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Gas Supply & Operations Update

9 Jul 2014
Victoria Oil and Gas Plc, the emerging African energy utility company, today announces an update on its Logbaba gas supply operations in the industrial port city of Douala, Cameroon, operated by wholly owned subsidiary, Gaz du Cameroun S.A ("GDC"). The announcement is the first update which includes supply to both thermal and gas fired electricity generation (“Genset”) customers.
Production Highlights
  • 4.2mmscf/d average gas supply rate on last 5 day commercial week - 4.5mmscf/d daily peak
  • 3.9mmscf/d average gas supply rate for last 5 day commercial week plus 2 day weekend
Operational News and Contracts
  • New Genset procurement strategy to source units meeting individual customer specifications from a range of vendors - Revised Energyst contract signed on 7 July 2014 removing the requirement to take further 1.5MW units
  • Recent reports from Dangote Cement Cameroon S.A. (“Dangote”) indicating commissioning of its cement plant scheduled for August 2014
  • Socapursel, a food manufacturing business, connected as new thermal customer
  • Pipe laying and network infrastructure work now wholly outsourced under a US$ per metre fixed price agreement. Significant advances in pipe infrastructure now made to signed gas supply agreement (“GSA”) customers on Western shore.  
  • Drilling under the Wouri River now scheduled to commence in July following receipt of new Auger (directional drill rig) parts by main contractor
  • Actis-Sonel negotiations progress for gas supply to national grid power stations
Operations Update 
Gas Supply
As at the end of June 2014 GDC had connected 6 x 1.5MW Gensets at 3 customer sites within Douala, Cameroon.  This is the first Company update incorporating gas supply rates to both the thermal and power elements of our business. The production average volume for the last 5 day commercial week was 4.2mmscf/d. 
Including the weekend to this 5 day period, (when customer usage drops) production is approximately 3.9mmscf/d.  Peak production days since the beginning of July have included 2 days at 4.4mmscf/d and one day at 4.5mmscf/d. These gas supply rates represent a significant increase from the 3.2mmscf/d average figure announced in April 2014 and the 2.0mmscf/d figure for the same time in 2013. 
GDC has now connected Socapursel, a food manufacturing business, to supply gas for thermal use in industrial boilers. The Company also notes the recent reports from Dangote that schedules the commissioning of its new Douala cement plant for August 2014. As previously announced, pipeline has been laid by GDC to the Dangote site and we await instruction to begin final gas connections at the plant.
Pipeline and Network 
GDC has made a strategic change to its pipeline and network expansion strategy pursuant to a new contract with our main contractor, Britanica HDD International (“Britanica”) where all trenching, horizontal drilling and pipe-laying work is now outsourced to them on a fixed price US$ per metre laid basis.
Under the new contract Britanica has made good progress in expanding the pipeline in the Bonaberi area of the Western shore.  GDC already has several GSA’s with customers who will be connected to gas once the main pipeline passes under the Wouri River. Britanica, under the direction of GDC has drilled a total of 1.3km and has laid 1.1km of pipe in Bonaberi.  Two spurs off the first branch line have been completed to Sopricam which will be the first customer connected on the West side of the river, while final design and routing to Sassel is confirmed.
Crossing of the Wouri River by Britanica is now due to commence in July following delays awaiting necessary Auger parts that have now been received. The Auger has been set up and all equipment is currently undergoing commissioning and testing.  Britanica’s steering engineer and technicians are due to arrive on site at the end of this week.  Preparations on the West side of the river to accept the shot have been ongoing since June.  The pontoon to carry the pipe on the river is on station and the pipe is in place ready to commence welding.  
Industrial Customer Power  
Having successfully installed the first 6 Gensets at customer sites and experienced an immediate increase in supply, GDC is looking to expand its gas to power business. To maximize expansion of the Genset model, with minimum capital exposure to the Company, it is intended to source units that meet the specific needs of the customers rather than supplying standard units of 1.5MW. GDC will work with customers to identify Gensets available from a wide range of suppliers that have the specific generation capacity needed for each project. 
A new agreement was signed with Energyst on 7 July 2014 limiting the rental of 1.5MW Gensets by GDC to the first 6 units currently connected to customers. There is no further obligation for GDC to acquire Gensets from Energyst and it is anticipated a form of sale and lease-back instrument will be set up with a local bank for future Genset customers.
GDC is now working to install and connect the next generation of gas fired Gensets to other thermal supply clients and businesses with no existing contracts in place with the Company.
Grid Power
UK based private equity group Actis recently replaced the US company, AES, as joint venture partner to Sonel, the state energy company. GDC discussions with Actis-Sonel and the Cameroon Government are progressing with the aim of supplying gas fired Gensets to local power stations in Douala. It is the intention of GDC to work with Actis-Sonel on the conversion of Heavy Fuel Oil (“HFO”) Gensets to gas. GDC is working with Actis-Sonel to demonstrate security of supply and capacity to become the potential supplier to 3 power stations in Douala. The initial planned output from the first 2 of these stations is 45MW, equating to about 10mmscf/d. 
Compressed Natural Gas (CNG) 
GDC is currently evaluating a CNG project where CNG is transported by road tanker from a compressor station to customers without the capital-intensive requirement of a pipeline. CNG enables gas to be sold economically to businesses via a “virtual pipeline” within a 200km radius of the operations.
Kevin Foo, Chairman said; "Today’s announcement is a milestone for the Company as we see a significant increase in consumption rates from both thermal and power business units. 
Gas to power is now an important component of GDC’s sales and the team shall be looking to build the Genset business working with a wide pool of suppliers. Our drive for operational efficiency is paying off with our pipe laying now outsourced and a major internal training programme implemented company-wide.” 
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