Use of hydro power sources cut Songas gas demand

Continued support of hydro power generation by state owned Tanzania Electric Supply Company (Tanesco), has led to decreased demand for natural gas from Songo Songo by 20 per cent during the second quarter of last year, compared to the same period in 2013.

Orca Exploration Corporation which is the holding company of Pan African Energy said in its latest annual report that production fell from 53.8 million cubic feet per day (MMcfd) to 42.8 MMcfd during the period.

“Compared with second quarter of 2014, power sales during third quarter increased by 12 per cent due to the gradual reduction of hydro generation during the quarter,” the report said.

The report further noted that natural gas supply to industries also increased by 19 per cent to 14.2 MMcfd. The Orca Exploration report further noted that during the period, Tanesco substantially honoured its commitment by paying 10 of 13 weekly instalments for a total of 18 million US dollars and a further 6 million US dollars payment relating to the World Bank’s 100 million US dollars.

“The payment relating to the World Bank’s Second Development Policy Operation was substantially less than the company was led to believe,” the company’s report stated.

Orca however said it will continue to draw attention to the going concern issue relating to Tanesco’s reduction of arrears totalling 50.6 million US dollars.

“In the event that the company does not collect from Tanesco the balance of the receivables and Tanesco continues to be unable to pay the company for subsequent gas deliveries, the company may be unable to undertake the level of capital expenditure required to increase well deliverability to the expansion target of 190 MMcfd,” the report stated.

In total, Tanesco currently owes Orca Exploration 56.4 million US dollars during the quarter saying the state utility pledged its commitment to maintain the 3bn/- (US$1.8 million) weekly payments with a target to clear the debt by end of last year.

“However, since the end of the quarter Tanesco has only made one payment of 1.8 million US dollars. Net income fell during the quarter affecting due to provision for stock-based compensation.”Income for the nine months ended September 30, 2014 was 8.5 million US dollars,” the report noted.

Gross revenue after tariffs was 23.2 million US dollars which was a reduction of 8 per cent from the prior year period with the company’s share of revenue down 5 per cent to 14 million US dollars from 14.8 million US dollars in the prior year period.

As at September 30, 2014, Orca had 63.1 million US dollars in cash compared to 32.6 million US dollars in December 2013 and no debt, more than double the cash balances of the prior year period. The company currently has 63 million US dollars in cash.
Source: Daily News, reported from Dar es Salaam, Tanzania
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