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LONDON (Alliance News) - Aminex PLC on Wednesday said it has achieved first gas production from the Kiliwani North project in Tanzania only days after fellow AIM-listed oil and gas firm Solo Oil PLC increased its stake in the project, sending shares in both companies higher.
Aminex shares were trading up 15% to 1.41 pence per share whilst Solo shares were up 24% to 0.359 pence per share on Wednesday afternoon.
Aminex said initial production from the Kiliwani North-1 well started this week and is expected to build to 25 million to 30 million cubic feet of gas per day over the next 90 to 100 days.
That level of gas production is equal to 4,000 to 5,000 barrels of oil a day.
"This is a significant moment for Aminex, its shareholders and Tanzania, and is the culmination of a tremendous amount of hard work by all involved. First gas at Kiliwani North marks the transition of the company from developer to producer in Africa and sets us on the path for growth as we begin to generate cash," said Aminex Chief Executive Jay Bhattacherjee
Aminex is the operator of the licence, and its stake is set to fall to 51.75% from 55.575% previously due to the partial disposal of a stake to Solo Oil. A sale and purchase agreement was signed on Monday which will take Solo's share in the licence up to 10% from its current 6.175% stake.
"Solo is delighted to see its investment in the Kiliwani North project move into production. This is a truly transformational step for the company. Resulting revenues will initially be reinvested in growing our reserves base in Tanzania, a country which has new national gas infrastructure and huge prospects for growth in the local gas market," said Solo Chairman Neil Ritson.
The project is deriving its first gas from the KN-1 well, which will deliver gas to the newly-built Songo Songo processing plant that is tied into the main national pipeline infrastructure to allow it to be fed into the local Tanzanian market.
The project already has a gas sales agreement in place, securing a gas price of USD3.0 per million British thermal units, which is equal to around USD3.07 per million standard cubic feet of gas. That price will be adjusted annually.
Importantly, the price will be adjusted by applying an agreed United States Consumer Price Index and the price is not linked to any commodity price, meaning it would not be affected by further deterioration in oil and gas prices in the future.
Another important aspect of the gas sales agreement is that the project partners are only responsible for delivering gas to the wellhead, meaning they are not responsible for transporting it through the pipeline system nor are they responsible for the transportation and processing fees.
The other partners on the project apart from Aminex and Solo are RAK Gas LLC, Bounty Oil & Gas NL and the state-owned Tanzania Petroleum Development Corp.
Both Aminex and Solo expect to book reserves from Kiliwani later on this year.
The gross mean gas initially in place in the licence was declared at 44.0 billion cubic feet of gas, of which the partners expect 28.0 billion cubic feet to be reclassified and proven up once commercial production begins.
By Sam Unsted; samunsted@alliancenews.com; @SamUAtAlliance. Updated by Joshua Warner; joshuawarner@alliancenews.com; @JoshAlliance
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