Orca Energy Files $1.2 Billion Claim Against Tanzania Over Alleged Gas Agreement Breaches

Orca Energy Group Inc. (TSX-V: ORC.A, ORC.B), a player in Tanzania’s natural gas sector, has initiated legal proceedings against the Government of Tanzania and the Tanzania Petroleum Development Corporation (TPDC).

The claims, exceeding $1.2 billion, stem from alleged breaches of investment agreements and contracts related to the Songo Songo gas field.

Orca’s subsidiaries, PanAfrican Energy Tanzania (PAET) and Pan African Energy Corporation (Mauritius) (PAEM) have accused the Tanzanian government of violating the Bilateral Investment Treaty (BIT) with Mauritius where PAEM is registered.

Additionally, Orca contends that the Government and TPDC have breached the Production Sharing Agreement (PSA) and the Gas Agreement (GA), which govern the operations of the Songo Songo Field.

In its press release, Orca explains that it has invested over $311 million in Tanzania and contributed significantly to its economy since the start of its operations in the country in 2001 and that PAET’s request for an extension of the Songo Songo Development License, which expires in 2026, has been ignored by TPDC, sparking the current dispute.

The conflict intensified following the termination of the Protected Gas (PG) agreement on July 31, 2024. Orca asserts that TPDC’s insistence on continuing PG production beyond this date is baseless. Moreover, TPDC has rejected Orca’s commercial terms for the sale of Additional Gas (AG), further escalating tensions.

Orca has warned that the government’s actions could lead to the expropriation of its rights in the Songo Songo Field and it will pursue all legal avenues to resolve the dispute, including potential arbitration, if negotiations fail.

At the time of writing this news, there has been no public response from the Tanzanian government.

The Songo Songo Project

The Songo Songo project was Tanzania’s first natural gas development and East Africa’s first gas-to-power project. The blocks are located in shallow water 15 km off the coast of Songo Songo island and 200 km south of Dar es Salaam.

Orca operates a license for a total area of approximately 170 km2, which contains the large Songo Songo gas field. The gas in the reservoir is categorized as either Protected Gas or Additional Gas.

Protected Gas is owned by Tanzania Petroleum Development Corporation (TPDC) and sold under a 20-year gas agreement to Songas. This company owns the infrastructure that transports the natural gas from the Songo Songo field to Dar es Salaam where it is utilized for its gas turbines at Ubungo to supply power and industrial customers.

Additional Gas is the gas in the Discovery Blocks that is in excess of Protected Gas. Orca is entitled to produce and sell all Additional Gas until October 2026.