospect in 2011, while ExxonMobil Exploration & Production Tanzania Ltd. agreed in March to take a 35% interest in deepwater Block 2 off Tanzania from operator Statoil Tanzania AS. A 3D seismic survey of the block was completed in February (OGJ Online, Mar. 31, 2010).

Maurel & Prom and Cove Energy PLC agreed to shoot 600 sq km of 3D seismic and drill two appraisal wells on the Mnazi Bay discovery in 2011 (OGJ Online, Sept. 18. 2009).

East Africa sees momentum for more oil and gas deals

Sunday, 20 June 2010 (Source: TB Petroleum)

Tanzania. Recent activity in East Africa could spur further interest for newcomers and existing oil operators to increase their position in the region, according to sector players and participants interviewed by mergermarket.

Alongside further farm-in agreements, M&A is also likely, with companies like Orca Exploration, Aminex,  Cove Energy, Dominion Petroleum and other Toronto, London and Australia-listed businesses seen as good acquisition targets. Some groups with an East African presence that could also be targets include Centric Energy and Lion Energy, a sector analyst said.

Cairn Energy, Premier Oil and Tullow Oil are rumored to be actively pursing acreage in the region at present, added a banker.

Sector majors and independents like BG Group, Statoil, ExxonMobil, Petronas, Anadarko, Africa Oil Corporation, Shell, ENI and Beach Energy (which itself could prove an attractive target) and several Asian oil companies could also look to increase their investments in the region, either acquisitively or through farm-ins, sector participants added.

Proven discoveries encourage new investments

East Africa is still seen to be a region significantly underdeveloped in oil and gas activities, compared to the Western part of the continent, an ex-Total sector executive acquainted with the region explained. However, the past “success stories” in the region are encouraging sector players to snap up assets and establish their positions, he added.

According to W. David Lyons, the chairman and chief executive of listed Orca Exploration, which has gas assets in Tanzania, the past 18 months have been especially active for regional investments.

Tullow Oil’s acquisition of Heritage Oil’s assets in partnership with CNOOC and Total in Uganda for some GBP 1.5bn (EUR 1.8bn) has become the price guideline for assets in the region, a UK-based sector analyst said. Also, successful drilling campaigns in the region, like the one by Anadarko in Mozambique, are encouraging investors to make further investments.

Anadarko this February announced the results of its first deepwater discovery offshore Mozambique, which industry sources said could be a multi-billion TCF discovery.

Anadarko’s discovery is understood to have attracted BG Group to make its first big move in the region. BG has farmed into the assets of Ophir Energy in Tanzania, which are based southeast from Anadarko’s Windjammer discovery. BG is planning its first exploration in the region towards the end of this year, its spokesperson told this news service.

Two other Tanzania-based players, Aminex and Orca Exploration, are also seen as attractive takeover targets in the short-to medium term. Again, both companies have neighboring assets.

Orca’s CEO told this news service the company is hoping to double its size on the back of a drilling campaign planned for summer of next year.

Orca Exploration, which says it is the only gas producing company in Tanzania so far (it has been present in the country for 15 years and in production for six years), currently has 1,236 Bcf in Proved and Probable (2P) Gas Initially in Place in the Sogo Sogo project, with remaining recoverable 2P reserves of 689 Bcf, according to the company’s website. The CEO said that every one out of two drilled wells in the region could be successful. The company is currently has a market cap of CAD 123.9m (EUR 95.4m). The analyst following said the company is undervalued at present, as the markets are not giving it credit for the exploration assets.

Orca could be a logical target for businesses seeking easy access to the region, a sector banker said. However, with the CEO holding more than a 25% stake, this would be a natural obstacle to any deal.

Aminex was also pointed out by two bankers as a potential target. UK and Irish-listed Aminex has a current market cap in the range of GBP 30.95m, with a share price of around 7.50p. Its brokerage’s equity house, however, said the company’s net asset value would be reflected in a 26p per share price.

In the next year, the company might need to look to raise funds for the development of its Ruvuma license in Tanzania, it was said. A farm-out agreement could be a logical option, it was added. The company could not be reached for an immediate comment.

“I think every single one of the majors that has already some acreage there [in East Africa] is looking for more opportunities to invest”, said the first banker.

Dominion Petroleum, with assets in Central and Eastern Africa, was rumored in the press to be a takeover target for one of the majors given its relatively low share price. The company’s current market cap stands at GBP 90.3m.

Cove Energy, with assets in Mozambique, was also mentioned as a takeover target by this news service in December last year. A banker close to the company said that “it is just a matter of time and money for this deal to happen,” claiming that as a junior, Cove could listen to good offers. The company has a GBP 199.8m market cap.