Orca Exploration announces Government approval of Additional Gas Plan 2 doubling Songo Songo gas supply for market

TSX-V: ORC.A, ORC.B

TORTOLA, British Virgin Islands, July 27, 2017 /CNW/ - Orca Exploration Group Inc. ("Orca" or the "Company") announces the approval of the Second Additional Gas Plan ("AGP-2") by the Government of Tanzania, more than doubling the available volume of Additional Gas for sale from the Songo Songo Field.

Under the Production Sharing Agreement for the Songo Songo gas field, production is identified as "Protected Gas" or "Additional Gas."  Prior to being permitted to market and sell increased volumes of Additional Gas from the Songo Songo Field, under its Project Agreements the Company is required to prepare and submit for approval an Additional Gas Plan that demonstrates how such demand for Additional Gas can be met to the end of the existing licence in 2026, while assuring the continued and reliable supply of up to 45 MMscfd of Protected Gas to 2024.  Preservation of Protected Gas is vital to the economics of the overall Songo Songo project.  Protected Gas is supplied to the Tanzania Petroleum Development Corporation ("TPDC"), for the state oil company's onward sale to Songas Limited ("Songas") and the Tanzania Portland Cement Company ("TPCC"), while volumes are also used for village electrification along the Songas Pipeline route. Protected Gas enables Songas to generate and sell electricity to TANESCO at approximately US$0.05 per kWh, making Songas the lowest cost supplier of gas-fired power generation in Tanzania.

Additional Gas is produced by the Company's subsidiary, PanAfrican Energy Tanzania Ltd. ("PAET") and TPDC, and is sold to the Government's electricity company TANESCO, to TPCC above and beyond their allocation of Protected Gas, and to 39 industrial customers in Dar es Salaam.  Approval of AGP-2 was initially sought from the Company's partner, TPDC, and from Songas, prior to seeking final approval by the Tanzania Ministry of Energy and Minerals ("MEM"). After a rigorous preparation, review and approvals process which lasted more than two years, AGP-2 was ultimately approved by MEM last week.

Beyond ensuring the supply of Protected Gas to 2024, and the increased sale of Additional Gas to 2026, AGP-2 also contemplates additional field development to support and optimize the Songo Songo production profile through the life of the field. 

The Company completed Phase 1 of the Songo Songo Development Program (the "Offshore Program") in February 2016 with the recompletion of SS-5, SS-7, and SS-9, together with the drilling of SS-12, at a cost of US$80 million, and supported by a facility from the World Bank International Finance Corporation ("IFC"), productive capacity of the Songo Songo Field has been increased significantly, to potentially more than 180 MMscfd.  With current average production of approximately 90 MMscfd, the Company has a further 90 MMscfd behind pipe and available for sale.  Approval of AGP-2 by the Government has unlocked the potential to market these already developed gas volumes, and presents the opportunity to deliver significant new sales volumes by accessing the substantial spare processing and transportation capacity, assessed to be approximately 700 MMscfd, in the Government of Tanzania's National Natural Gas Infrastructure Programme ("NNGIP") commissioned in late 2015. 

The Company is already in the final stages of negotiations with TPDC regarding a Gas Sales Agreement for 15 MMscfd, which if concluded would represent more than a 36% increase on average Additional Gas sales for the first 6-months of 2017.  The Company has also identified and is developing additional markets among existing industrial customers, new industry and Government gas-fired power generation which, based on current forecasts, has the potential to contract for sale all of the existing and potential new productive capacity of the Songo Songo field to the end of the license.  Additional supply could be developed to meet further demand, but such field development would be subject to prevailing economics being suitable at the time.  

PAET Managing Director David K. Roberts stated, "approval of AGP-2 is a decisive milestone in the already incredible story of the Songo Songo project.  The project, a Government of Tanzania initiative, in partnership with the World Bank and the private sector developers, has been in the vanguard of the burgeoning gas industry in East Africa for nearly a quarter of a century, and has already delivered innumerable benefits and savings to the Government and the people of Tanzania.   Attaining approval of AGP-2 has taken considerable effort by the management and staff of TPDC, Songas and PAET, who have worked together as a team to achieve this objective.  It now takes the Songo Songo partners to the next stage of the project. We are excited by the future, and are very grateful to the Government of Tanzania for its cooperation and support of this project.

