Otto Energy Doubtful of Kito-1 Drilling Until Disputes Are Resolved

Joint venture partner in the Kilosa-Kilombero license Australian explorer Otto Energy has poured cold water on the drilling of Kito-1 well until outstanding disputes with Operator, Swala Oil & Gas (Tanzania) plc (SOGT)  are resolved in its latest quarterly report.

“Forward Plan Until the outstanding joint venture disputes are resolved, Otto does not see that the joint venture can progress drilling planning with confidence,” Otto Energy says in the report.

According to Otto the disputes which range from issues under the relevant joint operating agreements, including SOGT’s handling of joint venture funds, SOGT’s position as operator, SOGT’s notice purporting to require Otto to withdraw from the Kilosa-Kilombero JOA and SOGT attempt to cash call Otto for the entire 2017 work program remain a big hindrance.

Otto maintains that SOGT was entitled to take such actions and has issued further dispute notices in respect of the same.

“Otto intends to vigorously defend its position via the dispute resolution provisions (including both mediation and/or arbitration mechanism) provided for under the Kilosa-Kilombero JOA.”

The joint venture is currently operating on a 12 month extension to February 2018 with the ministry of energy having included a caveat that the contractors provide financial guarantees ($6 million) covering the minimum well commitment.

The JV plans to drill the Kito-1 prospect in the Kilosa-Kilombero valley in late 2017 and the operator has been working with the Tanzanian Petroleum Development Corporation to secure all necessary permits and consents to progress the drilling programme.

There are four joint venture partners in the block with a 25 percent interest each. Among the partners include the  Swala Energy (operator), Otto Energy, Tata Petrodyne, and MV Upstream a joint venture between Vegas Oil & Gas Limited, (Vegas) and Motor Oil Hellas SA (MOH).