Member Info for Ufufuo

Believe me, I understand exactly where you are coming from Northern. Remember that under Magafuli we effectively lost 5 years as he directed a highly nationalistic approach to government. With Samia Hassan as President, we are in a much better place. Yes, we want the next drill, infrastructure and production from Ruvuma. We can be more confident than ever that this is all going to happen. The noises coming out of Tanzania are totally different now to back when Magafuli was in power. We needed that change in attitude for things to move ahead and for the JV partners to get favourable outcomes.

We are in a very different place now...

* Samia Hassan made many changes including appointment of a new Energy Minister. Her government is demonstrably pro foreign investment, and keen to see oil & gas projects progress quickly
* In Aug 2021, the Ruvuma PSA extension was awarded. In Nov 2021, a long-standing tax dispute with the Tax Revenue Authority (TRA) was settled
* Operational progress has resumed. The JV partners have just completed acquisition of the largest onshore 3D seismic programme in East Africa
* Aminex is fully funded for its share of ~$140m Ruvuma development costs and has more than sufficient funds to get to first gas and revenues
* After 5+ years of almost zero revenue, when Ruvuma starts production in early 2024, Aminex will receive very significant revenues.

The next 12 months look set to be pretty spectacular ;-)

It is true, the estimated resources are huge. Further confirmation on that has to be significant though. Currently estimates are based on old 2D seismic and analysis following NT1 and NT2. Any increase in estimates would be a nice bonus too.

I'm hopeful that we may see conclusion on the gas sales terms very soon. We know that those negotiations have been ongoing for at least 5 months now...

01 Sept 2022 RNS - " Negotiations on the gas sales agreement (“GSA”) between the Ruvuma partners and the Tanzania
Petroleum Development Corporation (“TPDC”) for the sale of gas from the Ntorya gas field to the
TPDC commenced recently in Tanzania and are currently ongoing."

01 Nov 2022 RNS - " Negotiations continue regarding the finalisation of gas terms and gas pricing."

We also know that the Tanzanian authorities should no longer be anything like as tied up with negotiations on the LNG facility...

On 26 Dec 2022, this article explained that the LNG agreement was all but sorted and it was mainly "consensus in some key definitions and the language to be used in the agreement, to avoid misunderstanding during the implementation stage" https://www.thecitizen.co.tz/tanzania/news/national/festive-season-only-reason-for-delay-in-lng-talks-says-makamba-4066974

With all that in mind, I've a feeling that agreement of our GSA won't be far away

Another recent article. Upbeat on the Tanzanian economy. Also, interesting references to Tanzania’s trade and inflows of foreign currency (ref recent WEN RNS)…

“The economy is moving on the right direction due to our policy approach aimed at attracting more Foreign Direct Investment, investment in mega infrastructure projects and measures to attract equity private financing,” he said.

He said the diversification of the economy has helped the country to continue bringing the much needed foreign currency into the economy, thus making the exchange rate stable.

For example, he said, the country’s sources of foreign currency are improving due to the gradual improvement of the tourism sector, ongoing efforts to boost agriculture productivity as well as the execution of the 30 billion US dollars mega Liquefied Natural Gas (LNG) project.

The Finance and Planning Deputy PS said also that the country is benefitting from the huge demand for rare earth metals in the global market thus continuing to increase the inflows of foreign currency.

He said Tanzania’s strategic location as the transport and logistics hub for most land-linked countries is giving a huge advantage to boosting its flow of foreign currency.

The PS said Tanzania’s trade with regional countries like Kenya, the Democratic Republic of Congo (DRC) and South Africa has continued to bolster the country’s foreign exchange earnings.

The World Bank (WB)…said the Tanzania GDP is projected to grow from 5.6 per cent this year to 6.1 per cent next year.

https://dailynews.co.tz/economy-on-track/

Another recent article related to Tanzania's ambitions as an Energy Hub. Also a call from the Tanzanian President for foreign investment into natural resources...

