30 April 2012 – The Orca exploration group has agreed with the government of Tanzania to increase deliverability from the Songo Songo field to 200 million cubic feet a day (MMcfd) in parallel with its investment in gas processing and pipeline infrastructure.

During 2011, the company had signed a rerating agreement with Songas and the electricity utility Tanesco that enabled the gas processing capacity to be increased from 90 MMcfd to 110 MMcfd.  As a consequence, the overall infrastructure capacity increased to 102 MMcfd (limited by the pipeline diameter). The gas supplier has also signed a portfolio gas sales agreement with Tanesco for the supply of a maximum of 37 MMcfd through to about 2023.

At the moment gas processing and pipeline capacity remains a restriction in Tanzania. To deal with this the government of Tanzania announced in September 2011 that it was in the final stages of negotiating a 20 year term financing arrangement with the Chinese Exim Bank for the construction of a new gas processing plant on Songo Songo island and an oversized onshore pipeline to accommodate future growth in gas production. It is this that is expected to initially increase the Songo Songo infrastructure capacity to 200 MMcfd. Subsequent incremental investments in gas processing capacity and the construction of a new offshore pipeline to Songo Songo could increase gas deliverability. The target for project completion is currently the end of 2013.

Since June 2011, 217 MW of new gas fired generation has been commissioned in Tanzania, which increased the amount of gas fired generation in the country that is dependent on gas from Orca to 406 MW. The new gas fired generation capacity comes from the recommissioning of the Symbion 112 MW plant and the recent start up of a 105 MW Jacobsen plant. At maximum capacity the power sector can utilise 90 MMcfd of additional gas.

Last year also represented the 10th anniversary of Orca’s role in bringing the Songo Songo gas field, regarded as the most prolific gas basin in East Africa, into production. It is the operator of Tanzania’s first natural gas development and the largest supplier of natural gas to help alleviate Tanzania’s urgent power needs. Orca has invested US$130 million in its current Songo Songo exploration and development programme.

Orca reports that it has an excellent gas reservoir in the Songo Songo field that continues to perform above expectations. As at 31st December 2011, the independent reserve evaluator McDaniel and Associates assessed the additional gas gross proven (1P) and proven and probable (2P) Songo Songo reserves available to Orca to the end of the licence period as 469 billion cubic feet (Bcf) and 548 Bcf respectively. This is compared with 369 Bcf and 451 Bcf respectively in 2010.  These significant increases were recorded despite additional gas production of 17.5 Bcf during the 2011.

The company’s sales of additional gas to the power sector increased by 34% during 2011 to 40.3 MMcfd (2010 was 30.0 MMcfd), mainly as a result of the increase in the capacity of the gas infrastructure that enabled latent power demand to be met.

During 2011 Orca maintained service to existing customers but did not expand industrial sales.  The priority was to ensure that gas was available to meet power sector needs at a time of crippling electricity shortages. This will continue until the gas infrastructure capacity is increased.

When new allocations of additional gas can be made available for market expansion there is a significant untapped market to be developed. A number of the existing customers wish to establish a reliable electricity supply through the development of their own small scale generation capacity. There are also a number of other industries and hotels that are anxious to sign gas purchase contracts. The company will be ready to expand the low pressure pipeline system and the capacity of the compressed natural gas (CNG) infrastructure to meet this demand when it can deliver more gas to Dar es Salaam.

In addition, Orca is assessing the economic and logistical viability of using a small scale liquid natural gas (LNG) plant to provide gas to the mines around Lake Victoria. These are high margin opportunities that are particularly attractive.