Dubai-based Dodsal Group has announced that its first gas exploration project is likely to reap much more revenue than initially estimated.
The company said that the first two of its three onshore gas fields explored – in the Mambakofi and Mtini regions – are likely to contain 2.7 trillion cubic feet of gas, versus the 2.17 trillion cubic feet (tcf) that had been announced by the Tanzanian government in February.
Dodsal said that based on current agreements between Tanzania and other small producers, in which the former buys gas at a price of $3 per 1,000 cubic feet, the two fields should be worth $8bn in revenue.
Further, it said there was a “potential upside” for the fields to produce up to 3.8tcf, which would be worth about $11bn. Any profit after production costs would then be split on a 50/50 basis with Dodsal’s state-owned partner, Tanzania Petroleum Development Corporation.
Dodsal's chairman and president, Rajen Kilachand, said that on top of this a third gas column has been found on the western side of its 7,500 square kilometre licence area, which is estimated to contain up to 5.9tcf of gas, although the company said that studies were still ongoing in this area.
“We are kicking off a programme for an early production system to bring this gas to market, and simultaneously continuing exploration activities in the rest of the territorial block,” Mr Kilachand said.
Dodsal has spent more than $200 million on exploration activities since it commenced drilling in Tanzania in 2009 and now expects to invest a further $500m on an early recovery system to extract the gas. It is looking to raise about $250m of this through bank debt, and is in talks with banks in both the UAE and London to secure this “we hope by June or July”, said Mr Kilachand.
Dodsal is a privately-owned, UAE-based company with operations in several GCC countries, as well as Tanzania, Algeria and India. It employs about 10,000 people and its main source of work has been as an EPC contractor on other oil & gas and industrial projects.
Mr Kilachand said that it intends to carry out the work to build the Tanzanian plants itself.
“We do this for a living,” he said.
He expects the first gas to be produced from its Tanzanian fields by the first quarter of 2018 and says the Tanzanian government will initially be its sole customer.
In the longer term, there is potential for export, but Mr Kilachand said this “depends on the final quantities and our discussions with the government”.
“Our first priority is to ensure there is sufficient gas for the Republic of Tanzania over the next two decades.”
Salam Awawdeh, a partner and Middle East energy and resources leader with Deloitte, said that the gas discovered to date in Tanzania since 2004 has largely been used to generate electricity and for industrial customers within Tanzania.
“Exploration success since 2010 has raised Tanzania’s profile as a potential supplier of LNG to Asian markets, along with its neighbour, Mozambique,” he added.
“East Africa has recently witnessed increasing gas reserve discoveries in Tanzania and Mozambique, and if recent discoveries are confirmed, Tanzania would be in a leading reserves position.”
If that were the case, East African producers would find willing buyers in India, according to a recent BMI report.
It said that India’s net imports of liquefied natural gas are likely to double over the next 10 years, driven by a combination of increasing demand and flat domestic production.
“Our data shows that the country will require about 24.9 billion cubic metres [880 billion cubic feet] of imports in 2016, which will subsequently climb to 56bn cubic metres [1.98 trillion cubic feet] by 2025.”
mfahy@thenational.ae
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