The Mnazi Bay Production Sharing Agreement (“Mnazi Bay”), is located onshore southern Tanzania (Mtwara region), approximately 410 km south of Dar es Salaam, covering an area of 756 km2. The Mnazi Bay asset is operated by Maurel et Prom (48.06%) with the Tanzania Petroleum Development Corporation “TPDC” (20%) and Wentworth Resources (31.94%) as joint venture partners.
The Mnazi Bay & Msimbati gas fields have been onstream and continuously producing since January 2007, initially through a testing and commissioning phase at c.2.5MMscfd to Mtwara. In October 2015, the Madimba gas processing plant was completed and commissioned, allowing production to be ramped up to 44 MMscfd in 2016. Production continued to grow to c.50 MMscfd in 2017. In 2018 production has averaged 82 MMscfd year to date and 86 MMscfd in Q3, from five producing wells. The Joint Venture is contracted (“DCQ”) to supply 82.5 MMscfd, with a Gas Sales Agreement (“GSA”) option to increase to 130 MMscfd.
The increase in production to the current plateau levels, has resulted in operating expenses being reduced from $1.16/Mscf in H1 2017 to $0.43/Mscf in H1 2018, as the mainly fixed costs are distributed over a larger production base.
Within Tanzania, Mnazi Bay is the leading domestic gas to power (“GTP”) supplier, with a c.53% market share.
Tanzanian power generation capacity is currently c.1,500 MW, with some 780 MW derived from Natural gas.
Demand for Mnazi Bay gas is currently in excess of 95 MMscfd. Future demand is ramping up significantly, with Mtwara, Sumanga-Fungo, Kinyerezi III and Kinyerezi IV power plants all planned, with a projected combined additional demand of 180 MMscfd.
To the Company’s knowledge, there are currently no uncommitted onshore 2P gas reserves to supply the near to mid-term Tanzanian demand requirements.
As part of the redomicile and AIM re-admission process, the Company commissioned an RPS Canada Competent Persons Report (“CPR”) evaluation of the Mnazi Bay field’s reserves which has resulted in gross 2P reserves of 541 Bscf of gas, with 111 Bscf of net attributable 2P reserves to Wentworth Resources (with an effective date 31 May 2018). The NPV15 of the 2P reserves (net to Wentworth) was estimated at $121 million USD after tax (on a life-of-field basis). RPS Canada estimated the upside reserves potential (3P) for the Mnazi Bay field at 817/152 Bscf (gross/net). This CPR is available on the Company’s website as of today and a reserves summary table follows below.
|Oil and Gas – Reserves at 31 May 2018
Mnazi Bay Licence, Tanzania
|Proved||Proved + Probable||Proved + Probable + Possible||Proved||Proved + Probable||Proved + Probable + Possible|
|Oil & Liquids Reserves MMstb|
|Mnazi Bay Gas Field||–||–||–||–||–||–|
|Total for Oil and Liquids||–||–||–||–||–||–|
|Gas Reserves Bscf|
|Mnazi Bay Gas Field||295||541||817||69||111||152|
|Total for Gas||295||541||817||69||111||152|
Activity & Production Outlook
Given the field is producing on plateau from the current well stock, Joint Venture technical and operational activity has focused on better understanding in-place volumes, reservoir connectivity, future production profiles, outlining infill well locations and defining additional exploration potential on the block. These initiatives combine to ensure an integrated and pro-active field management strategy moving forwards.
From late August to early September 2018, slickline operations were performed in the MB-2, MB-3, MB-4, and MS-1X wells to remove downhole memory gauges, perform static pressure gradient surveys, and re-install downhole memory gauges. This pressure monitoring campaign is ongoing and will help to address the remaining uncertainty with regards to the in-place (and recoverable) volumes in the Mnazi Bay field and the connectivity between the wells in the different reservoir intervals, with near-term focus on the lower MB interval, currently producing from the MB-1 well only.
Critically, the Mnazi Bay partners are working closely together to ascertain production profiles and plateau periods that can be achieved for different recoverable volumes, flow rates, pipeline inlet pressures and compression scenarios. The results from this work suggest that at current stabilized production of 82.5-90 MMscfd, the plateau can be maintained until sometime between mid-2024 and late-2026, with limited capital expenditures (“CAPEX”). Although the GSA provides the option for volumes of up to 130 MMscfd to be delivered, the Company does not believe this will be achieved until certain commercial conditions have been satisfied.
In order to increase field production rates closer to a 130 MMscfd plateau, while still maintaining the capability to provide minimum contractual volumes of 80 MMscfd to Madimba (TPDC) and 2.5 MMscfd to Mtwara (TANESCO), Wentworth believes that additional well recompletions and/or drilling and compression facilities will be required in due course.
In order to sustain and/or increase the Mnazi Bay production plateau Wentworth (along with the Operator) is focused on four key value catalysts:
Unlocking these commercial triggers will allow the Joint Venture to extend and materially increase the current production plateau of 82.5-90 MMscfd with confidence, as well as access, unlock and convert the existing material prospective resource base to 2P reserves.
Joint Venture discussions are ongoing between various Tanzanian stakeholders to secure fair and equable outcomes on these issues, which ultimately will help satiate a demand hungry landscape.
Wentworth has undertaken a detailed review of the exploration potential of the greater Mnazi Bay area and as such has identified a material prospect and lead inventory. Seven of the highest potential leads were evaluated by RPS Canada as part of the reserves and resources evaluation, which ascribed P50 full block gross prospective resources at greater than 1.5 Tcf.
Wentworth is currently working with the operator to determine how to best de-risk the running room portfolio and developing a strategic plan towards converting these material resources to future 2C and 2P reserves.