Govt, Invictus product sharing deal complete

Business Reporter

INVICTUS Energy, the Australian firm exploring oil and gas in northern Zimbabwe, says its legal counsel has completed the independent review of the petroleum product sharing agreement (PPSA) between the firm and the Government.

Apart from the PPSA ensuring the equitable sharing of value generated from the Cabora Bassa Project, the agreement will also provide a robust governing framework for Zimbabwe’s oil and gas sector.

Managing director Scott MacMillan said in a letter that the review completed by external European legal counsel was a major milestone for the company and was now fast approaching execution.

“Once executed, the PPSA will ensure the long-term success of the Cabora Bassa Project, which has potential to address the region’s growing demand for a reliable energy source,” MacMillan said.

Notably, the Mutapa Investment Fund, Zimbabwe’s sovereign wealth fund, which committed to underwrite US$5 million of the Invictus’ US$10 million capital raise earlier this year, was assigned the beneficiary of the PPSA product/profit share arrangement and equity holder, on behalf of the Government.

President Mnangagwa is on record saying the discovery of oil/gas in the country presented huge potential for economic growth, Zimbabwe’s petroleum industry, energy security, export generation, job creation and development of downstream industries among others.

MacMillan said the company’s transition from explorer to developer continued to progress well and Invictus had achieved significant further exploration success in Mbire, Manicaland Central Province, this year.

The company holds significant exploration rights in the Muzarabani District of the same province and is still in the process of evaluating the well-site of the successful oil/gas discoveries to determine the exact quantum of the resource available and negotiating with partners who will extract the deposits from the ground.

“We continue to discuss strategic partnerships and farm-out options with a range of stakeholders that have the potential to provide both the capital and expertise to support further exploration and development of the Cabora Bassa Project,” he said.

The Mukuyu field was earlier this year declared the second largest oil/gas discovery in Sub-Saharan Africa in an upstream review published by global energy research firm Wood Mackenzie last month. 

Mukuyu’s placing as an estimated 230 million barrels of oil equivalent (boe) and 1,3 Trillion cubic feet (Tcf) resource followed two gas discoveries from the Upper and Lower Angwa reservoirs declared by Invictus in December 2023. 

The review also noted that the regional exploration yielded seven discoveries from a total of 17 wells drilled across the subcontinent in 2023, with Invictus accounting for two of the discoveries. 

In September this year, following the Mukuyu 1&2 successful discoveries, Invictus announced eight new high-potential prospects had been defined in the company’s eastern Cabora Bassa Basin, totalling an estimated 2,9 trillion cubic feet (Tcf) gas and 184 million barrels of condensate.

MacMillan said this was a huge milestone for Invictus and highlighted the significant further potential of the project, in addition to the significant Mukuyu Gas Field discovered in late 2023.

“In 2025, our exploration focus will turn to the Musuma prospect to test the Dande play in eastern Cabora Bassa. 

“This prospect has interpreted seismic amplitude support and is estimated to have a recoverable prospective resource of more than 1 Tcf and 73 million barrels of condensate,” he said.

Invictus plans to complete a 3D seismic survey and further appraisal drilling at the Mukuyu Gas Field to determine future development well locations and commence the planned pilot project to provide gas to power the nearby Eureka Gold Mine. 

“We are on the cusp of something special, not only in terms of delivering a long-term, high-value natural resource development project but helping overcome critical energy issues that have been crippling at regional scale for many years,” MacMillan.

A Standard Bank document entitled South African Gas Optionality published in December 2023 noted that Africa accounts for 7 percent of the global proven natural gas reserves, a figure that is on the rise.

“Since 2000, the gas output volume in Africa has increased by over 70 percent. In coming years, it is likely that [a] record annual growth rate in production of around 3 percent could be reached on the continent, increasing from around 230 billion cubic metres (bcm) in 2020 to about 520 bcm in 2050,” says the study.

Algeria, Egypt and Nigeria accounted for more than 80 percent of Africa’s gas production in 2020, but this is likely to change going forward, particularly with new natural gas developments in Mozambique.

Mozambique is now the continent’s third-largest source of gas reserves and has emerged as a major player in the global liquefied natural gas (LNG) sector. Standard Bank says Mozambique should become the dominant provider of LNG for eastern and southern Africa.

Getting gas from offshore developments in Mozambique, Tanzania, Namibia, and Angola will however require major investment in gas pipelines to the hinterland.

Several such projects are currently under consideration, linking Dar es Salaam to Ndola in Zambia and Lobito in Angola to Lusaka. A third potential gas pipeline linking Walvis Bay in Namibia to Lusaka is also under consideration.

Tanzania is also on track to become a strong gas producer and exporter via the Tanzania LNG project, which is currently in the planning stage.

Africa has large reserves of natural gas, with Algeria, Egypt, Libya, and Nigeria having more than the entire European Union.

Natural gas is the cleanest burning fossil fuel.

The gas can help Africa achieve universal energy access, which is important because 600 million people in Africa lack access to energy.

In 2021, natural gas and oil made up about 40 percent of Africa’s energy mix.

Countries that use gas for power generation have seen their electricity supply grow faster than countries that don’t use gas.

Natural gas can be key to Africa’s industrialisation process.

Countries with access to natural gas, among them Algeria, Egypt, and Tunisia have relatively more developed economies where gas provides about half of all primary energy.

Nigeria, Mozambique, and Angola have historically looked to maximise the export value of gas.

Some African leaders have touted gas as a transitional fuel.

Policymakers face questions about how to balance the benefits of gas with the need to transition to clean energy.