Victoria O&G Sees Sales Slump, But Eyes CNG
London-listed Cameroon integrated gas firm Victoria Oil & Gas has seen gas sales fall at its Logbaba project in Douala, with the failure of Cameroon's main generator and power utility Eneo to renew its gas offtake agreement at the end of December. However the company, which sells only into the domestic market, sees scope to expand sales in other ways - to industries, IPPs, and as a motor fuel (CNG).
VOG said May 24 it is confident of a resolution of the Eneo issue, and said it also gained four more industrial customers that need gas for in-house power generation, and that the power cuts in the country make its gas a more attractive alternative.
First-quarter 2018 gross gas sold was 330mn ft³, which was down 54% on Q4 17 and down 71% on the same period last year. Average daily gas production was 3.5mn ft³/day, compared with 7.94mn ft³ in Q4 2017 and 14.57mn ft³/d in Q1 2017. Net revenue was $2.5mn, compared with $4.4mn in Q4 2017 and $8.1mn in Q1 2017. As previously guided, the loss of revenue from Eneo, which accounted for about 53% of revenue in 2017, will be significant in 2018 and affect profits and results.
The revised year end production targets are 11.3mn ft³/d if Eneo is back online by July 1, and 7.8mn ft³/d if it stays offline. Bur revenues could go up from two initiatives: dedicated gas-to-power solutions for customers; and deliveries of compressed natural gas to power generators not on the grid now and running plant on liquid fuel.
VOG is also in talks with three grid-power customers to produce 150 MW, 140 MW and 150 MW respectively with the potential to consume 78mn ft³/d of gas in aggregate when operational.
CEO Ahmet Dik said that the loss of Eneo could mean a stronger and more diverse product base this year and said VOG has "developed gas reserves to meet industrial and grid power demand for large quantities of gas and power that is required by groups other than Eneo." Eneo has also been paying down its debt for past gas deliveries.
Despite the Eneo problems, VOG said it aims to build sales up to 100mn ft³/d by 2021. VOG subsidiary Gaz du Cameroun (GDC) is the only onshore gas producer in the former French colony and management estimates that with Logbaba and Matanda, it has recoverable gas resources of at least 1.5 trillion ft³.
VOG seeking to develop CNG
Speaking at the Africa E&P Summit conference in London May 23, VOG executive chairman Kevin Foo said the company was selling to industrial firms at prices ranging from $7 to $16/mn Btu, depending on size and regularity of offtake. He said the aim was to get Eneo back online, while also securing offtakes with independent power producers (IPPs) in the region such as the UK's Globeleq and Abu Dhabi's Taqa.
Foo said there was pent-up gas demand for a potential 200mn ft3/d within a 200-300km radius of VOG's operations, and one way it hoped to access some of that was through Compressed Natural Gas (CNG).
"We will work very hard to have a pilot CNG project by the end of 2018," he said, adding this would have 2mn ft3/d capacity and initially serve truck fleets and other vehicles that want to switch from diesel, now rising in price once again in Africa as everywhere, as oil prices recover.
Eneo is 44% owned by the state of Cameroon, 5% by Eneo employees but 51% by Africa-focused UK based investor Actis; sources say that the latter is losing income by the non-renewal of Eneo's gas offtake.