Aminex's Wait for Tanzania Approvals Continues

February 26, 2020

Uncertainty and unpredictability continue to grip Tanzania's offshore sector as the government keeps international oil and gas exploration and production firms guessing on the outcome of their applications for approval to progress their previously approved projects.

In its latest shareholder update, London-listed, Africa-focused oil and gas company Aminex Plc said delays in the government response to its request for a modification of one of its work programs and also approval for an extension of a permit offshore Tanzania meant the company could not proceed with planned development of its assets in the East African country.

Aminex had applied to Tanzania authorities for permission to modify its work program in the offshore Nyuni permit as the company opted to focus on "exploiting near-term cash-flow opportunities" which include areas surrounding Songo Songo Island located close to the Kiliwani North Development Licence and which can be tied back to the gas plant in a  cost-effective manner.

The work program modification involved changing from a deep-water 3D seismic acquisition program to a program designed "to cover those areas in more proximal shallower water."

Aminex said the change "will allow for a combined Kiliwani and Nyuni 3D seismic survey in order to reduce costs."

Gov't Update Expected Soon

However, instead of approving the request for changes to the work program for Aminex, the Tanzanian government had towards the end of last year notified the company the Nyuni permit was actually expiring in October 2019 and hence warned against any further work progress on the Nyuni production sharing agreement (PSA).

Although the company's management had early last year opted to impair the carrying value of the Nyuni asset because of the approval delays, this week, Chief Executive Officer Tom Mackay expressed optimism the issue would be resolved, despite no firm commitment being received from the Tanzanian government.

He said Aminex was still hopeful it would conduct a work-over of the Kiliwani North-1 well and unload it using foam treatment to an already existing gas plant.

"As of yet,  no formal update has been received from the Government of Tanzania in regards to our licenses, however, we have had positive indications in-country that the Government is approaching a place where it can update the international oil companies," he said.

With the completion of the work-over, Aminex anticipates to flow the Kiliwani North-1 well unaided and to recover a portion of the remaining gas resources within the Kiliwani North structure.

Aminex's list of delayed approvals in Tanzania does not include the request for remediation work on Kiliwani-North-1 well and formal extensions of the Mtwara and Nyuni permits only but also a review of production sharing agreements especially after Tanzania brought into play new hydrocarbon sector rules and regulations.

$6.7 million owed

This unpredictability by the government has also extended to its legal obligations to pay for gas that international exploration and production firms have previously supplied to the East African country's state agencies.

For example, Aminex says the government owes it US$6.7 million in outstanding receivables of gas sales from the Kiliwani North gas field.

Although there are indications of progress in settling the debt, Aminex is yet to get an official commitment from the government on the matter despite the company's management telling shareholders there has been a "return of senior government officials who have recognized their obligations and are making efforts to resolve the matter."

The company's hopes now hinge on the outcome of a proposed meeting with government officials at a date yet to be confirmed.

But, on a positive note, Tanzania Petroleum Development Corporation, the State national oil company, has supported Aminex's 2020 'reduced' 

Work Programme and Budget for the offshore Nyuni Area PSA raising hopes an earlier application for the extension of the permit could be approved.

"The Company takes the support of the reduced work program and budget as a positive indication of progress and hopes to receive approval for the license extension from the Ministry soon," said Aminex in its Tanzania update on Tuesday.

Tanzania has recently joined other African countries such as Nigeria and Mozambique that have either reviewed or are in the process of amending their hydrocarbon codes to increase their share of earnings from oil and gas resources but which has delayed the commercialization of many offshore and onshore projects.

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