"According to the president of Tanzania, building regional power pools in East and Southern Africa can ensure energy security across the continent".

"Africa is rich in natural resources and has the potential to play a significant role in the global energy transition, according to Samia Suluhu Hassan, President of Tanzania. Speaking at the 53rd World Economic Forum Annual Meeting, Hassan called for greater private sector investment in Africa to tap into the continent's resources and promote sustainable energy solutions.

https://africa.businessinsider.com/local/markets/tanzanias-president-samia-suluhu-hassan-urges-world-to-look-to-africa-for-energy/ewemt37.amp

Article from yesterday. Tangible measures being taken to set-up Tanzania as regional 'Energy Hub'...

THE DECISION AIMS AT MAKING TANZANIA A PETROLEUM HUB IN EAST AND CENTRAL AFRICA as well as sustaining the country’s fuel demands for up to six months.

The Tanzania Association of Oil Marketing Companies (TAOMAC) executive director, Mr Raphael M***a, said THE PROJECT WILL IMPROVE the efficiency of OIL BUSINESS IN THE COUNTRY AS WELL AS TRANSIT TO NEIGHBOURING COUNTRIES.

“Estimation shows that we are losing up to 50 percent of the business to ports located in neighbouring countries due to excessive delay. The project whose MoU has been signed today (yesterday) will provide a solution to the problem,” he said.

https://www.thecitizen.co.tz/tanzania/news/national/-tanzania-uae-firm-sign-petroleum-facility-deal--4102018

As explained before…

Tanzania is in the process of establishing itself as an Energy Hub for the region. The Tanazanian Power System Master Plan explains that:

P.44 “Total installed capacity in the country is 1,602.32 MW which comprises of interconnected Grid System (1,565.72 MW) and isolated Grid System (36.60 MW). The National Grid System comprises of hydro and thermal generation units owned by TANESCO and IPP’s with total capacity of 1,565.72 MW (base year 2019) out of which hydro 573.70 MW (36.64%), natural gas 892.72 MW (57.02%), liquid fuel, 88.80 MW (5.67%) and biomass 10.50 MW (0.67%)”

On P.79 it goes on to explain that:

“In the period 2020 – 2044, Tanzania requires the total installed capacity of 20,200.6 MW. The Plan indicates power generation mix consisting of hydro (5,684 MW or 28.15%), natural gas (6,700 MW or 33.18%), coal (5,300 MW or 26.24%), wind (800 MW or 3.96%), solar (715 MW or 3.54%), geothermal (995 MW or 4.93%) and (0 MW or 0%) diesel/HFO by 2044”

So, Tanzania plans to dramatically increase it power production capability. Including from natural gas, hydro and other sources. Tanzania currently has a significant power deficit (hence the recent power rationing). Also, Tanzania is building interconnectors with other countries to allow it to export power across the region.

The above growth figures represent more than a 650% increase in natural gas derived power generation in the period.

On top of that, there are the planned pipelines for export of natural gas to Uganda, Kenya, Zambia and beyond. Also, strongly increasing domestic demand for natural gas use by industry, institutions, for transport and for use in homes.

With first gas/revenues planned for the start of 2024 and cash to get through to the end of 2024, there is no worry there either.

My pleasure Rojo. Yes, Ruvuma is classified as resources rather than reserves - until we have the 3D seismic, further drilling and the pipeline to Madimba. As you will know, we should then see the recoverable portion of that 9.587 TCF figure start to become reserves. The GIIP estimates are from ARA.

I've not looked at Culzean (for the benefit of others: a UK North Sea gas field) in any detail but a quick look on the web suggests Culzean reserves of 1.3 TCF to 1.5 TCF - so reserves, not resources (couldn't see a GIIP figure but didn't spend much time on it). Let's call it 1.4.

So, to answer your question, if at least 14.6% of the Ruvuma resources figure translates into reserves, Ruvuma is bigger. On that basis, it seems likely that Ruvuma will prove to be considerably larger.

