Victoria Oil & Gas Inks Term Sheet in Cameroon: Update
(Adds comment from analyst at end)
Cameroon-focused Victoria Oil & Gas’ unit Gaz du Cameroun has signed a non-binding term sheet with Aksa Enerji Uretim to supply up to 25mn ft3/day of gas to its planned 150-MW power station, to be built in Bekoko, Douala.
The term sheet is subject to various conditions, including government approvals and the signing of a power purchase agreement by Aksa Energy with state-run utility Eneo Cameroon, Victoria Oil & Gas said July 29.
Gaz du Cameroun will supply the gas at $6.75/mn Btu for a period of 25 years. The parties have an option to extend the term sheet for an additional five years.
Aksa Energy is one of the largest independent power producers in Turkey. Earlier this month, minister of water resources and energy of Cameroon and Aksa Energy, entered into a memorandum of understanding to develop the power plant.
The location of the proposed power plant is expected to be near the Bekoko substation, near to Gaz du Cameroun's existing gas pipeline network.
Victoria Oil & Gas expects the term sheet to lead to a long term grid power contract which will support the long term field development plans of for both the Logbaba field and Matanda block in order to deliver the contracted gas for this project.
Contract 'truly significant': Malcolm Graham-Wood
This is a "truly significant contract and for all concerned parties," commented oil market analyst Malcolm Graham-Wood in his daily blog. "From the top down in Cameroon at presidential level, with ministerial involvement and of course the director general of Eneo all parties have worked with VOG and Aksa to make this happen. With Aksa hoping to have the power station up and running by 4Q 2020 this provides the opportunity to supply more gas from Logbaba and decent incentive for the well at Matanda next year.
"CEO Ahmet Dik has said that the deal ‘would dwarf the current level of gas sales and propel VOG into a profitable trajectory of growth which has always been our aim’. The modest rise in the share price today must reflect some degree of closing risk in the project," Graham-Wood said, "otherwise the enormous potential for VOG Ebitda which might see growth by multiples has really not been taken into account at all."