Victoria Oil and Gas VOG

There has been a lot of excitement today as a very nice article appeared in the Daily Telegraph.
http://www.victoriaoilandgas.com/newsMedia/DailyTelegraph_CameroonSupplement_Feb2011.pdf

Victoria Oil & Gas
Sponsored by Peregrine Investments Ltd
Distributed with The Daily Telegraph


Victoria Oil & Gas to turn on first ever domestic gas supplies in Cameroon
By Pat Lay


AIM-listed Victoria Oil & Gas plc (“Victoria”) will shortly become the first producer and supplier of domestic natural gas in the Republic of Cameroon. Victoria is ready to lay the pipeline already shipped into country and finalise all necessary civil works in order to deliver gas to Douala-based industrial consumers in Q2 2011. The project is the first in Cameroon to deliver gas to industrial users, thus supplying cheaper, more reliable and cleaner energy where demand is growing rapidly.


Since its entry into Cameroon two years ago, Victoria has enjoyed a very positive experience. Chairman Kevin Foo stated, “Cameroon is an excellent place to invest with a stable and democratic government that welcomes outside investment and, in return, provides strong technical and professional project oversight.”


In less than two years of project involvement, Victoria has completed appraisal, development and commercialisation of the Logbaba Gas Field, which lies beneath the city of Douala, the industrial capital of Cameroon. Douala is the Central African regional base for international giants like the French Castel Group (SABC), Guinness and Nestlé.


One of Victoria’s most noteworthy customers, Cotonniere Industrielle du Cameroun (Cicam), is the largest textile producer in the country, with roughly 60 per cent market share, with current fuel costs of around US$2.2m a year. However, newly installed machinery to expand its operations and increase efficiency is still lying idle because of high energy costs and the unpredictable nature of power supplies in Cameroon. Cicam estimates that converting to gas could lower its energy costs by up to 30 per cent per annum.


There are nine customers within ten kilometres of the plant, who have already contracted for gas supplies and many others are in active consultation with the company. Victoria estimates that there are in excess of forty potential industrial customers capable of taking large volumes of gas for raising the heat needed for their manufacturing process and/or for their own onsite power generation. Victoria’s customers expect to make significant savings from their existing energy costs when the lower energy price is coupled with increased efficiencies, zero storage costs and lower maintenance requirements associated with using gas. The other major advantage is the environmentally cleaner nature of gas and the lower carbon footprints that are generated.

The Government of Cameroon intends to triple power generation in the next 10 years and much of that will be generated by gas. One of the biggest problems facing the country today is the lack of generation capacity and many industrial customers have cited constant power disruptions as a hurdle to future economic growth and corporate expansion. This puts Victoria in a very good position, for not only does the Company operate the only onshore gas discovery in the country, giving them first-mover advantage, but it has also the required proven and probable reserves to meet much of the future demand.


Victoria’s gas to power strategy is two-fold. Once the pipeline infrastructure is in place and gas supplies are underway, the Company anticipates a large proportion of this existing customer base to readily enter into additional gas purchase contracts for their own onsite gas-fired power generation. Although this requires an initial capital outlay on the part of the customer, the advantages of a lower-cost, uninterrupted power supply greatly outweighs this initial capital cost.


Once gas supplies are on stream, the Company expects many new industrial customers who desire a reliable onsite power source to also become customers. The fuel cost of diesel power generators currently available to the market is approximately twice the price of Victoria’s supply contract price.

Power projects are a high priority in Cameroon and so the Company has also commenced discussions with the Government for participation in a large gas-fired power project, which would be connected to the existing power grid.

Since Victoria acquired its interest in the concession two years ago, it has managed to increase proved reserves five-fold and has more than doubled proved and probable reserves. These reserves are attributable to a total of six wells. Victoria anticipates drilling many more wells in the Logbaba natural gas field to meet future demand.


As far as Victoria is concerned, this is just the end of the beginning; 90 per cent of the licenced block remains unexplored, and the best location within the current structure has yet to be drilled.
International languages spoken in Cameroon include French and English, and there are abundant well-educated professionals and experienced local labour with a solid work ethic. Given its positive experience, the Company may also seek further on-shore licences, and believes excellent growth prospects lie ahead for Cameroon.


For its part, Victoria Oil & Gas, working closely with SNH, the State-owned hydrocarbon company, has invested more than US$70m on the Logbaba development and facilities and will provide nearly 100 jobs during the construction of its pipelines, and 50 more during steady-state operations. All construction is carried out to top UK specifications and the whole operation, when completed, will provide a major boost to the Cameroonian economy.
This has given many investors a lot of hope that the licence may be issued shortly. One poster was suggesting that the sp may be 7p on Monday. We will see but it can certainly do no harm!!