A proposed deal to transfer Orca Energy Group's Tanzanian gas business to Taifa Gas Tanzania Limited and Amber Energy Investment is facing a critical deadline. The Songo Songo development licence and certain gas supply contracts are set to expire on October 10. Orca Energy Group, the Canadian-listed parent company of PanAfrican Energy Tanzania Limited (PAET), announced on September 28 that the proposed transaction had not yet closed, raising uncertainty over the operating arrangements for the Songo Songo gas field.
The proposed transaction, announced on April 13, involves Orca selling all shares in PAE PanAfrican Energy Corporation (PAEM) to Taifa and Amber. Taifa would acquire 49 percent and Amber 51 percent of PAEM, which through PAET holds Orca's entire interest in Songo Songo. The agreed cash consideration is $10 for the shares, with Orca stating that the nominal price was in addition to the buyers' other contractual obligations and strategic benefits.
Orca Energy Group had announced its decision to exit Tanzania in April, citing uncertainty over the extension of the Songo Songo development licence and production-sharing agreement (PSA), as well as potential tax liabilities, capital expenditure, and arbitration and litigation costs. The company's board concluded that the Tanzanian assets had no material residual value in the near term, citing the ownership of geological data by the Government of Tanzania and significant contingent tax and other liabilities.
The immediate challenge is the approaching October 10 deadline, with Orca stating that the Songo Songo development licence and certain associated gas supply contracts are due to expire on that date. If the transaction closes before the licence expires, operations would continue under the new ownership, subject to applicable regulatory arrangements. If it does not, Orca said PAET may cease operating the field and associated infrastructure after the licence expiry.
PAET has informed its customers, TPDC, and relevant regulatory authorities about the uncertainty surrounding the timing of the transaction. PAET has recommended that TPDC, customers, and other stakeholders immediately advance transition planning, including operational familiarisation and asset-mapping exercises. The objective is to facilitate an orderly transfer of responsibilities if the transaction is not completed before the deadline.
For Taifa, the proposed acquisition would give it a larger role in Tanzania's natural gas sector beyond its established liquefied petroleum gas business. Taifa Group chairman Rostam Aziz described the transaction in April as a significant moment for Tanzania's energy sector, citing the potential for greater Tanzanian ownership to deepen industrial capacity and retain profits in the country.
The proposed transaction requires approval or clearance from the Fair Competition Commission, approval by the minister responsible for petroleum affairs, approval by Orca shareholders, and acceptance by the TSX Venture Exchange. Separately, Orca said Swala Oil & Gas (Tanzania) Plc and Swala UK Operations Limited had withdrawn all claims and causes of action against Orca, PAEM, and PAET in arbitration proceedings.
Key points
- The Songo Songo development licence and certain gas supply contracts are set to expire on October 10.
- Orca Energy Group's decision to exit Tanzania was driven by uncertainty over the extension of the Songo Songo development licence and production-sharing agreement.
- The proposed transaction requires multiple approvals, including from the Fair Competition Commission and Orca shareholders.
