Otto Energy in Legal Suit with Swala Energy over Tanzania’s Pangani Licence

Swala Energy Limited has said it has been served notice by lawyers acting on behalf of Otto Energy Limited that Otto has commenced a legal action against the Company, Swala Oil and Gas (Tanzania) plc (SOGTP) and current and certain former directors of the Company and is seeking to recover a gross amount of approximately US$1,000,000 plus alleged damages.

Otto’s action relates to the Pangani licence, a licence operated by SOGTP with a 25% working interest with Swala Energy holding a 58.5% interest in SOGTP.

Swala Energy together with SOGTP and the Company’s current and former directors add they intend to defend such legal action with vigour and, having taken initial legal advice, are of the opinion that Otto’s claim has no legal merit.

The Pangani licence a large frontier licence (17,156km2) located in the Pangani Rift, on one arm of the Northern Tanzanian Divergence triple junction is part of the East African Rift System that, in the west, runs from Uganda to Malawi, and in the east from Kenya to Tanzania.

Swala Energy (operator) and Otto Energy were awarded the Production Sharing Agreements (PSA) for Pangani  in February2012 after which the joint venture partners conducted analysis of legacy gravity and magnetic data, followed by acquisition of new airborne gravity and magnetic data.

Later in 2013 the partners undertook a 2D seismic program over exploration licence area. In February 2014 the joint venture partners agreed to enter into Years 3 and 4 of the agreement involving a commitment to drill one exploration well in each contract area before February 2016 and the acquisition of additional seismic data to allow optimal well positioning.

Last August the operator added that the Tanzanian Ministry of Energy and Mining (MEM) had agreed to extend the period within which an exploration well must be drilled in the Pangani licence to the 20th February 2017

This year Swala Energy reported it had notified the Tanzania Petroleum Development Corporation together with partners Tata Petrodyne and Otto energy its desire to relinquish the Pangani licence after the technical review of the licence showed no structures of commercial interest.