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Fresh from making a major gas condensate discovery in Zimbabwe, Australian junior Invictus Energy is juggling multiple balls as it plans an major exploration and appraisal drilling campaign in a frontier play, while also entertaining farm-in offers and ensuring the Harare government is on the same page when it comes to a development.
In December 2023, Invictus declared a discovery at its Mukuyu-2 well in the Cabora Bassa basin, a find that consultancy Wood Mackenzie estimates could house resources of 230 million barrels of oil equivalent in two reservoirs, the Upper and Lower Angwa.
Speaking to Upstream earlier this month, managing director Scott Macmillan said Mukuyu-2 has been suspended in readiness for a flow test to be carried out.
“We've been doing design work to determine how best to conduct the flow test, because there's a lot of equipment that we need. It's ensuring that we get the biggest bang for our buck in terms of information and what we're trying to achieve.”
While these studies are under way and based on a longer term drilling requirement, Invictus is in negotiations with all its service providers “to reset our contracts… because, for the first wells (Mukuyu-1 and -2), we couldn’t get the best terms”, explained Macmillan.
Born and bred in Zimbabwe, he said the big challenge is to get mobilisation and logistics part right for operations in a remote part of inland Africa.
“That's the expensive part.”
With all the data secured from the initial basin wells, Macmillan said: “We’re in a much better space and we think the wells are going to be 40% cheaper. We know now how quickly we can drill and the total number of days for a well has come right down.”
Invictus is pulling together an integrated well campaign, involving appraisal drilling on Mukuyu and exploration wells on huge swathe of adjacent exploration acreage.
Key tests
“We want to run some key tests on plays we haven't drilled yet, so we've been putting all the pieces together for testing, appraisal and exploration because it's a far more efficient way to do it.”
He said the exploration team is “pretty excited” about the eastern part of the company’s license area where interpretation of seismic data is “very, very encouraging".
The data show “very nice amplitude-supported prospects across multiple vintages of seismic and across multiple lines” in a shallower play than Mukuyu.
Another exploration trend on Invictus’ acreage include an eastern basin margin string of pearls’ play, thought to have similarities with Tullow Oil’s legacy oil discoveries in the East African Rift System.
Invictus is also talking to a contractor — thought to be Canada’s Polaris — to shoot 3D seismic over Mukuyu to help understand the structure better.
“That's nearly ready to go,” said Macmillan.
Partner hunt
Invictus holds an 80% stake in Mukuyu and would farm down its interest if the right deal comes along.
“We've accelerated that process so we can bring a partner in and put together a work programme that will provide us with a comprehensive evaluation of the basin.”
A potential deal with Cluff Energy fell through in 2022, since when Invictus has focused on proving the Cabora Bassa basin holds hydrocarbons, although Macmillan said: “We had a few other offers as well.”
Because Invictus has managed to get through the discovery phase with a high amount of equity, it is now in a decent negotiating position with lots of options to play with.
To date, the interested parties include traditional E&P players and service companies which would provide services for licence equity or a share of future production.
Also at the table are offtake partners which are looking to secure preferential gas supply because, said Macmillan, “it's an arms race for everyone” given the dire energy supply situation in the southern African region.
Also evaluating Invictus’ assets are strategic investors in Zimbabwe and regional development banks which, he said, “understand the energy crisis, the opportunity and the need for (Mukuyu to be) developed quickly".
Macmillan said: “We're in active discussions on every single one of those. We've got a few levers to try to get an optimal arrangement.”
He is reluctant to publicise a timeline by when a farm-out could be done, saying only that the quicker the better.
“We're looking to ensure we've got a deal that will see the work programme funded and will allow us to concentrate on executing it to unlock value in Mukuyu and the rest of the expedition portfolio.”
Sanctions lifted
An important event that has helped the partner search is the US government’s recent lifting of 21 years of sanctions against Zimbabwe.
This move, said Invictus, has eliminated a barrier to partnering and participation in the project previously identified by some parties.
Another company goal is to push ahead with a pilot gas-to-power project, a “proof-of-concept” for what Invictus is trying to do in Zimbabwe and which can be scaled up as demand increases.
It has signed a provisional deal to supply electricity to the Eureka gold mine, one of the biggest in Zimbabwe that currently runs on diesel.
The mine owners want to secure more reliable and more affordable power, said Macmillan, because their margins are being hit by being forced to increase the use of diesel due an unreliable electricity network.
Invictus’ initial plan is to supply 2 million to 3 million cubic metres per day of gas to an 8 to 12 megawatt power plant that can be expanded to 50 MW.
Because Mukuyu’s gas has so few impurities, it can be tapped using a very simple processing plant that just knocks out the liquids.
Also a priority for Macmillan is to finalise the details of a production sharing agreement with the Zimbabwe government — which is currently based on a royalty tax arrangement — in order to give investors the confidence to fund a development over the long term.
“Our financiers, shareholders and backers want to be confident there’s going to be a stable, long-term fiscal framework in place; and that there’s not a temptation, down the track, as there is with a royalty system which can be hiked up with just one swift stroke of a pen,” he said.
“By having a PSA in place with stabilisation clauses, everyone knows what the rules are. It's a rate-of-return based arrangement so that it works for everyone."
