Tanzanian-based Swala Oil and Gas announced on January 2 that it will buy the stake in Orca Exploration Group’s PAE PanAfrican Energy Corp. for $130 million (approx. 280 billion shillings).
When completed, the deal will give Swala part ownership of PAE’s Tanzanian subsidiary, which holds exploration and production rights for natural gas in the Songo Songo block, in partnership with TPDC.
But TPDC said yesterday that it has instructed Swala Oil and Gas to delay the deal until a more detailed analysis is conducted into how the transaction would affect an existing natural gas production sharing agreement (PSA) between PAE PanAfrican Energy Corp. and the Tanzanian government.
"TPDC wrote to Swala requesting them to hold the transaction pending government and its institutions' satisfaction that the deal will have no effect on the PSA signed between the government, TPDC and PanAfrican Energy," the Tanzanian national oil company said in a statement.
"TPDC wishes to inform the general public that it has demanded that all companies in the transfer process to hold the transaction pending government ... to have full information regarding the transaction."
It said the government will issue a public statement when it approves the deal, but did not specify when that decision would be made.
"Since TPDC is a licence holder in all PSAs, it is responsible for supervising international oil companies to ensure they undertake their operations in accordance with the laws and it protects national interests on behalf of the government," it said.
TPDC's decision to freeze the deal raised questions from the leader of the opposition ACT-Wazalendo party, Zitto Kabwe.
The Kigoma Urban lawmaker questioned how TPDC as the national oil company would block the deal, instead of relevant regulators such as the Petroleum Upstream Regulatory Authority (PURA) and the Fair Competition Commission (FCC).
"What is the role of the regulator -- PURA -- and the FCC?" Zitto queried via his Twitter account yesterday following TPDC's announcement.
Under the Petroleum Act passed by Parliament in 2015, TPDC was transformed into the national oil company and PURA was established as the new regulator of the country's oil and gas activities.
Swala said earlier this month that the transaction would involve the issue of 16.3 million preferred shares, worth $16.3 million, to Orca, if shareholders approve. It will also take on PAE Tanzania’s debts worth another $24 million, Swala said.
“It is the first deal of this magnitude between a foreign and a Tanzanian company,” David Mestres, the CEO of Swala, said in a statement on January 2.
Funding for the deal was arranged by Exotix Capital, a London-based specialist frontier markets investment bank.
PAE PanAfrican Energy, a wholly owned subsidiary of Canada's Orca Exploration Group, supplies natural gas for power generation and to around 40 industrial and commercial customers in Dar es Salaam.