Solo and Aminex rocket on Tanzania approval

The Tanzanian authorities have approved Solo Oil and Aminex's application for an appraisal licence at its Ntorya-1 discovery, sending the shares soaring 27% and 3.5% respectively.

The appraisal programme will consist of 2D seismic to delineate the extent of the Ntorya discovery and the drilling of an appraisal well. The appraisal licence is granted for a period of two years with options to extend at the discretion of the Minister.

Ntorya-1 was drilled in the Ruvuma production sharing contract (PSA) area in 2012 and successfully tested gas at a rate of 20 million standard cubic feet per day, equivalent to more than 3,000 barrels of oil per day. The Ruvuma PSA covers 6,079 square kilometres on the Tanzanian border with Mozambique, where well over 100 trillion cubic feet (tcf) of gas has been discovered in recent years.

An independent estimate has indicated a gross discovered volume of 178 billion cubic feet in place, with the operator Aminex evaluating this to be a contingent resource of 134 billion cubic feet of recoverable gas.

It had been estimated that 1.17 tcf of gross unrisked gas in place was potentially present at Ntorya and that further appraisal would be required to confirm this volume. The mean gross unrisked gas in place in discoveries, prospects and leads within the PSA was estimated to be in excess of 5.75 tcf.

It is anticipated that gas from Ntorya, and the Ruvuma PSA generally, will be commercialised via the planned diameter pipeline which will run through the PSA area to Dar es Salaam, which is the largest gas market in Tanzania.

Both Solo Oil and Aminex are actively seeking additional industry partners to farm into the Ruvuma PSA and negotiations with a number of parties were confirmed to be "in progress".

Aminex holds a 75% interest in the PSA, with Solo holding the remaining 25%.

"This award represents a significant step in the commercialisation of gas in the onshore Ruvuma PSA and we look forward to the acquisition of additional seismic later this year," commented Solo Oil's executive director Neil Ritson. "The conclusion of a farmout with a new partner will also assist in ensuring the work programme advances as quickly as possible as there is a large gas resource yet to develop."

Aminex chairman Brian Hall added: "The gazettal of this new licence is an important stage in appraising a significant discovery at Ntorya, which can ultimately be tied into the nearby major new Tanzanian pipeline infrastructure now under construction and due for commissioning end 2014."

Investor view

On the Interactive Investor discussion board for Solo Oil, user 'dice1950' stated: "We are all fully aware of how significant the Ruvuma discovery is, but this has been forgotten somewhat over the past three months as we wait for the farmout news.

"Stay long and strong and I think we will be rewarded here. My only fear is cashflow [in the] short term."

'The Raconteur', however, did not anticipate a cashflow problem, pointing out: "The RNS and Solo's website states the board and partner companies are actively seeking additional partners and negotiations are taking place. This means we could soon see a further RNS published with more good news."

'Swooped' added: "Personally, I see this as excellent news for Solo and will definitely sweeten the pot for someone wishing to farm-in," while 'Cryptonite' commented: "After [Monday's] news, Solo could be a significant gas producer sooner than we thought. The approval of Ntorya is great news. They have set this hole up for production and they probably need another two or three wells to really exploit the Ntorya discovery.

"Things are progressing nicely."

On the Aminex discussion boards, Interactive Investor user 'seagull2' said: "Aminex is forging ahead; [it's] nice that [the] market [is] being reminded [of the good] progress [the] company has made."

'Nyetimber' added: "To me, this makes good reading and as I suspected, it very much looks as though we are front runners for domestic supplies."

The user questioned: "Surely [this is] enough to push any would-be farm-in partner into signing up safe in the knowledge we are in the front of the queue with government backing?"