The signing of the petroleum exploration, development and production agreement with the Australian companies, is a deal with potential to make Zimbabwe one of the major oil producers if tests at Muzarabani deposits are successful.
The investor has put in a lot of time and effort to determine the likelihood of natural gas and petroleum condensates in the Cahora Bassa basin around Muzarabani in Mashonaland Central. This is important for two reasons.
First, and most obviously, it clears the way for Invictus Energy and its majority shareholder Geo-Associates to invest another US$15 million to US$30 million to drill two test wells this year into the formations they have identified as a potential gas and oil reservoir.
Quite naturally, before they sink this sort of money into drilling 4,5km deep wells by October, they want their legal position, with both their rights and obligations, clearly spelt out. At the same time Zimbabwe is anxious to find out if the potential reserves do exist, and if they do, to ensure that they can be exploited, and is more than happy to sign the deal that meets the needs of both Zimbabwe and the exploration companies.
Invictus has already spent quite a bit of its own money, around US$3,5 million, working over the results of a seismic survey done by Mobil in the 1990s and then having its work checked by an independent consultancy. It came to a different conclusion to Mobil, reckoning that the probability of finding natural gas in exploitable quantities was worth the investment into test wells, with the possibility of finding some commercial quantities of condensates, crude oil, being a useful bonus.
The second important point to note in Friday’s signing, as President Mnangagwa was careful to state, is that Zimbabwe is more than willing to deal with serious investors and move rapidly to draft and sign off the commercial agreements. Invictus and Geo-Associates are not charities; they are companies that hope to make a fair profit from their investment.
A lot depends on whether the three domed-layers of hard strata that Invictus has discovered are in place and still trap the rotten remains of plants and animals that died in a rifted inlet of the early Indian Ocean in Cretaceous times. At the same time Zimbabwe will win, if the investment pays off, with assured energy self-sufficiency and just as importantly a source of industrial raw materials for the fertiliser industry and other new ventures.
This shows others thinking about investment in Zimbabwe that the Second Republic is going far beyond rhetoric and is prepared to welcome investors. We have already been making major investment deals with South African and Russian platinum companies, and more recently with an American gold producer, an Australian lithium company and a top Chinese steel company. Our doors are open to everyone. Previous investors have, without prompting, made it clear that they are getting a fair deal.
At the same event, President Mnangagwa stressed that Zimbabwean companies and other investors need to be prepared if the test wells produce gas and oil.
The potential quantities of gas and oil involved are useful and desirable, and will push Zimbabwe into the top ranks of oil exporters. The natural gas, which forms the bulk of the estimated reserves, can be put to use fairly quickly. Already Sable Chemicals, which is importing natural gas products to make fertilisers, has signed a preliminary deal with Invictus to run a pipeline to Kwekwe to get gas on tap and after it has extracted its products, there will be other products that can be made use of in the industrial area.
Natural gas is used increasingly to generate power, without refining, into a power station. They can be built quickly; basically all they are is a row of jet engines connected to generators with the civil works being little more than a shed to keep off the rain. So the discovery of natural gas will allow Zimbabwe to build its third large power station to complement Kariba South and the expanded Hwange coal thermal quite quickly.
The economic growth that is laid down in our national development strategy will need that third station sooner than we think. So the gas station would come just in time, as we need to look for the next station after the present expansion works at Hwange are completed.
When we talk about exports from Muzarabani we will find that we can make more money exporting electricity on the existing regional grid than laying long pipelines first. Gas stations can, incidentally, be started up quickly so we could use ours to generate the extra profits from peak power supply to our developing neighbours.
Any discovery of oil will need a longer lead time. Either we need to build a refinery as well, to convert it into fuels, or need to build a pipeline so we can ship it to a port and from there to a regional refinery. Both operations take time.
But regardless of these factors, we will be able to move a lot faster into the modern industrial world if we do find petroleum and gas near Muzarabani. So we need to keep our fingers crossed and start thinking on what such a useful discovery will mean and how we can exploit it for maximum national benefit. Those benefits go far beyond the fuel that most think about. They mean raw materials, infrastructure, jobs, wealth creation, and faster industrialisation.
As the President noted, having a major source of energy and raw materials makes the rapid development we need to see over the next decade to create our middle-income economy both easier and faster. Sunday mail