London-listed Aminex’s subsidiary, Ndovu Resources, has signed a farm-out agreement with Oman-based Zubair Corp. on Tanzania's Ruvuma production-sharing agreement (PSA). Zubair will receive a 50% share in the licence, for which it will pay US$3 million on closing and another US$2 million six months later.
Zubair is expected to assign its stake in the block to ARA Petroleum Tanzania, an affiliate of Dubai-based Eclipse Investments, which is also part of the Zubair group. ARA will also become the operator. Eclipse is Aminex’s largest shareholder, with 29.9% of its equity.
More significantly for Aminex than the cash payment, though, will be that Zubair has committed to covering its costs, up to US$35 million. Aminex will keep a 25% stake in Ruvuma. Based on the total 75% held by the two companies, this implies a spend of US$105 million.
The farm-out by Aminex, which comes at a time when the company's chairman Brian Hall has announced his stepping down from the board after 27 years, is intended to speed the development of the Ntorya project. The plan should see minimum production reaching 40 mmcf (1.13 mcm) per day and be self-funded through a full field development project, the company said. Ntorya holds 1.9 tcf (53.8 bcm) of gas gross.
In the short term, ARA will drill, complete and test Chikumbi-1, acquire, process and interpret 3D seismic over a minimum of 200 square km within Ntorya and develop an early production system to reach first gas.
Should ARA reach the target 1.13 mcm per day before spending US$35 million on Aminex’s carry, the new operator will provide one quarter of its profit gas to pay off the amount.
“With the Ntorya project carried to a minimum level of production it is now expected that the company will be self-funded for further development,” said Aminex’s CEO, Jay Bhattacherjee. The company continues to work on its Kiliwani and Nyuni finds, while also reviewing other opportunities, he said.
Aminex’s partner, Solo Oil, welcomed the deal for Ntorya and raised the possibility that it too might seek some changes at the licence.
“We believe Aminex's proposed farm-out represents a significant validation of the commercial and technical viability of the Ntorya gas development and allows us to consider our options with regard to possible pre-emption, project funding or the sale of our interest in the project. Whichever route we take, we see this as a positive development that proves we have a material stake in an asset with an implied value in excess of our current market capitalisation,” Solo’s executive chairman, Neil Ritson, said.
Solo does not have the cash to participate in the planned development so needs to bring in another partner, either for a pre-emption, which seems unlikely, or a small farm-out of its own.
The deal requires approval from shareholders and the Tanzanian government. The farm-out is expected to be completed by the end of November. This is likely to prove an interesting test of the Tanzanian government. Some recent deals have been delayed, such as the Orca Exploration and Swala Oil & Gas transaction, and the government is taking an increasingly tough line on foreign business.
A development plan for Ntorya was submitted to the government in September 2017. Aminex’s statement at the time said there were a number of potential options, including CNG, gas-to-power and a 35 km link the Madimba plant, in the country’s southeast. The plan called for a staged development, with an early production system based on existing wells, followed by the option of further development wells, based on demand.
In September last year, the company said it expected to spud the Ntorya-3 well in the fourth quarter. In April, Aminex said this had been renamed Chikumbi-1, at the government’s request, and expected to drill the well later in the year. The well is testing the same reservoir from the first two wells, plus a deeper target. Total depth will be about 3,400 metres.