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Victoria Oil & Gas reveals production and sales boost as power station supply resumed

Published: 08:17 17 Jan 2019 GMT

oil and gas operations
Output peaked at 7.67mln cubic feet on 28 December

Victoria Oil & Gas plc (LON:VOG) has, in its quarterly operations update, confirmed that its production operation ended 2018 of a high.

It reported an average gas production rate of 4.45mln cubic feet per day for the three months ended 31 December, and the average rate for the whole year measured 3.75mln cubic feet per day.

However, following the signing of a renewed sales deal for the ENEO owned Logbaba gas-fired power station on December22, output subsequently peaked at 7.67mln cubic feet on 28 December.

For the month to date, the company said that the production rate has averaged 7.8mln cubic feet per day.

READ: Victoria Oil & Gas lands deal to resume supply to Logbaba power station

Sales data naturally reflected the trend in production. In the fourth quarter, gross gas sales amounted to 403.8mln cubic feet, up 20% from the 355.6mln accumulated in the preceding three month period.

Gross sales for the whole year amounted to 1.4bn cubic feet, down 66% from 2017 reflecting the impact of a 99% drop in gas sales to the power station after the previous contract expired on 31 December 2017.

The new sales contract signed on 22 December 2018 has a three-year term.

Additionally, VOG highlighted in its outlook statement that ENEO has expressed interest in increasing power generation levels – 20 megawatts from its Bassa Power Station – and it said that such an increase would create additional gas demand of around 4mln cubic feet per day.

Talks are continuing with other independent power producers who are evaluating additional power supply options to meet the electricity shortfalls in the City of Duala and VOG aims to conclude a deal with at least one such party during 2019 to “kick off a new power project in Douala”.

Aims to diversify with more non-grid sales

At the same time, it continues efforts to diversify its gas sales outside of grid customers. The company said this remains a “major driver for 2019”.

The company noted that non-ENEO sales increased, with thermal gas customers consuming 3% more in the fourth quarter and industrial users consumed 80% more gas in the period.

VOG is also targeting industrial customers that are deciding to generate their own power. It noted that more than 30 existing and new customers have expressed interest in the company’s industrial power unit as a potential solution.

Most of these customers are already connected to the company’s gas pipeline, and, VOG noted that installing on-site gas-fired power generation units would increase their consumption volumes.

Following negotiations to date gas sales agreements were issued to 11 potential customers, and so far four customers have signed up. VOG said it expects the other 7 to sign agreements in the near term.

It added that aim is to have some 4.5mln cubic feet per day of gas supply signed up by the end of 2019.

Matanda exploration activities eyed

Upstream, the company is also eyeing activity through 2019 following the Presidential Decree in … which confirmed the transaction that sees VOG secure ownership of the Matanda production sharing contract area.

It is presently planning an initial drilling programme at Matanda, and, it is exploring the option of funding the project, including farm-out partnerships.

Earlier this month VOG highlighted that Matanda spans some 1,235 square kilometres, more than 60 times larger than Logbaba.

It covers both onshore and offshore areas (with the North Matanda offshore believed to host some 150bn cubic feet of gas resources, with upside potential seen at around 1 trillion cubic feet).

Onshore, the project area hosts prospects close to the Logbaba gas pipeline network and these areas will be the priority. Here, the company sees a total of 23 prospects and leads, with a total resource potential of around 1.3 trillion cubic feet.

It is anticipated that any new discoveries can be developed “efficiently and promptly”.

The Matanda contract has a minimum work obligation of one exploration well, plus seismic reprocessing, which need to be completed within the first two years following the presidential decree.

OECD complaint

Also in the statement, VOG noted that during 2018 a complaint was made against the company to the Organisation for Economic Co-operation and Development (OECD), and, it has been in communication with the UK National Contact Point (NCP).

The NCP has decided, following an initial assessment, that issues raised merit further examination.

The complaint comes from groups representing local people. It relates to the establishment and operation of Logbaba and is in reference to OECD Guidelines for Mulitnational Enterprises – which set out principles for responsible business conduct in areas including employment, human rights and the environment.

“While the board and GDC both strongly believes that the company has and has had the necessary policies and processes in place, we welcome the opportunity to engage further with the complainants to understand their concerns and to agree how we can advance together,” VOG said in the statement.

It added: “The NCP stresses in its report that its decision to examine further the claim against VOG is not a finding against the company.

“We look forward to engaging in NCP-facilitated mediation, which the company anticipates will take place over the coming months.”

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