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Victoria Oil & Gas signs LOI for Etinde gas supply with New Age

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Oilfield Technology,

Victoria Oil & Gas has entered into a non-binding letter of intent (LOI) with New Age for the supply of gas from the Etinde natural gas and condensate field, offshore Cameroon.

Under the LOI, the parties will seek to negotiate and enter into a gas supply agreement (GSA). The LOI envisages that under the GSA, New Age will bring its gas from the offshore Etinde field to onshore Cameroon for processing. Gaz du Cameroun S.A. (GDC), Victoria's wholly-owned subsidiary, would then purchase processed natural gas from the onshore New Age facilities and transport the gas to Douala, Cameroon, to supplement the current gas sales.

The LOI envisages that the GSA would be for a period of 20 years during which New Age would supply a minimum of 25 million ft3/d of gas to GDC for the first three years, followed by a minimum of 30 million ft3/d, with the potential to increase in the future as demand in the market increases. This would amount to a total gas supply in excess of 200 billion ft3 of gas over the contract period. GDC would then seek to distribute this gas to new independent power producers looking to produce power for the energy deficient Douala market as well as to existing and future thermal and retail power customers.

When combined with potential offtakes to be secured with long term industrial thermal customers plus grid power contracts, including with Aksa (subject to definitive agreements being entered into), GDC should be well positioned to grow into being the natural gas utility company leading the downstream gas distribution sector in Cameroon. The proposed GSA with Aksa alone would consume in excess of 20 million ft3/d for the initial 150 MW power plant, with potential expansion.

In order to access the gas production from Etinde, GDC will need to install a 60 km (approx.) high pressure gas pipeline from Limbe to Bekoko where it would connect with the existing low-pressure pipeline network which operates throughout Douala. The pipeline would be designed to allow for future expansion in Douala and the South-West region.

The installation of a major gas pipeline network from Limbe to Bekoko will provide numerous additional opportunities, which would have otherwise been deemed uneconomic, to supply gas into smaller towns along the route into Douala, such regions/towns as Ombe, Mutengene, Tiko and Buea, and provide much needed power using smaller gas-fired power plants.

GDC has commenced negotiations with multilateral and export credit agencies to fully debt finance this new pipeline project. The parties are currently negotiating a fully termed GSA and subject to signing, anticipate a Final Investment Decision by the parties on the project during 2H20.

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