As you suggest a UK North Sea gas field for comparison, it may be of interest to look at Ruvuma compared to the UK as a whole. So, according to the Oil & Gas Journal, UK total proven reserves were 4.6 TCF as at Jan 2022. So, again, reserves not resources but it gives an idea of the size of the Ruvuma asset!

For comparisons nearer to 'home':
* Ruvuma (Aminex 25% interest) - 9.587 TCF Gross Unrisked Mean GIIP
* Orca (92.07% interest but significant proportion of production on 'no profit' basis) - 0.611 TCF Gross Unrisked
* Wentworth (31.95% interest - being acquired) - 0.423 TCF Gross 2P reserves

Assets at different stages of development - hence the different classifications - but it is clear that Ruvuma is estimated to be a truly very significant asset.

Am not sure many people truly appreciate the size of the asset. It is huge.

Yes RogerJolly, they were actually very explicit about the possibility of oil / liquids:

FEB 2017 – FROM Ntorya-2 Well Drilling Result RNS: “Ntorya-2 also encountered traces of oil in the gross reservoir interval and the company is now evaluating the implications of this positive development through an updated basin model”

JUNE 2017 - then Aminex Ceo, Jay Bhattacherjee: “Ntorya-3 [Chikumbi-1]…we want to make sure we maximise as many targets as we possibly can. We are working on a basin model and evaluation some of the deeper targets for liquids”.

Conclusion - they ARE looking for oil / liquids in the deeper target in Chikumbi 1

Article from today. This is good news for Aminex and partners...

https://allafrica.com/stories/202301120149.html

“FINANCE AND PLANNING MINISTER MWIGULU NCHEMBA HAS REITERATED THE COMMITMENT BY THE GOVERNMENT TO PUT IN PLACE CONDUCTIVE TAX ADMINISTRATION POLICIES”

“There is a very close link between FAVOURABLE TAX POLICIES on one hand and growth of businesses and development of the country on the other," he told the delegates at the meeting, which drew participants from across the business community in the country”

“He added; "President Samia Suluhu Hassan has on several occasions directed us to continue improving our tax policies by incorporating views from stakeholders through these tax dialogues”

“The Deputy PS said the government focuses on strategic sectors which will attract Foreign Direct Investments (FDIs) such as NATURAL GAS, coal and gold.”

blackgold...looks like that Mr Santos knows his onions! :-)

RogerJolly, absolutely right. Not tomention, they have two commercially viable wells already at Ntorya.

Rojo, you asked "who described Ruvuma as a 'world class giant''"

The Ruvuma PSA is estimated to hold resources of 9.587 TCF (Gross Unrisked Mean GIIP). According to Encyclopaedia Britannica, gas fields of 3 to 30 TCF are classified as “World-Class Giants”

Hope that helps

What impact will any additional renewables generation have on Aminex? None at all!

The Tanzanian Power System Master Plan (2020 update) states that the National Grid System used 892.72 MW of natural gas fired capacity and that, in the period 2020 – 2044, that will grow to 6,700 MW. An increase of 5,807 MW or just over 650% in the next 21 years!

This is partly explained by the fact that, as stated in the latest TANESCO Corporate Strategic Plan: "The Plan provides export capacity of 1,500 MW, however due to limitation of transmission capacity in the short term only 1,000 MW may be traded within EAC and SADC regions from 2023 and the remaining 500 MW may be traded from 2025. The country’s available surplus power capacity and its cross border infrastructure enables power trading within EAC and SADC regions and thus will enable Tanzania to be the power hub in the SAPP and EAPP" (p.139)

The plan also states (p.140) “The Government to continue investing in the exploration and development of hydrocarbons to increase more discoveries. Further, investment in processing and transportation infrastructure is required to satisfy projected high demand of natural gas for power generation. Extension of the natural gas pipeline network from Dar es Salaam to other regions including Dodoma and Pwani (Bagamoyo) to be fast-tracked to allow its use for the proposed gas-fired power plants”.

