Fresh start bodes well for Tanzanian upstream: CEO
The change of leadership in Tanzania has given a new lease of life to upstream investors there, according to the CEO of Wentworth Resources, Katherine Roe. In an interview with NGW April 21, she said the new president, Samia Suluhu Hassan was "enthusiastic about inward investment" and that had been "very encouraging for us. And she has come out vocally with a plan to tackle COVID-19."
The autocratic John Magufuli died March 17 in a hospital in the capital, Dar es Salaam, reportedly of heart failure. In his last year of life he denied the efficacy of vaccines as COVID-19 swept the east African country. He recommended instead herbal remedies and Christian prayer as a cure. His successor however has so far shown support for the rule of law and democratic principles.
Magufuli had also dragged his feet over an LNG plant that Anglo-Dutch Shell and Norwegian Equinor had been planning for several years. The European companies' country heads wrote a joint article in the local press April 13 urging the revival of the stalled project.
Whether or not the letter played a part in the turnaround, the 7.5mn metric tons/yr project has now been given the green light, according to a Reuters report. It quoted energy minister Medard Kalemani telling parliament April 20 that construction work would start in 2022.
And the previous weekend, Samia Suluhu had flown to Kampala to sign an agreement with Uganda on a 1,440-km crude oil pipeline to the Tanzanian seaport of Tanga.
Roe said: "We have only heard positive things from the new leadership although it is still early days for the new president. We are now considering expansion plans within Tanzania, both with and without our Mnazi Bay partner and operator Maurel & Prom (M&P). We want to increase our foothold within Tanzania and reinvest in the country. The new regime is very encouraging and so we are pressing ahead with new vigour."
Wentworth owns 32% of the Mnazi Bay project which supplies half of the country's gas with a cost of production of $0.7/'000 ft3. About 30% of the power supply comes from it. Its other partner is the state gas buyer, in the form of Tanzania Petroleum Development Corp (TPDC).
"We are looking at low and zero carbon power generation, as well as at ways of decarbonising our Mnazi Bay production. As the operator, M&P is in the driving seat on execution but this is a joint partnership to ensure we are responsibly managing our core environmental and social governance risks. We are working on reducing our scope 1 & 2 emissions further this year although our footprint, in terms of kg CO2/boe produced, is already very good, giving us a leading position amongst the peer group in London," she said. The company has published its first sustainability report.
"Wentworth is reliably supplying gas to power a developing economy and helping it to industrialise in a low carbon and affordable way," she said. "TPDC is the sole buyer of gas for the country and negotiates with end-users but we assist in those talks. We and Orca, operator of the Songa-Songa field, have roughly half each of the power generation and industrial markets for gas. There is a lot of spare capacity in the major pipeline built from our site to the Dangote cement works: Wentworth [and partners] use about 15% of it."
The plan for this year is consolidation rather than radical expansion. Outgoing chairman Robert McBean said: "Whilst we are not budgeting for any significant capital projects in 2021... a minimal work programme will allow us to strengthen our balance sheet further by year-end. This solid financial base will also give us the ability to leverage our position in any competitive negotiations where appropriate."
Roe said the company was not looking at investing in hydroelectricity because of the costs involved but she said it was interested in "other low- and zero-carbon generation. We are looking at other ways to enhance the energy mix outside natural gas."
Roe said: "Our first step is to increase the compression so we can raise output to 130mn ft³/day [all figures are gross]. That will be our next capital expenditure to approve and it is the ceiling in our contract with the TPDC. We produce according to TPDC's weekly nomination and it pays for at least 85% of that volume at a fixed price."
In Q1 2021 Wentworth produced 84.74mn ft3/d on average. This year it broke its daily production record, with 110mn ft3/d while March averaged about 1o2mn ft3/d. "We have proved in March we can produce above 100mn ft³/d sustainably – gas demand is what limits us," Roe said. "Revenues from extra volumes from our production go straight to the bottom line and dividends, as the operating costs are fixed. April and May are the main monsoon months, when hydroelectricity displaces gas. We will see what happens before we revise guidance for the year's production."
She said that Wentworth. which announced a higher dividend for 2020 than it did for 2019, along with higher profits on its 2020 business, is a resilient company, one that has proved that even with one non-operated asset it is possible to succeed in difficult times. "In partnership with M&P and TPDC, we have managed the COVID-19 pandemic very well. I am pleased; we delivered a strong set of results," she said.