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Major Gas Sales Agreement Signed With ENEO, Cameroon

29 Dec 2014

Highlights

  • Major gas sales agreement signed with ENEO
  • Gas to be supplied to Logbaba(30MW) and Bassa (20MW) power stations under a two year contract at a fixed price of US$9/mmbtu 
  • Gas consumption to generate 50MW is 10.1mmscf/d of which minimum take or pay component is 90% in dry season and 30% in wet season
  • ENEO's schedule requires 50MW of power to be online by end Q1 2015  
  • Total GDC gas production for 2015 expected to average 10.4 mmscf/d  

Victoria Oil & Gas Plc, today announces that it's wholly owned subsidiary Gaz du Cameroun S.A. ("GDC") has signed a legally binding term sheet with ENEO Cameroon S.A ("ENEO"), Cameroon's integrated utility Company, to supply gas to two power stations located in the city of Douala ("The Agreement").GDC has also signed a legally binding term sheet with ENEO and Altaaqa Alternative Solutions Projects DWC-LLC ("Altaaqa") a United Arab Emirates equipment supply company. Altaaqa will provide power generation equipment and has responsibility for importing and installing the Gensets at the Douala power stations. GDC will work with Altaaqa to make the initial gas connections.

The term sheets have been signed to enable the project to be expedited to meet ENEO requirements and it is expected that these will be replaced by full contracts in early 2015.

The Agreement with ENEO is a major gas supply contract for VOG in terms of scale and profitability with guaranteed minimum take or pay gas consumption at a fixed US$9/mmbtu over the 2 year contract term. The contract can be extended by mutual agreement. The take or pay element gives GDC the necessary incentives to allocate significant levels of gas to a single customer. The minimum take or pay levels are 9mmscf/d in the January-June dry season and 3mmscf/d in the July-December wet season. GDC anticipates actual demand from ENEO will be higher than the minimum take or pay levels during both seasons. ENEO requires all 50MW of power to be online by the end of Q1 2015.

The Bassa Power Station is located 0.3km from our operating northern pipeline and the Logbaba Power Station is located 1.3km along the proposed eastern leg off our main line. The pipeline construction to Bassa has been completed to the power station boundaries and GDC has started pipeline construction towards the Logbaba power station, this work is scheduled to be completed by mid-January 2015. Please refer to the pipeline schematic, a link to which is provided below:

Operations Map

By entering into the Agreement, GDC has become a part of the Cameroon national energy strategy. ENEO have selected GDC to be a key energy supplier as it has established a gas supply network that is proven to be reliable and safe.  GDC has been able to mobilise quickly, working with equipment suppliers to meet ENEO's requirement to rapidly bring on new power sources to Douala.

Based on a current production rates of 4.4 mmscf/d and assuming a minimum take or pay gas supply level to ENEO, GDC would be selling approximately 13.5 mmscf/d in the dry season and 7.4 mmscf/d in the wet season. These figures do not include any near term thermal customers which the Company expects to be online during the course of Q1 2015.

Kevin Foo, Chairman, of Victoria Oil & Gas said: "Today's agreement with ENEO is truly a game changer for VOG. We have secured a major, near term user of gas for our Cameroon business. We are now becoming an active part of the Cameroon energy equation. GDC and Altaaqa have been tasked by ENEO to meet an aggressive schedule to supply gas to the two power stations and we expect to deliver gas on time during the first quarter of 2015. Adding annual average take or pay consumption of ENEO to our current production indicates average minimum production levels for 2015 of 10.4mmscf/d."

Peter den Boogert, Managing Director of Altaaqa Global, said, "Our gas power plant systems meet worldwide emission standards and do not harm our environment. These plants are designed for performance and reliability, while being more environmentally friendly compared to systems running on other fuels. Additionally, as the generators run on natural gas, they do not require expensive after-treatments and are more economical to operate owing to more cost-effective fuel prices. Gas systems are also more flexible in fuel usage and remain efficient even with different fuel varieties."

Usman Mahmood, Director of Finance and Accounting at Zahid Group (of which Altaaqa Global is a subsidiary), added, "We recognize the vital role that Cameroon plays in the regional economy of Sub-Saharan Africa, and we understand how essential electricity is in fulfilling such a part. We are proud to be involved in a project that contributes to the improvement of the country's overall energy infrastructure."

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