Swala waits approval for farm-out of its blocks to Indian firm

Swala Energy Limited (Swala or the Company) disclosed that its subsidiary company Swala Oil and Gas (Tanzania) Plc has received a no objection notice from the Tanzanian Ministry of Energy and Mines to the farm-out of 50 percent of its interests in the Kilosa-Kilombero and Pangani licenses in central and northern Tanzania, respectively to India’s Tata Petrodyne Limited (TPL).

With the receipt of consents from the Tanzanian Petroleum Development Corporation (TPDC), the Tanzanian Revenue Authority (TRA) and now from the Ministry of Energy and Mines, the company is awaiting only the consent of the Fair Competition Commission (FCC), the firm said in a statement.

“The rapid approval by the Tanzanian regulators to the farm-out of the SOGTP licences illustrates their desire to encourage activity in this important economic sector.

We are confident that the FCC consent shall be received soon, which shall allow TPL to join the license joint venture ahead of the planned drilling campaign.” said Swala Chief Executive Officer, Dr David Mestres Ridge.

In June, this year, Swala Oil and Gas announced it reached an agreement with Tata Petrodyne Limited (TPL), a subsidiary of the multinational Tata Sons Limited, under which TPL shall farm into the Pangani and Kilosa-Kilombero licences in Tanzania.

The agreement allows Swala to remain committed to these licences and to secure funding for future exploration activities in a way that minimises the risk to its current shareholders.

“This farm-out allows the company to fund its commitment obligations in a way that materially reduces the risk exposure to our shareholders without the need to raise additional share capital at this time,” Dr Ridge said.

In the oil and gas industry, a farm-out agreement is an agreement entered into by the owner of one or more licences (who ‘farms out’) and another company that wishes to acquire a percentage of ownership of that licence in exchange for providing services (and ‘farms in’).

A farm-out agreement differs from a conventional transaction between two oil and gas lessees, because the primary consideration is the rendering of services, rather than the simple exchange of money.

Dr Ridge said Swala will now focus on securing the necessary consents and governmental approvals to allow the newly formed joint venture to progress the drilling programmes on both licences and they look forward to updating the market with guidance on when these will begin.
Source: Daily News, reported by Masambe Tambwe, from Dar es Salaam, Tanzania
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