Then we have this recent article: https://www.oilnewskenya.com/tanzania-kinyerezi-1-expansion-drives-gas-demand-despite-record-production/

The article confirms that:
1. The Kinyerezi I extension is putting massive strain on gas supplies
2. Kinyerezi III (600MW) is to commence operations this year

It specifically states “with drilling expected thereafter at the yet-to-be-commercialized Ntorya field in an effort to bridge the current gas deficit from oncoming projects.”

Also this article from earlier this month: https://www.thecitizen.co.tz/tanzania/news/national/former-nssf-head-opens-up-on-project-portfolio-4077480

The article mentions that:
1. A proposed power station in Mkuranga District that is expected to generate 1,000MW of electricity from natural gas
2. NSSF acquired 100 acres of land in Mkuranga District, Coast Region, worth Sh100 million for implementation of the 1,000MW power project.

The article states that “We are currently in discussions with Tanesco (Tanzania Electric Supply Company) on the possibility of implementing the 1,000MW Mkuranga project, with the next round of talks scheduled to take place later this month”

That’s not to mention increasing demand for gas for industry, institutions, transport and use in homes. Also the planned export via pipelines to Uganda, Kenya, Zambia and beyond.

There demand for gas is looking incredibly good. There's so much more data out there that makes this very clear. Happy to provide.

Hope that helps.

It’s worth a reminder of how things have shifted gear with Aminex since Samia Hassan became President of Tanzania in March 2021. After a few very difficult years under the previous President, the change in progress and news flow has been very pleasing to see…

2021

JUN – Tendering for Ruvuma 3D acquisition completed. Awaiting approval from Tanzanian authorities

AUG – Extension of Ruvuma Licence

SEPT – Award of Ruvuma 3D seismic acquisition contract

OCT – Long-standing dispute regarding Kiliwani receivables settled with Tanzanian authorities

OCT – Confirmation Ruvuma 3D seismic team mobilised

NOV – Kiliwani receivables paid

2022

FEB – Ruvuma seismic camp constructed

FEB – Confirmation that CH1 contracting being undertaken

APR – Confirmation that all CH1 long lead items contracted

APR – Agreement with PAET for 3D seismic over 40%+ of ‘critical area’ of Kiliwani at no cost to Aminex

Aug – First batch of 3Dseismic data for Ntorya available

AUG – Contract for PAET 3D seismic over Kiliwani awarded

SEPT – Confirmation that ½ of seismic over Ntorya area completed

SEPT – Confirmation that negotiations for the Gas Sales Agreement (GSA) have commenced

NOV – Confirmation that all 3D seismic for Ntorya was completed on 09th Oct

NOV – CH1 delayed to Mar '23 pending negotiations with Tanzanian authorities but target for first gas brought forward by nearly 1 year to early 2024

NOV – Details of Early Production System confirmed - including planned workover of NT1. Plus confirmation that EPS production to be AT LEAST 60 mmscfd

NOV – Addendum to Ruvuma PSA signed. Covering fiscal terms (profit share, royalty, and taxations rates) for the production of gas

Beautiful to see. Don’t believe those that try to tell you that nothing has changed. That’s more progress than in the previous 3 years combined.

...and the news flow for the weeks, months and year ahead will be even better imho

Hi harnose, simple really..

After the highs of the last drill in early 2017, Aminex had a torrid spell:
* Nov 2015, John Magafuli sworn in as Tanzanian President – heralding the start of an extremely nationalistic period of government. They made changes to Production Sharing Agreements making them much less favourable for investors
* After Aminex drilled Ntorya 2 in early 2017, all upstream appraisal & development projects in country ground to a halt
* Also in 2017, Aminex lost its only producing well (Kiliwani North) - due to pressure issues, then the government not approving work to remediate
* Aminex and the Omanis proposed the farmout in July 2018. By 30 Sept 2020, around 10 deadlines for government approval of the deal had passed. The Omanis gave one last deadline and threatened to walk away
* The end of Aminex was looking a real possibility. Money running out, no income, no plan, and a hostile regime blocking progress
* The farmout finally completed in Oct 2020 but then no further progress as the JV partners awaited licence & other approvals
* In this period, the share price slid from ~7.5p to less than 0.5p

