[Tanzania] Orca Exploration, Swala discuss minority share acquisition
Orca Exploration Group is in discussions with Swala Oil & Gas in Tanzania on a possible minority investment in PAE PanAfrican Energy Corporation, a Mauritius-registered company that is a wholly-owned subsidiary of the Company.
There are no assurances that these discussions will lead to a definitive agreement and any such agreement is expected to be subject to Swala securing necessary financing as well as a number of other conditions.
There are no assurances that such conditions will be satisfied. Any investment by Swala, if concluded, is not expected to affect the management or operation of the Company’s operating subsidiary, PanAfrican Energy Tanzania Limited ("PAET") (which will continue to be a wholly-owned subsidiary of PAEM), and the many benefits accruing to Tanzania from the Orca Group's involvement in the Songo Songo Project.
Orca Chairman and Chief Executive Officer, W. David Lyons commented, “We would welcome Swala’s minority participation in the Orca Group. Orca has for some time sought the right partner for a minority stake in the Orca Group and we welcome Swala’s ability to attract and engage Tanzanian investors. Such an investment is strategic to Orca in underpinning the intrinsic value of our business and providing a platform from which to grow and diversify our company.”
The first gas-to-power project in Sub-Saharan Africa, the Songo Songo Project was initiated by the Government of Tanzania, with the technical and financial support of the World Bank and private sector investors, including the predecessor to Orca. During the period July 2004 – December 2016 the Company estimates that the total economic rent in direct cash payments made to the Government as a result of producing Songo Songo natural gas were US$408 million (or 78%), with PAET earning US$113 million (or 22%), all while enabling the IPP, Songas, to generate power for the state utility, TANESCO, at US$0.05/kWh being the lowest cost thermal generated power in Tanzania.
Beyond the direct cash payments to the Government of Tanzania, the Songo Songo Project has had a significant positive impact on Tanzania’s economy. It has helped to increase energy supply security by reducing the national grid’s dependence on hydropower and importantly has also reduced the use of imported liquid fuel for power generation and process heat production in major industries.
From September 2004 to December 2016, the Company estimates that Tanzania has saved over US$5 billion (over TZS 11 trillion at current exchange rates) by substituting Songo Songo natural gas for liquid fuels.