About Orca Exploration Group Inc.

Orca is an international public company engaged in natural gas exploration, development and supply in Tanzania through its wholly-owned subsidiary, PAET. Orca trades on the TSX Venture Exchange under the trading symbols ORC.A and ORC.B.

Neither the TSX Venture Exchange nor its Regulation Service Provider (as that term is defined in the policies of the TSX Venture Exchange) accepts responsibility for the adequacy or accuracy of this release.

Forward Looking Information

This news release contains forward-looking information. More particularly, this news release contains statements and information concerning, but not limited to, the anticipated effect of AGP-2 on the Company's available volumes of Additional Gas for sale; additional Songo Songo field developments contemplated in connection with AGP-2; the current and potential production capacity of the Songo Songo field; the Company's ability to access new markets; the Company's ability to produce additional volumes; the Company's ability to access additional processing and transportation capacity; the status of ongoing negotiations with TPDC; the potential increase in sales volumes associated with new Gas Sales Agreements; the Company's ability to locate and bring online additional supply in the future; and other matters. Although management believes that the expectations reflected in the forward-looking information are reasonable, it cannot guarantee future agreement, levels of activity, access to resources and infrastructure; performance or achievements since such expectations are inherently subject to significant uncertainties and contingencies. As a consequence, actual results may differ materially from those anticipated in the forward-looking information.

Forward-looking information involves substantial known and unknown risks and uncertainties, certain of which are beyond Orca's control, and many factors could cause the actual results to differ materially from those expressed or implied in the forward-looking information presented by Orca, including, but not limited to: risk of a lack of access to Songas processing and transportation; risk that Orca may be unable to complete additional field development to support the Songo Songo production profie through the life of the field; risk that Orca may be unable to develop additional supply or increase production values; risks associated with Orca and PAET's ability to complete sales of Additional Gas; risk that Orca will be unable to access new markets; risks regarding the uncertain evolution of Tanzanian legislation; risk that the Company may be unable to replace production from declining reserves; risk that Orca will be unable to negotiate additional Gas Sales Agreements; inability to achieve full production capability due to infrastructure constraints; the impact of general economic conditions in the areas in which Orca operates; changes in laws and regulations including changes in how they are interpreted and enforced; the lack of availability of qualified personnel or management; fluctuations in commodity prices, foreign exchange and/or interest rates; obtaining certain required contractual approvals and approvals of certain regulatory authorities; risks associated with negotiating with foreign governments; risk that the Company will be required to pay additional taxes and penalties; delays in drilling plans; failure to obtain expected results from drilling; inability to access sufficient capital; and risk that the Company will not be able to fulfill its obligations. Actual results, performance or achievements could differ materially from those expressed in, or implied by, the forward-looking information and, accordingly, no assurances can be given that any of the events anticipated by the forward-looking information will transpire or occur, or if any of them do so, what benefits Orca will derive therefrom. Readers are cautioned that the foregoing list of factors is not exhaustive.

Such forward-looking information is based on certain assumptions made by Orca in light of its experience and current knowledge of the circumstances, as well as other factors Orca believes are appropriate in the circumstances, including, but not limited to: that the Company will be able to negotiate Additional Gas Sales contracts in relation to the approval of AGP-2; that the Company will be able to complete additional developments and increase its production capacity; that the Company and TPDC will agree to the terms of a Gas Sales Agreement; infrastructure capacity; the ability of Orca to obtain equipment and services in a timely manner to carry out exploration, development and exploitation activities; future capital expenditures; availability of skilled labour; conditions in general economic and financial markets; commodity prices will not further deteriorate significantly; current or, where applicable, proposed industry conditions, laws and regulations will continue in effect or as anticipated; and other matters.

The forward-looking information contained in this news release is made as of the date hereof and Orca undertakes no obligation to update publicly or revise forward-looking information, whether as a result of new information, future events or otherwise, unless so required by applicable securities laws.

SOURCE Orca Exploration Group Inc.

For further information: W. David Lyons, Chairman and CEO, +44-7717-100-200, wdlyons@orcaexploration.com

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