IVZ media thread, page-5748

ASX-listed independent Invictus Energy is pioneering upstreamdevelopment in Zimbabwe. Managing Director Scott Macmillan spoke with PetroleumEconomist about the company’s progress and plans.

Can you give us an update on progress at yourMukuyu project?

Macmillan: In December 2023, we declaredtwo gas discoveries from our Mukuyu-2 well drilling programme in the Upper andLower Angwa reservoirs, with the recovery of moveable hydrocarbons to thesurface. Subsequently, Mukuyu-1 has also been classified as a discovery in theUpper Angwa, which was successfully drilled in late 2022, confirming thepresence of a working hydrocarbons system and improved confidence of resourceprospectivity in the Cabora Bassa Basin. We are developing a comprehensiveappraisal plan for the Mukuyu gas field consisting of well testing, 3D seismicand appraisal drilling to enable a phased future field development andcommercialisation.

What next for your other exploration works inthe Cabora Bassa Basin?

Macmillan: We have a large position in the basinand an extensive portfolio of prospects and leads, which have now beende-risked by the Mukuyu discovery. We are maturing the eastern flank of ourlicence area with some additional seismic we acquired last year and refreshingthe wider portfolio with the new insights from Mukuyu. We are aiming to unlockthe rest of the portfolio value by demonstrating a new play in a provenhydrocarbon basin.

You have a gas supply memorandum ofunderstanding (MOU) in place with Mbuyu Energy, a development led by Zimbabweanfirm Tatanga Energy. Can you tell us about that?

Macmillan: This MOU is the precursor toformalising a long-term gas sales agreement to supply sufficient gas to theproposed plant and follows an MOU first struck in 2019.

Initially, we will look at an option to fast-track up to a 50MW pilotpower plant that can take short-term supply from future wells ahead of a phasedfull field development. Production timelines will ultimately be determined by arange of activities required to firm up resource estimates and a pathway todevelopment.

What will be the nextadministrative/government approval milestone for Invictus?

Macmillan: Invictus has been working closelywith the Zimbabwean government and relevant ministers to conclude the PetroleumProduction Sharing Agreement (PPSA). We envisage the PPSA will be formalised inthe coming months.

What production capacity are you targetingfrom Mukuyu?

Macmillan: Full field production capacity willbe informed through future appraisal drilling and well testing to determineoptimal production and facility size and match it to market demand.

You have secured a rig for another two years.Were you impacted by any of the supply chain issues which some companiesexperienced last year?

Macmillan: We have an outstanding and dedicatedteam and support from our service providers and suppliers, and we commenced ourcampaign on schedule. Securing Exalo’s Rig 202 for another two years removesthe need to source and mobilise a drilling rig, which is a major component ofthe campaign and provides us with flexibility and cost savings. The rig and itsteam have performed exceptionally to date, and we are pleased to extend ourrelationship with them.

Will there be potential capacity to supplymore than the Mbuyu power projects?

Macmillan: The proposed Mbuyu gas-to-powerdevelopment can be expanded up to 1,000MW, requiring up to 1.4tcf of gas toconvert into power. This will not only feed much-needed power into nationalgrid to help stabilise supply, but also underpin commercialisation of theMukuyu gas field. Depending on the ultimate resource size from not only Mukuyubut also the rest of our portfolio, we could see Zimbabwe become a net exporterof energy to the region.

Are you looking to secure more domestic supplycontracts or aiming to establish exports?

Macmillan: There is a huge energy shortfall insouthern Africa at present in both electricity and natural gas supply. There isa large market domestically for power, and we also see a substantial market forlarge industrial users to build gas into their processes, as we have seen inplaces such as Tanzania and South Africa once gas supply became available fromthe development of new discoveries.

“We could see Zimbabwe become a net exporter of energy to the region”

The domestic market will be the focus of the initial development, withthe potential to export into the region, including the South African market, inthe future. We are within 100km of three major interconnectors to [regionalenergy grid exchange] the Southern Africa Power Pool and can utilise the gridvia a ‘virtual pipeline’ to supply electricity to anywhere in the regionwithout the need to build new infrastructure. Gas can be exported throughlinking up to the existing ROMPCO pipeline to deliver it into a captive marketin South Africa. We also have the option to export any liquids (oil/condensate)to Asia by sea via Mozambique.

Regarding those gas supply MOUs, how do youhedge against currency risk?

Macmillan: The project will be insulated fromcurrency risk, as all contracts will be US dollar denominated.

Last time we spoke, you credited Zimbabweangovernment reforms and a desire to attract foreign investment as significantfactors. Is Harare still supportive of your activities? And have there been anyfurther regulatory or fiscal reforms relevant for the gas sector?

Macmillan: We continue to have a collaborativeand positive working relationship with the Zimbabwean government, which ispromoting foreign investment and has implemented investor friendly reforms suchas the amending the Indigenization and Empowerment Act and Special EconomicZone Legislation. Finalising the PPSA with the government will provide a stableand transparent legal and fiscal framework for the development and provide thecountry with a fair share of her resources.

We also have strong support from local communities and otherstakeholders, and we continue to roll out an extensive corporate socialresponsibility programme that now includes upgrading critical infrastructuresuch as roads, as well as provisioning for improved year-round community accessto and storage of water, solar panel installation and extensive localemployment opportunities.