Aminex is becoming more positive on its delayed farm out in Tanzania, giving it sufficient confidence to get under way with preparations for the Chikumbi-1 well.
The London-listed minnow struck a deal with ARA Petroleum in July 2018, expecting at the time that it would be completed by November 2018. ARA was to take a 50% stake in the Ruvuma block, in exchange for $5 million in cash and cover up to $35mn in work commitments, in order to reach first gas.
The cash was to be paid in two instalments, with $3mn on closing and $2mn 180 days later. ARA has now agreed, under a binding heads of terms, to provide the first $3mn ahead of the completion of the farm out. The second tranche will be paid on closing of the farm out.
A new stop date for the farm out has been extended to the end of June 2020. In July, the company said it had pushed this date out to the end of October. If the deal has not been completed by this point, the advance will be converted into an interest-bearing secured loan. This would be repayable by the end of June 2021. ARA is backed by Oman’s Zubair Corp.
Aminex had $1.86mn of cash at the end of 2018, with no debt. It raised $2.4mn in February to reprocess 2D seismic on the Kiliwani North block and to acquire 3D seismic around Songo Songo Island.
ARA was to cover costs for the work associated with the Chikumbi-1, in addition to acquiring and processing 200 square km of 3D seismic on the Ntorya area and install an early production system (EPS). The Chikumbi-1 well was previously known as Ntorya-3 and is intended to target the same reservoir from the first two Ntorya wells but also a deeper target. The company had hoped to spud the well in 2018.
“We are encouraged by the ongoing discussions with the Tanzanian authorities to be able to accelerate the planning for the early spud of the Chikumbi-1 well, through the tendering of services, ordering of long lead items and securing a contract for a drilling rig,” ARA’s CEO Sultan Al-Ghaithi said.
One factor complicating progress in Tanznaia has been the government, which has been reviewing a number of PSAs. The country passed three laws in 2017 on the mineral and energy sector, giving the government the power to renegotiate unacceptable terms.
A Chinese-backed company completed a gas pipeline in Tanzania in 2015, from Mtwara in the south to Dar es Salaam. Earlier this month, the Tanzania Petroleum Development Corp. (TPDC) said it would choose a contractor in October to construct a link from Dar to Bagamoyo.
Aminex’s chairman, John Bell, said the new agreement with ARA demonstrated a commitment to the gas assets, “which when on production will play an important role in meeting domestic demand for gas from the people and businesses of Tanzania and a possible international market through export arrangements with neighbouring countries”.