Grand deal inches closer before oil find

INVICTUS Energy, the Australian company that is scouring Zimbabwe's northeastern front for potentially lucrative oil or gas endowments, says it has inched closer to inking a crucial production sharing agreement with President Emmerson Mnangagwa's administration, just under a year before its first testing wells are drilled.

It is not yet clear whether the explorers will strike oil or gas when they sink the US$20 million testing wells around September 2021.

But an agreement about how whatever comes out of the vast fields in Muzarabani will be shared forms part of the conditions under which Invictus ended up in Zimbabwe.

The resources outfit has been undertaking complex negotiations to strike a deal, as government got careful to avoid the pitfalls that saw backstage deals salt away diamonds worth billions at Chiadzwa.

In a shareholder update released recently, Invictus said: "The production sharing agreements (PSA) with the Republic of Zimbabwe continue to progress and are now in the approval process.

"The company will provide updates to the market regarding progress to the finalisation of the PSA and any associated government approvals."

An update on the PSA was part of a broad range of issues despatched to the market, including new discoveries of important signals that may point to where exactly the fortune lies.

"The company successfully concluded its recent field operations and reconnaissance programme in the Cabora Bassa Basin," said Invictus.

"Detailed traversing and mapping across the area has been completed and identified the optimal acquisition routes.

"The company is making significant progress on executing the first seismic acquisition programme in the country for 30 years and is working closely with the seismic contractors on a planned acquisition campaign in 2021 to commence once the rainy season has concluded.

"This will be followed by a high impact basin opening drilling campaign to test the petroleum potential of the Cabora Bassa Basin," the statement added.

Mines minister Winston Chitando said in August that as Invictus zeroed in to find the best location for its test wells at the heart of a presumed oil field traversing 100 000 hectares in Muzarabani, the parties were already negotiating.

This could even see government establishing its own infrastructure at the production site to claim its share as it flows out, according to Paul Chimbodza, the local partner in the project.

"We have had key milestones," Chitando told reporters then.

"The Zimbabwe Investment Development Agency licence has been given and the area's special grant has been extended by three years.

"A production agreement is being negotiated with government.

"Government will get a certain percentage of the production.

"The draft agreement is in place and the final agreement is expected in the next few weeks and drilling of the well will be in the third quarter of 2021."

It is not clear exactly whether it will be oil or gas that lies in abundance beneath the earth at the claim that lies towards the eastern end of the Zambezi Valley.

But Invictus said it was armed with US$30 million worth of data from previous exploration by Mobil Oil, which confirmed that either of the resource was available.

By August, Invictus had invested US$3,5 million in preliminary work before sinking its six-kilometre-deep test wells.

If Invictus makes the hyped find, this will represent a massive boost to Zimbabwe's cashstrapped government, which has struggled to fund growth-stimulating projects and end two decades of economic turmoil.

Chitando hopes that a gas or oil find would help him achieve an ambitious plan to transform the mining sector into a US$12 billion industry.

"By 2030, Zimbabwe will be selfsufficient in electricity and fuel," the Mines minister said, warning Zimbabweans to be patient as significant ground remained uncovered before the first gas or oil drop flows.

"Some thought that we would have oil pouring in six months (when the find was announced last year).

"We are dealing with a very expensive exploration exercise.

"We are looking at US$20 million to check the existence of the oil beyond doubt.

"We must ensure that the well is on point. So, it has taken long in order to correctly site the well, and then drilling can start.

"From that hole, you then make a determination, hence the massive work being done before drilling.

"I will call the siting of the well a do-or-die. But we can safely say in 2021, Zimbabwe will have two test oil wells.

"When you have an investor sinking US$20 million in a well, it means they are confident of the result.

"We have two test sites, one is four kilometres deep and the other is two kilometres deep."