The company said it aims to drill two new wells and expand production at a third existing well to tap demand for gas for power generation and industrial use.

"PanAfrican Energy ... expects to increase its gas production capacity from 113 million standard cubic feet per day (MMcfd) to over 250 million standard cubic feet per day in the coming months," the company said in a statement emailed to Reuters on Sunday.

The company's general manager, Andrew Brown, said the energy firm would spend $130 million to boost output at its main Songo Songo gas field in southern Tanzania, with the drilling of two new wells and the expansion of an existing third well.

"With demand for gas having increased since production began in 2004, PanAfrican Energy will be raising production capacity of gas in line with Tanzania's energy infrastructure drive, and is helping plan for all areas of potential expansion with the industry and the economy as a whole," said Brown.

Drilling of the first of the new wells is expected to begin in late November or early December, said the company.

Orca operates the Tanzanian project via its wholly owned subsidiary PanAfrican Energy and in cooperation with power company Songas, a consortium including state-run Tanzania Petroleum Development Corporation and Bermuda-based Globeleq.

It supplies gas to 35 industrial customers and for power generation for the national grid by Songas and state-run Tanzania Electric Supply Company (TANESCO).

Tanzania's natural gas reserves are seen at more than 10 trillion cubic feet (tcf) from a previous estimate of 7.5 tcf following major gas discoveries offshore.

The Tanzanian government has shifted its focus to thermal-powered power projects to wean itself off rain-dependent hydropower stations.

Hydro power accounts for 55 percent of the energy sources in Tanzania, with prolonged drought resulting in chronic energy shortages in the country.

Tanzania signed a $1 billion loan agreement in September with China to build a 532-kilometre natural gas pipeline from Mnazi Bay and Songo Songo island in the south of Tanzania to the country's commercial capital, Dar es Salaam.

Energy demand is expected to grow to 1,583MW by 2015 from the current demand of around 1,000MW, according to estimates by the country's energy ministry.

The International Monetary Fund (IMF) cut its 2011 growth forecast for Tanzania to 6 percent from 7.2 percent in March, saying frequent power outages would hurt output while food and fuel prices could push inflation higher.