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The PSA includes the new Ntorya gas discovery which, according to Aminex, has ‘strong commercial potential’.
Aminex and Solo own 75% and 25% of the PSA respectively. Through this formal process they each aim to reduce their stake by half, with the new partner taking a 50% per cent interest.
“This is a sensible approach by the licence holders,” said Job Langbroek, analyst at Davy.
“Gas has been established and the presence of a new gas line much improves the possibility of commercial development throughout the PSA.
“A farm-out is the best value approach for shareholders at present.”
Indeed, City boutique Old Park Lane Capital agrees this is a positive step for the Ruvuma PSA.
“The commencement of the farm-out process is very good news for Solo as exploration activity on the Ruvuma PSA moves into a new phase,” analyst Barney Gray said in a note to clients.
“With the requirement to drill two more wells on the PSA before the end of 2013, we believe that the partners have allowed themselves ample time to complete a farm-out deal on favourable terms."
The Ntorya discovery is believed to contain 1.2 trillion cubic feet of discovered and un-discovered gas in place. It is planned that the gas will be commercialised via a new pipeline which runs through the PSA to Tanzania’s capital Dar es Salaam.
The pipeline is currently under construction and it is slated for completion in early 2014.
While Ntorya presents an attractive commercial opportunity, it is the broader potential of the remaining exploration acreage that is expected to be a major attraction for potential new partners.
The entire PSA area is currently estimated to contain 5.75 trillion cubic feet of gas in place, though much of the area has yet to be explored fully.
A key feature of the PSA is that it includes offshore areas, extending from the shallows through the ‘transition zone’ and into deep water.
In recent years, over 100 trillion cubic feet of gas has been discovered offshore, within the Ruvuma basin, and the region is expected to develop into a significant gas production hub.
According to Aminex, the Ntorya discovery indicates that the ‘gas fairway’ related to these large discoveries extend onshore.
“FirstEnergy's experience and capabilities are expected to be of significant assistance to the company in order to access a full spectrum of potential farm-in partners and to maximise the potential farm-in terms to the benefit of the company's shareholders."
The partners also told investors that a 2D seismic programme is set to get underway across the PSA during the current quarter. And it plans to drill two wells on the acreage next year.
"Solo is keen to seek an industry partner to participate in the next phase of exploration and appraisal in the Ruvuma PSA,” said Neil Ritson, executive director of Solo Oil.
“The recent discovery and the encouraging resource evaluation offer a very high value opportunity.”