Magafuli died on 17 Mar 2021. Samia Hassan was sworn in as the new President. A new era had begun:
* Samia Hassan made many changes including appointment of a new Energy Minister. Her government is demonstrably pro foreign investment, and keen to see oil & gas projects progress quickly
* In Aug 2021, the Ruvuma PSA extension was awarded. In Nov 2021, a long-standing tax dispute with the Tax Revenue Authority (TRA) was settled
* Operational progress has resumed. The JV partners have just completed acquisition of largest onshore 3D seismic programme in East Africa

The change in fortunes is dramatic. The share price has started to respond but with things really moving now, CH1 in March and lots of news flow throughout the next 12 months until the start of very significant revenues, the market will properly catch on and it will build on recent rises IMHO

"THE Independent Power Tanzania Limited (IPTL) contemplates selling its fuel-powered 100-megawatt plant which has been idle for the past six years at Tegeta, in Dar es Salaam"

"IPTL’s Director James Yara said the company would be ready to sell the plant if the government considers buying it to generate power during emergencies, especially to address current reduced hydropower production as a result of lowering water levels in Kidatu, Kihansi, Pangani and Hale dams"

"Elaborating, he noted that there is also the possibility of transforming the power generator from using fuel to natural gas, should the buyer wish to reduce operating costs"

"during a telephone interview on Thursday last week, Eng Mramba told the Daily News that if the owners decide to change the plant into using the natural gas for producing electricity, the government’s doors are opened for discussion before considering partnership."

https://dailynews.co.tz/iptl-mulls-selling-its-power-plant/?utm_source=rss&utm_medium=rss&utm_campaign=iptl-mulls-selling-its-power-plant

Hi edgar,

Precisely, the asset is a monster! 9.587 TCF gross unrisked mean GIIP according to current estimates (Aminex 25% interest) - including Jurassic. Resources not reserves but, as you say, work underway to change that.

Over 22 times bigger than 0.423 TCF of gross reserves at Mnazi Bay (WEN 31.94% interest)

10.5 times bigger than the unrisked reserves and prospective resources for Orca (92.07% interest but significant amount of production on ‘no profit’ basis)

It’s not that those competitor resources are diddlers, it’s more that Ruvuma is truly exceptional.

Hi HighYield, thanks for the response and apologies for the delay in getting back to you. Very busy at the moment. Yes, I agree regarding the Aminex 25% share. I didn’t state otherwise but it is good to clarify.

You mention that the reported reserves are only those recoverable in the licence period to Oct 2026. That is true for the risked reserves figure I mentioned of 158 BCF.

You suggest that “Most likely there are more gas to produced if the license is extended”. Yes, that potential is represented in the unrisked figure - which is still only 297 BCF - the resources report makes clear that this figure includes “resources associated with the Songo Songo Main (“SSM”) pool and the Songo Songo North (“SSN”) pools NOT recovered prior to the current Songo Songo PSA expiry in October 2026”

The 611 BCF prospective resources figure I mentioned was unrisked and so not factored according to time remaining on the licence.

So, all in, still only 0.91 TCF of unrisked reserves and prospective resources for Orca and Orca’s economic interest in that is smaller still. At 2.4 TCF, Aminex’s 25% share of Ruvuma estimated resources is considerably larger.

You mention that you believe 3D seismics are not in Orca current liabilities (those which must be paid within 12 months). The report says: “At the date of this report, the Company’s only significant outstanding contractual commitment is in relation to the 3D seismic acquisition program”…”As of September 30, 2022, $1.6 million of the seismic contracts has been paid, the remaining capital expenditures of $21.1 million is forecasted to be paid by Q2 2023”

As such, those costs are due withing 12 months of report (period ended 30 Sept 2022) and therefore must be part of the $71.65m current liabilities.

