Wednesday, 24 February 2016

Victoria Oil & Gas expands in Cameroon thanks to Glencore deal

Victoria Oil & Gas has become used to conquering challenges, but with an opportunistic new acquisition it now faces its biggest to date. In a few short years it has successfully traversed from being an exploration driller to become a gas producer and more recently a fully-fledged regional utility.

But, now thanks to a new deal, announced last week, AIM quoted VOG is taking on a 75 per cent stake in the Matanda block in Cameroon from Glencore. The new project could be about 60 times larger than the company’s Logbaba gas field.

Matanda comprises both onshore and offshore areas, spanning a total of 1,235 square kilometres and has prospective resources estimated at 1.8 trillion cubic feet. Logbaba, meanwhile, is host to some 208billion cubic feet of gas. The discovery’s commercialisation to date has seen VOG service Douala - Cameroon’s ‘second city’ and industrial hub - with thermal gas, industrial customers and increasingly gas-to-power electricity generation.

Discovering, unearthing and finding a market for Matanda’s potentially huge gas resources, represents a mammoth challenge over the coming years. But, it is also an equally big opportunity. The company takes the asset without paying an upfront acquisition fee. Instead it has committed to a work programme that will be steered by the Cameroonian authorities.

The Matanda programme starts by explore onshore licence areas within a few kilometres of Logbaba, and the idea would be to send the new gas into the pipeline infrastructure already established by VOG’s Cameroon subsidiary. At present, it estimates demand for gas in Cameroon (for thermal and power generation) to be in excess of 150million cubic feet per day. One of company’s stated ambitions is to grow production to meet this demand. Matanda will certainly do that.

The company is currently the only supplier of natural gas to rapidly growing Douala. And, in its own words, it manages the whole value chain from the wellhead to customer connection.
Long-term supply contracts have been established with customers at prices from $9 per British thermal unit (mmbtu) to $16/mmbtu. It is worth noting too, that the demand for gas locally means the business is protected from the broader machinations of the oil industry.

Just from Logbaba, where it has 60 per cent stake, production is currently running at 15mmscf/d and a 'primary objective' in 2016 is to exceed 3.7 Bcf of annual production, a 30 per cent increase over 2015. Two new wells will be added this year, while infrastructure is also being expanded by GDC. The plans include designs for the gas treatment plant capacity to rise to 40million cubis feet per day, by adding 13km to the pipeline network and to develop new product areas such as Compressed Natural Gas (CNG).

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