Tanzania: Unusual Dispute around Petroleum Rights - Africa’s premier report on the oil, gas and energy landscape.

Tanzania: Unusual Dispute around Petroleum Rights

Two partners in a Tanzanian licence are involved in very unusual dispute over payments of cash calls.

Ordinarily, the operator of the licence leads the other partners and spends the money on operations, while the non-operating partners pay their share of the cost, sometimes after the fact.

This means that more often than not, the operator is the most aggressive partner.

However, in thecase between  two Australian minnows: Swala Oil &Gas and Otto Energy, both of whom are partners in the Tanzanian onshore Pangani and Kilosa Kilombero acreages, anon operating partner is accusing the operator of laxity and not paying cash calls (ie. Agreed contribution for opex and capex) and is demanding to take over operatorship.

Otto Energy and Swala Oil&Gas each has 25% of the assets. Each of them initially had 50%, but had farmed down to other partners.

Otto Energy says it has issued i variousdispute notices toSwala Oil and Gas Tanzania, the Dar es Salam listed local subsidiary of the Australia listed Swala Oil and Gas.

These notices relate to: (1). defaults in relation to non payment by Swala Oil and Gas Tanzania of cash calls and associated interest accrued under the Joint Operating Agreements (JOAs); (2). claims by Otto Tanzania for payment of interest accruing under the JOAs as a result of Swala Oil and Gas Tanzania’s default samounting to approximately $360,000; and (3). the removal of Swala Oil and Gas Tanzania as operator of the Kilosa Kilombero licence area, following that company’s

“failure to satisfy the joint venture partners that it is not insolvent”. Otto contends that “the matters raised in these notices are unrelated to the current Federal Court proceedings brought by Otto Tanzania against Swala Energy Limited (In Administration)”

The company argues that “these steps are the most appropriate course of action to ensure that joint venture operations, including the drilling of the planned Kito-1 exploration well, are undertaken by a joint venture which has the financial and technical capability to ensure the efficient and safe completion of drilling. Otto Tanzania believes it is likely that the joint venture will be unable to progress the drilling of the Kito-1 well in 2016 until the joint venture disputes are resolved”.

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