My original post was in response to prosciutto’s suggestion that Aminex’s fundamentals are “absolutely atrocious” and highlighting (incorrect) cash in bank and (incorrect) production figures for Orca. Prosciutto’s post also did not mention Orca’s actual share of revenues from that production, high costs, etc.

So, overall, I still maintain that…

Orca has a complex business model, producing a significant proportion of its gas on a ‘no profit’ basis. Its cash position doesn’t look great considering current liabilities. Its estimated reserves & resources are considerably smaller than Ruvuma (even just Aminex’s 25% share). Plus the other issues I mentioned previously.

Aminex is fully carried for its share of the ~$140m Ruvuma development costs. They have more than enough cash in bank to get to significant first revenues. They have no debt. A 2.4 TCF share of Ruvuma’s estimated resources (I agree with your point about potential for TPDC to back in). No ‘no profit’ production to dilute profit from that share. Not so bad after all. I know you are not suggesting otherwise by the way, and it is good to chew the fat on competitors and relative health and prospects.

All the best

prosciutto, Orca is not producing 150 to 155 MMcfd. According to their Q3 interim filings published on 15 Nov 2022, GROSS production is approximately 135 to 140 MMcfd. The figure you are quoting is their total capacity...and that’s after the $43.4m they just spent on a compression project and $31.6m on work over of 3 wells…no free carry for Orca ?

You touch on the fact that this includes ‘protected’ gas. That is crucially important! For those that don’t know, their Songo Songo PSA divides the gas produced into:
1. Protected gas – produced by Orca on a ‘no loss, no gain’ basis on behalf of TPDC. So they make no profit on that gas
2. ‘Additional gas’ – produced by Orca and with profits shared with TPDC. Orca’s share of profits for this gas is between 25% and 55% of net revenues (depending on certain criteria).

So, during the period, average ‘additional gas’ was actually 83.9 MMcfd. The average for the ‘protected gas’ for which they get NO PROFIT was 36.6 MMcfd.

As mentioned above, Orca will see a 25% to 55% share of profit on the 83.9 MMcfd. What a complex and stingy set-up!

The latest report detailed cash equivalents of $93.1 million. Not “ $95 - $100 million in cash” you mention. You do not mention the $50m long-term loan (at 10% interest) or liabilities due within 12 months of $61.5m (excluding the loan). Part of that is the $22.7m they are about to spend on 3D seismics…no free carry for Orca ?

They need to do that seismic though, because their proven and probable reserves are a paltry 158.1 BCF (and only a 115.6 net economic interest in that due to those PSA terms). That won’t last long.

The 3D seismic is hunting for prospective resources of only 611 BCF unrisked (106 BCF risked). ARA’s unrisked resource estimate for Ruvuma is nearly 16 times bigger than that at 9.587 TCF.

There are other uncertainties for Orca such as their license runs out in 2026, they appear to have $45m in disputed tax across 12 different assessments and ongoing dispute with the Fair Competition Commission regarding the takeover of Swala (with a fine of nearly $3m).

All that complexity, low profit share, debt, high costs, small asset base…and they still manage a MCAP of just over $200m.

With a free carry for $140m of development costs, no debt, more than enough cash to get to first revenues in just over 12 months, initial production of “at least” 60MMcfd and full field at approximately 160 MMcfd and much, much larger estimated resources, Aminex is looking very attractive from here IMHO.

Hope that helps.

“Energy Minister January Makamba has concluded a preliminary agreement with Equinor vice-president Nina Koch as the latter visited the Liquified Natural Gas LNG) designated site in Linde after the talks were concluded in Dar es Salaam at midweek”

Yet more evidence that it is 'all systems go' for oil and gas projects in Tanzania. They are moving ahead with agreements and approvals at pace now.

https://www.ippmedia.com/en/news/govt-equinor-drafting-lng-project-final-pact

"Highly unlikely". We are in agreement.