Invictus Energy is confident of concluding a production-sharing agreement with Zimbabwe’s government for its gas discovery at Cabora Bassa, managing director Scott Macmillan tells The Africa Report.
There has “good traction” in discussions with the government, and an agreement “will be executed in the near term,” Macmillan says from Perth, Australia. An agreement will “definitely” be reached this year, he says.
While it would be possible to go into production under existing Zimbabwean legislation, a production-sharing agreement would provide fiscal stability for the project, he says. “Everyone wants to know where the goalposts are.”
Invictus in December 2023 discovered gas at the Mukuyu well at its 80% owned Cabora Bassa project. Wood Mackenzie estimates that Mukuyu is the second-largest gas discovery made in sub-Saharan Africa in 2023. The company’s local Zimbabwean partner is One Gas Resources, and institutional shareholders include BNP Paribas and Citicorp.
Macmillan sees the progress of the talks as evidence that the stability of private property rights in Zimbabwe has improved. The government now accepts that white farmers who were expropriated should be compensated, he says. There’s now “an acceptance that property rights are sacrosanct.”
The Australia-listed company is also making progress on finding partners for the project, and Macmillan hopes for a “near term” conclusion. Possible types of partnerships include offtake agreements or strategic investors such as infrastructure players or banks, Macmillan says.
SAPP Distribution
The company has existing gas-sale memoranda of understanding (MoUs) with Sable Chemicals, a manufacturer of ammonium nitrate fertilizer, and the Mbuyu Energy consortium.
In April, Invictus signed an MoU for a gas-to-power project for the Eureka gold mine, which is 50 kilometres south of the Mukuyu field. The mine is owned by Dallaglio, a subsidiary of Padenga Holdings, which trades on the Victoria Falls Stock Exchange.
Zimbabwe’s gold production fell by 15% to 30 tonnes in 2023, due mainly to lack of reliable power supplies. State power utility ZESA said in 2023 that it aims to more than double national grid capacity by 2025 to meet mining sector demand. The gas to power plant will be built by power-solutions company Himoinsa, which is also providing back-up diesel power to the mine as part of the agreement. Himoinsa is part of the Japanese company Yanmar Energy Systems. The plan is to start building the plant after further well testing at Mukuyu in coming months.
The agreement will provide early cashflow for Invictus, reduce the need for ongoing capital raising and support the sale of senior debt, according to a company presentation. The cashflow will allow time for midstream and downstream infrastructure to be built which will increase distribution options, the company says.
Macmillan says the plant will provide “proof of concept” for gas-to-power from Mukuyu. The gas at Mukuyu contains minimal impurities, enabling low-cost processing. Production could be scaled up to 50 MW from an initial 12 MW. Himoinsa, Macmillan says, would be able to sell excess power not needed for the gold mine into the Southern Africa Power Pool (SAPP). An upgrade of the local SAPP connection would allow more power to be supplied into the pool, he adds.
