Victoria Oil & Gas plc Confirms New Customers: Production Could Double

Victoria Oil & Gas customer site

Victoria Oil & Gas is using its producing Cameroon gas field, Logbaba, to create a gas supply network for industry in the Doula region of Cameroon, bypassing the country’s unreliable power grid and cutting customer costs (image copyright Victoria Oil & Gas)

An interesting update from Victoria Oil & Gas plc (LON:VOG) this morning. The firm has agreed a deal with Cameroon’s only electricity utility to begin a program aimed at converting it from fuel oil to gas-fired generation.

The deal, along with a couple of smaller agreements also confirmed this morning, should see the firm’s gas production double during the first half of this year, in my opinion.

Victoria has also received a payment of $4.1m, the first of several owed the firm by ‘new’ partner RSM, following the recent ICC arbitration award (see here for details and my analysis of the possible implications of this award).

Double gas production?

Victoria’s hoped-for production increase at the back end of 2013 didn’t materialise, but there could be better news this year. AES-Sonel, Cameroon’s sole electricity utility, currently supplies 192MW of electricity into the Douala region (where VOG operates) from fuel oil generators.

Victoria’s Cameroon operating company, Gaz du Cameroun (formerly Rodeo Development), will initially supply temporary gas-powed units with a combined capacity of 45MW to replace some of the fuel oil-powered generation. Gas consumption is expected to be between 2.6 – 5.9 mmscf/d, which should along with the delayed SOCAVER and Dangote deals also announced today, should approximately double the firm’s current gas production.

RSM cash machine

The RSM cash machine has started paying out, and has now paid the $4.1m cash call submitted by VOG after the ICC Arbitration Award on 13 December 2013.

Victoria says that further cash calls have been submitted, and according to the RNS announcement relating to the award, the next one should be approximately $20m.

RSM’s apparent compliance, so far, with the ICC award, continues to make me wonder about its motivations — see my earlier analysis — but I am still none the wiser.

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