Orca Exploration has announced that it has entered into a loan agreement with International Finance Corporation (IFC), a member of the World Bank Group, for a US$60 million investment in the Company’s operating subsidiary, PanAfrican Energy Tanzania Limited (PAET).
According to Orca Exploration the proceeds of the Loan will be used to fund part of an estimated US$120 million first phase of a Songo Songo Main Field development offshore programme currently being undertaken using the Paragon M826 drilling rig since September 2015.
The Off-Shore Programme is designed to:
- put safe existing suspended and operating production wells;
- restore and increase the current productive capacity of the Songo Songo Main Field to ensure the continued delivery of Protected and Additional gas into the existing Songas infrastructure; and
- provide additional operational redundancy and deliverability for future additional gas sales, by way of the work-over and re-completion, abandonment or sidetrack drilling of three existing offshore wells, and/or the drilling of additional production gas wells at locations to be determined in the region of the existing offshore wells depending on the outcome of the work-overs.
“It allows us to raise finance and manage risk in the face of a challenging business environment, and to undertake urgently needed development of the Songo Songo field. It further safeguards Songo Songo’s future as an important part of Tanzania’s energy security,” says W. David Lyons, Orca Chairman and Chief Executive Officer.
Since programme commencement, previously suspended production wells SS-5 and SS-9 have been successfully worked over and recompleted, and have been restored to full productive capacity estimated to be approximately 35 MMscfd per well.
Orca adds the Off-Shore Programme is intended to restore and expand field productive capacity from approximately 83 million standard cubic feet per day (MMscfd) prior to the programme to approximately 190 MMscfd on completion of the programme.
When completed, the field is expected to be capable of both filling the existing Songas infrastructure to capacity of approximately 102 MMscfd, as well as providing additional gas volumes to the newly commissioned National Natural Gas Infrastructure Project (NNGIP) as and when contracted.
“The Songo Songo field is Tanzania’s most important source of proven natural gas production, and is the largest supplier of energy to the Dar es Salaam region. Through this investment, IFC is working to help to alleviate electricity shortages in Tanzania, which are an impediment to the country’s continued economic growth and development,” said Lance Crist, IFC Global Head of Natural Resources.
The term of the Loan is 10-years, with no repayment of principal for the first seven years, followed by a three-year amortization period.
The Loan is an unsecured subordinated obligation of PAET and is guaranteed by Orca to a maximum of US$30 million. The guarantee may only be called upon by IFC at maturity in 2025 and, subject to (among others) IFC approval, Orca may issue shares in fulfillment of all or part of the guarantee obligation in 2025, subject to receipt of all required regulatory approvals.