In a report published earlier this month, the British Virgin Islands based company which operates the Songo Songo gas plant through its subsidiary, Pan Africa Energy Tanzania Limited said net present value of total proved value estimates decreased by nine percent to U$216.4 million compared to U$237.1 million during the period under review.
The independent reserves evaluation report undertaken by McDaniel & Associates Consultants Limited stated that the company’s total proved plus probable conventional natural gas reserves were 229 Bcf.
“After adjustment for the company’s share of gas produced in 2020, this represents a six percent or 16 Bcf decrease from the year end 2019. Net present value of1P estimated future cash flows discounted at 10 percent were U$216.4 million at year end 2020,comparedto $237.1million at year end 2019, representing nine percent decrease,” the report said.
It further added that net present value of proved plus probable gas estimated future cash flows discounted at 10 percent were U$241.3 million at year end 2020, compared to U$282.6 million at year end 2019, representing a 15 percent decrease.
“The reduction in gross company present value preserves from year end 2019 to year end 2020 are primarily attributed to forecasted company gas sales of approximately 27Bcf for the year2020, of which approximately 19Bcf were produced and sold,” the report added.
The Orca report explained that actual sales of additional gas were lower than forecast in 2020 due to reduced power and industrial gas demand in the country attributable to abnormally high rain fall leading to increased hydro power production in addition to the worldwide coronavirus pandemic which impacted global supply chains and associated industrial gas demand in the local market.
“Company gas sales are forecasted to average approximately 65.3 million standard cubic feet per day (less 23.8 Bcf) in 2021 assuming normal hydro power generation, recovering industrial demand and prospective customer confidence,” the report stated.
The reduction in future net present values were primarily attributed to lower reserves at year end 2020 associated with the reduced number of years remaining on the primary license (5.8 years at year ending 2020 versus 6.8 years at year ending 2019, or a 15 percent reduction in producing days to end of license), the McDaniel prepared report stated. The Songo Songo license period is due to end in October 2026 when Tanzania Petroleum Development Corporation will take over control from the investor.
“Reserves included herein are stated on a company gross reserves basis unless noted otherwise. Company gross reserves are the total of the company’s working interest share in reserves before deduction of royalties owned by others and without including any royalty interests of the company, and are based on the company's 92.07 percent ownership interest in the reserves following the transaction with Swala Oil & Gas (Tanzania) Plc,” the report concluded.