(MENAFN- ProactiveInvestors)Shareholders in Aminex have had to be a very patient lot of people. For well over a year they have been on tenterhooks about when the company would finally bring its Kiliwani North-1 gas well In Tanzania into production. The KN-1 gas well is on the Kiliwani North field in which operator Aminex has a 58.5% interest with Solo Oil currently holding a 6.5% stake is on the landward side of Songo Songo Island. The well tested at 40mln standard cubic feet of gas a day(mmscfd). It has been completed and ready to produce for quite a while but it has taken an unconscionably long time to build a pipeline to markets and particularly to conclude a gas sales agreement (GSA) with the Tanzania authorities in the form of the Tanzania Petroleum Development Corporation (TPDC). However the pipeline (a spur from the main 540km 36 inch Mnazi Bay to Dar es Salaam pipeline) together with processing facilities has now been completed with Chinese loan financing and the sales agreement has been sorted in just about every aspect it seems. But it still has not been signed off. Does this means that the political risk involved in working in Tanzania has thrown up if not an insuperable commercial obstacle then a problem that can allow the authorities to keep kicking the can down the road for as long as it suits them as they say Beating the bushes trying to flush out what exactly the trouble has been I spoke to two brokers in London both of whom did not want to be named one said: 'I think the problem is that for political reasons the politicians do not want to be seen handing over large sums of money to one of those damned foreign oil and gas companies without first getting their hands on the gas.' The second broker said: 'The problem is called payment protection guarantees. You must remember that Orca the company that runs the Songo Songo gas field Tanzania's only current producer had outstanding payment issues with the TPDC. The companies usually want to ensure that some kind of third party like the European Bank for Reconstruction and Development (EBRD) will underwrite payments from the TPDC.' I then spoke to Jay Battacherjee who has been Aminex's chief executive for the past two difficult years and relayed to him what the brokers had said to me. He replied: 'Neither of those scenarios is quite right. Yes the companies do want to be sure they will be paid for their gas. I refer you to what Wentworth Resources said when they signed their first gas sales agreement with the TPDC'. Wentworth together with operator French group Maurel & Prom operates a Manzi Bay field in the south of Tanzania and is the only other foreign consortium apart from the Aminex/Solo partnership producing new gas for Tanzania internal consumption. Wentworth said: 'The partners have agreed payment security terms with TPDC the buyer of the gas and various other parties'. Battacherjee added: 'I can tell you that a gas sales agreement between us and the TPDC will be signed shortly and there will be payment guarantees in place. Yes there are political risks in working in Tanzania. This is not Texas. But the authorities have been very supportive in everything we have tried to do there.' As well they might be. Tanzania is not a rich country but as an emerging economy it is actually emerging with economic growth rates that have been running at 7% a year. There is a huge demand for energy. Estimated 2016 demand from existing and new power plants is around 120 mmscfd. Gas demand is expected to grow to 475mmscfd by 2018. So Aminex is in the right place at the right time. Getting KN-1 into production is very important for Aminex. It would establish first output for the company and therefore first meaningful revenue. Not only would this help alleviate the company's debt burden which has been such a drag on the share price these last two years it would also allow development to progress on another of Aminex's Tanzania assets the Ruvuma production sharing agreement (PSA) which could be company-making . All-in-all therefore political risk in Tanzania is something Aminex has had to learn to live with.
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