It’s been drilled, and gas has been discovered; however, Solo, and operator Aminex, have opted to acquire more seismic data to better define the resource potential before offering the licence up to potential farming partners.
We are joined by Chief Executive Neil Ritson for a Q&A.
Proactive: I know you aren’t now actively marketing Ruvuma, but is there still strong interest in this part of the world?
NR: Yes, the onshore Ruvuma is not being actively marketed now, though it was in 2012, and the feedback that we received at that time was that we needed additional seismic data.
That’s what we’re actually doing right now; we’re collecting additional seismic data to better define the next few drilling locations, and to help us to clarify the size of the potential discoveries that were made at Ntorya and earlier at Likonde.
This is an area with proven gas and condensate potential, and a lot of people have been focused on the offshore, with massive amount of gas being found, but we think that there is an opportunity here for medium-sized companies who can exploit the rather cheaper development schemes that will be possible onshore.
Proactive: The development of a new gas pipeline in Tanzania is being closely followed by investors here in London. For those who haven’t been following its progress, tell us why this is important.
NR: Yes, a new pipeline is a vital ingredient of what we’re doing, and it’s very exciting.
What needs to happen with the gas is that we need a connection between the gas in the south of the country and the markets about 450km away in the north, and there is a Chinese-funded and -built pipeline which will be commissioned later this year.
The pipeline is being constructed now; it is in fact well into that construction phase and that will provide this link between gas discoveries, such as our Ntorya discovery, and the markets in Dar es Salaam, off to the north.
This is actually a very critical factor, and one which is almost in place.
The Tanzanians are very keen to see gas committed to that pipeline, and this is a good time for us to be pushing forward with our development.
Proactive: Tell us a little more about your recent deal with Pan Minerals; and how it might develop. Do you have the funds required to finance the field?
NR: Pan Minerals is on the other side of Africa; this is in West Africa, onshore.
What we’ve done is provide Pan Minerals, which is a private company, a special-purpose company out of Switzerland, with the seed funding they need to get this project in West Africa ready for debt funding by a bank.
We have an option to invest directly in the project, but we haven’t decided yet to do that.
Most people in the markets at the moment, in the junior sector, of course, are finding that getting debt finance can be quite time-consuming and difficult, even for proven oil developments such as this.
We’re seeing a little delay in getting that project moving forward, but at the same time, Pan are working on other opportunities to secure access to other oilfield developments in West Africa, and so as we own 20% of Pan through our seed investment, we’re benefiting from that investment too.
When things come together, we’ll decide whether we want to take a direct interest, and we’ll have to assess the best way to fund that when that occurs.
Proactive: Now, bring us up-to-date on Canada, and specifically the potential sale of your stake in Reef.
NR: Yes, sadly the Canadian asset is an underperforming part of the Solo portfolio.
We have considered selling our stake there back to the operator, Reef Resources, potentially even at a loss, as the money could be put to better use elsewhere.
We hold a 28% interest in the Ausable gas cycling scheme; however, so far, Reef have not been able to move the project forward, and it remains stranded.
We have the value in the ground; our 28% interest relates to potential production and reserves, but so far, it hasn’t moved forward in the way that we expected. We’d be happy to co-invest with a new partner, but that new partner has not yet emerged.
Proactive: Finally, Neil, it was interesting to see you take a stake in the Horse Hill development, albeit a very small stake. Talk us through the rationale for this.
NR: Yes, I think we have to kind of step back and look at what Solo’s overall strategy is.
Solo intends to hold an active investment in maybe 10 or 12 projects at any one time, and actually the sweet spot would be somewhere between 5 and 10, maybe 15% interest.
In fact we feel that our exposure to Tanzania, although it’s very exciting, is somewhat overweight at 25%, and that’s why we’re looking to farm it down.
The Horse Hill project is very exciting for a number of reasons. The UK market is very dynamic, and projects like Horse Hill that have planning permission and are ready to drill tend to go at a premium, so we’re delighted to have secured this stake on favourable terms.
The prospect, which will get drilled later this year, is a retest of a 1988 Esso well which we believe missed the main target. New seismic shows that the target lies somewhat further to the south, and we’re drilling that.
Finally, this is an opportunity to drill somewhat deeper to the Triassic, where if we can locate any gas reserves, that will potentially open an entirely new play in the north side of the Weald Basin.
A well will be drilled very close to Gatwick Airport, and as you can imagine, there’s a lot of demand for gas in that area, so that could be quite a major event if that happens.
Solo will continue to look for other good investments, and we look forward to somewhat better trading conditions this year as the markets pick up.