DESPITE GRAVE DEVELOPMENTS IN EYASI BID... SWALA ENERGY CONTINUES WITH DSE SHARE-LISTING PLAN Written by TIMES REPORTER Friday, 21 February 2014 12:04
SWALA Oil & Gas (Tanzania) Plc says that, despite termination of the negotiations with the Tanzania Petroleum Development Corporation (TPDC) for the Eyasi Licence, the company will continue with its plans to list with the Dar es Salaam Stock Exchange (DSE).
The company's chief executive officer (CEO), Dr. David Mestres Ridge, told Business Times in an interview that they have been disappointed by the Corporation's decision on the Eyasi issue...
However, “whilst it is disappointing, we remain committed to our planned listing on the DSE,” Dr Ridge said. “As part of that, we are completing the setting up of a Trust that will manage equity for the local communities in the areas in which we operate – and which, on listing, would have a value of some US$2.5 million!” Noting that the company is finalising the prospectus with the updated year-end audited accounts, the CEO said that, “fortunately, we never included Eyasi in our valuations and, so, our proposition remains robust, based on the prospective of our existing licences.” Eyasi is one of the blocks covering a portion of the East African Rift Valley System and, as such is technically interesting to prospective oil and gas investors. “In a virtually next-door block in Kenya, 'Block-14T,' the National Oil Company of Kenya is already two years ahead in its exploration programme. That was one of the reasons for us starting to work on the licence even before it was awarded,” Ridge revealed. Apparently, TPDC recently terminated negotiations for the Eyasi licence after another partner withdrew from the exercise.
Swala Energy had originally bid for the Eyasi licence on a 50:50 basis with a joint bidding partner. The joint bidding agreement allowed either party to withdraw at any stage, with the remaining party assuming the withdrawing party's interests in the licence.
However, when the joint bidding partner withdrew from the negotiation processes, TPDC deemed that to be a breach of the tender guidelines that governed the processes.
The three companies which had submitted tenders in closed-bidding were Beach Energy Ltd. (BPT) and Swala Energy Ltd. -- both based in Australia – and the UK-based Adamantine Energy Ltd.
Dr Ridge said Swala disagrees with TPDC's interpretation of the tender guidelines, and has informed the Corporation that it will seek advice on the merit(s) of challenging that decision!
"We are disappointed that TPDC has reached such a questionable decision, especially considering Swala’s track record in Tanzania over the past two years,” he said in a press statement issued earlier this week.
Reportedly, the company had invested significantly in the negotiations for Eyasi, and TPDC's decision raises questions not only in respect of the transparency of the processes to be followed in the current licensing processes, but also in respect of TPDC's commitment to local content and Tanzanian participation. “We remain committed to Tanzania, and shall advise the market further once the outcome of our challenge has been determined,” he said.
“We have all invested significant time, energy and other resources into completing the negotiations on Eyasi, which we finalised over Christmas (2013). We had pre-acquired data, and were already working on that with the aim of accelerating activity on a licence.”
He added: “we have said that we were seeking advice on challenging the decision, and that is still the case.” Swala Energy believes Eyasi is a highly-prospective area located on the southern extreme of the eastern branch of the East African Rift System (EARS).
The western branch of the Rift System has already proven to be a major oil province, with around two billion barrels of discovered oil in Lake Albert in Uganda.
More recently, the eastern branch has seen a number of oil discoveries announced in northern Kenya, in the Lokichar Basin where Tullow Oil (TLW: LSE) and Africa Oil (TSX.V:AOI) have recently been so successful with the Twiga South-1 and Ngamia-1 wells!
These wells have now proven that prospective hydrocarbon basins lie within the eastern branch of the EARS. The Lokichar basin is around half the size of each of Swala’s four separate basins in Eyasi!
In June last year, Swala Energy announced it had been invited to exclusive negotiations with TPDC for the award of a 32.5 per cent interest in the Eyasi licence, onshore northern Tanzania.
Reviews of vintage gravity and magnetic data, together with surface geology investigations undertaken by Swala, suggest that the Eyasi licence area may contain four separate basins with potential sediment thicknesses of around 3,000m.
Each of these basins is an area of approx. 2,000sq.km, and has the potential to provide the source materials for hydrocarbon generation.
The TPDC managing director, Yona Killagane, was quoted earlier as saying that termination of the Eyasi licence negotiations was the result of a breach of the tender agreement.
In the event, Killagane said TPDC cannot continue with the negotiations as the status of the bidding company changed in midstream.
“This means we are no longer dealing with the same player we had evaluated, and the option now is to consider the second best bidder,” Killagane stated.
