27 February 2012

Tanzania: Cove Sells Mnazi Bay Stake for $39 Million

Mtwara — A UK-Based gas exploration and production firm, Cove Energy plc, has sold its gas stake at the Mnazi Bay to Wentworth Resources, effectively exiting the Tanzanian gas upstream sector.

Under the terms of the agreement Wentworth Resources Ltd, will acquire Cove Energy's subsidiary, Cove Tanzania limited by 100 per cent at the cost of $39 million (Sh62 billion), according to information released by Wentworth early this month.The deal awaits the final approval of the Tanzanian government.

Cove Tanzania's interests at Mnazi Bay included 16.38 per cent production operations stake and 20.475 per cent exploration operations stake.

The Canadian firm, Wentworth, then known as Artumas Energy, was the first foreign investor in the Mnazi bay gas fields when it signed, in 2004, a Production Sharing Agreement (PSA) with the government for a Gas To Power (GTP) project as a means of exploiting the potential gas resources. This involved exporting the produced gas via pipeline to a gas fired power plant coupled to the local power transmission system for local power distribution.

But in 2009 Artumas sold about 51 per cent stake to a French consortium, Maurel & Prom, and the UK-based Cove Energy. Following the deal Maurel & Prom became the operator of the Mnazi Bay gas production.

Wentworth's buyback of stake from Cove Energy is seen as an attempt to consolidate its position in the Mnazi Bay project and in the country, believed to be heading into becoming a significant gas producing nation in futures.

Efforts are also underway to 'monetise' the Mnazi Bay gas and significant investments are planned on a major pipeline to Dar es Salaam, a 300MW power project and some petrochemical companies.

In exchange for its interests, Cove Energy is expected to receive 2 million newly-issued Wentworth shares, along with milestone payments of up to $8.5 million, Wentworth added.

Mnazi Bay and Songosongo are the only gas fields that are currently under production. The gas produced is mainly used for power production and as fuel in some manufacturing plants.

Following the exit of Cove Energy, Mnazi Bay's projected is remained with only three many players, which include Wentworth (41.78pc) Maurel & Prom (38.22pc) and the Tanzania Petroleum Development Corporation (20pc). Wentworth also owns a 52.225 per cent working interest in exploration operations on the block together with Maurel et Prom's 47.775 per cent working interest.

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