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Tanzania Petroleum Development Corporation Signs Gas Sales Agreement For Delivery From Kiliwani North Offshore Field

kiliwani gas Tanzania

The Tanzania Petroleum Development Corporation (TPDC) has recently signed a Gas Sales Agreement (GSA) for delivery of natural gas from Kiliwani North (KN-1) gas field off the coast of Tanzania to Songo Songo Processing Plant in the country’s coastal region, moving the gas field into its much anticipated production phase.

The GSA is a “take or pay” type agreement that provides a payment security mechanism to Kiliwani North, a joint-venture between Ndovu Resources Ltd (Aminex) 55.575% (operator), RAK Gas LLC 23.75%, Bounty Oil & Gas NL 9.5%, Solo Oil plc 6.175% and TPDC 5%.

Under the GSA, each year the TPDC is required to buy, take delivery or prepay a determined volume of gas, however, if the TPDC does not require to take delivery of the volume pre-determined, it is obligated to pay a rate equivalent to 85% of the daily minimum volume of 20 million of standard cubic feet (mmscf).

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Testing and commissioning to Songo Songo processing plant are currently on course at different rates of delivery with the total volumes of natural gas used at the end of each month to be invoiced to TPDC at a price of USD 3.00 mcf.

The price will be adjusted annually by applying an agreed United States Consumer Price Index. The gas price is not linked to any commodity price so is unaffected by current commodity market conditions.

To secure the payment, TPDC will be required to pay an estimated of one-month revenue in advance that will be supported by a letter of credit issued by TIB Development Bank, previously known as Tanzania Investment Bank.

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Aminex Chief Executive, Jay Bhattacherjee, commented: “Aminex has operated in Tanzania for over 13 years, always working closely with the Tanzanian authorities, and the Kiliwani North Gas Sales Agreement represents a major milestone as the Company’s first commercial production in Tanzania.

Bounty Oil & Gas anticipates it will receive in 2016 gross annual revenue of around A$ 3 million from this project.

Aminex has been advised by TPDC to prepare the Kiliwani North 1 well for production starting mid-February 2016.

Kiliwani North counts with proved reserves of 45 billion cubic feet (bcf) however Bounty estimates that the area has prospect resources of as much as 3.8 trillion cubic feet (tcf).

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