By Stewart Dalby
Solo Oil has been in the headlines recently because of its news that it is a partner in a really major oil discovery onshore southern England. But Solo is also involved in another important, if not so dramatic project.
It is possible that Aminex and Solo Oil have reached the point where they can finally, really finally put a date on when they might achieve first production from another flagship scheme– the Kiliwani North gas development in Tanzania. It would appear that they have reached this point, although the date is an approximate one.
We wrote earlier this year that shareholders have had to show great patience over this scheme which is one of two projects in Tanzania in which the Aim-listed Solo and the main-board listed Aminex share an involvement. For the past two years press releases about Kiliwani North have been peppered with the words “shortly” or “soon”.
Latterly investors have been told there have been hesitations about three aspects of the project. First, the key gas sales contract which has been on the cusp of being signed for the best part of a year, had to receive final approval from the Tanzanian authorities. Second, the gas pipeline linking the KN-1 well to markets had not been completed. And, third the important farm out from Aminex to Solo Oil had to go through.
Solo said last month that formal approval had been received from the Tanzanian authorities for the company to acquire up to a 13 per cent interest in Kilwani from Aminex. There remained no further conditions precedent to the previously announced acquisition of a 6.5 per cent interest in the KNDL for US$3.5 million and the transaction had been completed. Solo also retains the right to purchase an additional 6.5 per cent in the KNDL on the same terms up to 30 days after the signing of the Gas Sales Agreement.
Once this deal is done the Kiliwani North equity split will be: Aminex with 52 per cent, RAK Gas with 25 per cent, Solo with 13 per cent and Bounty Oil with 10 per cent.
Recently, Solo announced that it had been informed by operator Aminex that the Tanzanian Petroleum Development Corporation (TPDC) has formally reported that the regional pipeline connecting Dar es Salaam to Mnazi Bay is now complete and that hydrostatic pressure testing will begin shortly. The construction of the procession plant on Songo Songo Island is reported by TPDC as approximately 95 per cent complete and it is expected that commercial production of gas from Kiliwani North will start late in the first half 2015 with stabilised production rates achieved during the third quarter 2015.
Neil Ritson, Solo’s Chairman commented: “The project remains on track for first commercial gas sales in the mid-year and once the gas sales agreement comes into force we will consider our option to double our interest in the project from 6.5 per cent to 13 per cent”.
Once Kiliwani North is onstream the 45 BCF field will pump around 20 million cf/d, after being processed at Songo Songo into the main Dar es Salaam to Mnazi Bay export pipeline, putting Aminex on track for much needed production and revenues in the coming months to strengthen the balance sheet. This is an important deal for the financially hard pressed Aminex as it provides a US$7 million cash sum to pay down debt and help it develop other projects (see below).
Aminex’s CEO Jay Bhattacherjee said, “ We look forward to first commercial gas production from the field which will place the company in the position of being the first new Tanzanian gas producer in recent times.”
It’s also good news for Solo Oil, giving it a stake in a near-term production project in one of its core areas – it already partners Aminex on the Ruvuma PSA in Tanzania, home to the 2012 Ntorya discovery. For Solo, however, the deal is less binary as it’s portfolio is more diversified, as the news of Horse Hill in the Surrey West Sussex border has shown.
Both Aminex and Solo like other small cap oil and companies had been afflicted by the malaise that have laid the sector low. But Aminex at 1.82p is well above its 52 week low of 0.65p. Solo received a major boost from the Horse Hill announcement rising to 0.62p and is now well north of its 12 month low of 0.15p, though down on its 12 month high of 1.09p.