Pride Mzarabani
HARARE – The Government of Zimbabwe has signed a Petroleum Production Sharing Agreement (PPSA) with GEO Associates (Private) Limited relating to petroleum operations under Special Grant 4571, a development which could significantly reduce the country’s dependence on imported petroleum products and strengthen national energy security.
The agreement marks another major milestone in Zimbabwe’s emerging oil and gas sector following the Mukuyu gas discovery made in late 2023 in the Cabora Bassa Basin.
Speaking at the signing ceremony, Finance Minister Mthuli Ncube said the agreement has the potential to transform Zimbabwe’s energy sector and reduce the country’s reliance on imported fuel products.
“As government, we are particularly encouraged that this project has the potential to reduce Zimbabwe’s import dependency on petroleum products and strengthen national energy resilience,” said Ncube.
He said the agreement would also contribute towards improving Zimbabwe’s balance of payments position, stabilising production costs across key sectors and supporting long-term macroeconomic growth.
“The development of the Cabora Bassa project, represents a strategic national undertaking with the potential to reshape Zimbabwe’s economic landscape. This agreement is aligned with the government’s broader policy objectives of promoting value addition and beneficiation, attracting quality long-term investment, ensuring prudent exploitation of natural resources, enhancing energy self-sufficiency.”
Ncube added that the agreement provides a stable fiscal and regulatory framework to support petroleum exploration, development, production and marketing activities in Zimbabwe.
GEO Associates director Scott MacMillan said the Petroleum Production Sharing Agreement is structured as a hybrid model that combines Zimbabwe’s existing concession framework with a profit-sharing arrangement.
“In addition to the concession arrangement that we have in Zimbabwe which consists of royalty and corporate tax, there is also a fiscal arrangement on top which is a product profit sharing agreement,” he said.
MacMillan explained that under the arrangement, the government has the option to receive its share either in cash or in petroleum products.
“The state has participation, they are able to take their share in either cash or in-kind. The profit sharing or product sharing arrangement is a sliding scale, it is what is known as a sliding scale rate of return, so in times of lower returns the contractor, GEO Associates in this case, gets a higher share, in times of higher commodity prices or higher returns of the project, the government gets a much bigger share.”
He said the structure balances risk and reward while ensuring the project achieves a rapid payback period before the government’s share of profits progressively increases.
“The royalty and tax arrangement stays constant for the entire life of the project, but the government gets a share of the products or profit once the project is paid back.”
MacMillan revealed that while the Mukuyu discovery under Special Grant 4571 remains a key focus area, the company’s immediate drilling programme will shift to another licence area under Exclusive Prospecting Order 1848.
“We’re planning to drill the Musumi 1 well later this year, we’re at advanced stages now preparing for that, we are getting ready with well services, so we’ve gone out to tender for those to arrange for the service providers to tender for that project.”
He said preparations for the drilling campaign were already underway, including construction of the well pad and maintenance work on the Exalo drilling rig currently stationed at the Mukuyu 2 well site.
“We’re ready to commence building of the well pad, we’ll do some maintenance on the Exalo rig that is stacked at the Mukuyu 2 well site and then we’ll mobilise the rig to the new pad, send all the services and drill the well.”
According to MacMillan, a successful outcome at Musuma 1 could pave the way for an early production scheme focused on gas-to-power generation.
“In a success case for the Musumi well, that will then be suspended so that we can test it and then commence an early production scheme from that. Depending on the outcome of this well, we’ll either probably focus on Musuma first because that’s where the equipment will be, but then also return to Mukuyu and appraise that.”
The company also plans to undertake 3D seismic acquisition to improve understanding of the field and identify priority development zones for future production.
MacMillan said the company’s long-term strategy is centred on commercialising the gas discoveries through phased development, beginning with a pilot gas-to-power project in partnership with Eureka Gold Mine in Guruve.
“So we’ve got a number of options ahead of us which is a good thing because we can pick and choose what we think is going to deliver us the quickest route to production from there. So the early production scheme will consist of a pilot gas-to-power project which we have in conjunction with the Eureka Goldmine that’s in Guruve and convert them from grid and diesel power over to gas power and we can do that at a price that is cheaper than grid and diesel combined.”
He said the pilot project would serve as proof of concept to potential lenders and investors for larger-scale commercial development of the gas fields.
“That will be a proof of concept that will then demonstrate that we can, and this is to demonstrate to lenders that will finance the full field development, so the commercialisation of the project, that we can produce gas, process it, get all the approvals, so that’s environmental, get all the government approvals commenced, get it to our customer, sell it and get paid.”
MacMillan said successfully demonstrating the model would help unlock financing running into hundreds of millions, and potentially billions, of dollars depending on the eventual scale of the resource.
