Cameroon Gets Cheaper Gas from VOG

AIM-listed Cameroon producer Victoria Oil & Gas (VOG) said June 26 it has extended its gas supply agreement with Eneo, the Cameroon utility jointly owned by UK emerging markets investor Actis and the Cameroon government, until December 31 2017. But it is at a lower price.

VOG said this will enable both its wholly-owned Gaz du Cameroun as well as Eneo to optimise all technical and financial elements of a long-term gas supply arrangement aimed at increasing the current contractual power supply of 50 MW to beyond 100 MW. The take-or-pay components will remain in place and, until year end, an interim gas price of $7.50/mn Btu has been agreed.

That represents a reduction from the $9.00/mn Btu contract price to Eneo that VOG reported to investors on April 1 2017 under the contract to Eneo that expired April 22. Smaller industrial buyers are understood to pay higher prices for their gas. 

Eneo's success in negotiating a lower price may reflect confidence that the 2H 2017 launch of Cameroon FLNG, West Africa's first floating liquefaction project which is led by Perenco and supported by Golar, may lead not only to large export cargoes but eventually also to smaller volumes for regas into the domestic market.

VOG reported its gas sales in Cameroon averaged 10.23mn ft³/d in 2016. However CEO Ahmet Dik expects the market to grow: "VOG and Eneo have agreed that gas supply will continue until the end of the year. We are working with Eneo to create long term solutions, using natural gas for power generation beyond 100 MW. We believe there is demand for more than 150mn ft³/d in Douala and we are in discussions with third party independent power producer licensees to supply gas." Drilling of two new wells on its Logbaba licence continues and VOG said it would provide an update shortly.

Mark Smedley