HARARE – In order to increase the drilling programme success rate, Invictus Energy Limited’s subsidiary, Geo Associates Private Limited and the Sovereign Wealth Fund of Zimbabwe (SWFZ) have executed a Heads of Agreement to increase Special Grant 4571 licence area from 100 000 hectares to 709 300 hectares.
According to the agreement, The SG 4571 licence and application area will be combined with the SWFZ’s MSC003 Cabora Bassa South Reserved Area to encompass the whole Cabora Bassa Basin.
Invictus Managing Director Scott Macmillan, said the SWFZ will have a 10% equity back-in-right to the extended SG 4571, which will be exercisable within six months of the positive Final Investment Decision to develop any identified resource inside the licence. This will allow the SWFZ to participate in the SG 4571 without danger until production begins.
Initially, Invictus was seeking an extension of land ten times bigger than the 100 000 hectares.
Geo Associates and the SWFZ may also work together to explore areas of mutual interest that are not covered by the enhanced SG 4571 licence which will be covered by other agreements.
“We are extremely pleased to have executed the binding Heads of Agreement with the Sovereign Wealth Fund of Zimbabwe. This follows extensive negotiation and collaboration with the various ministries and government bodies over the last 7 months” said Macmillan.
For the current second exploration period, the business will enhance the minimum work programme obligation to drill two exploration wells, including the Muzarabani-1 prospect, and one exploration well in the extended region. The rig contract with Exalo Drilling SA, which was confirmed on March 10, 2022, allows for a two-well drill program to begin in late June 2022.
The SG 4571 area increase is now awaiting procedural Government gazetting.
Zimbabwe and Geo Associates will also conclude the Petroleum Production Sharing Agreement which will encompass the legal and fiscal provisions to govern the project and the development of any discovered resource.
The proposed Petroleum Product Sharing Agreement (PPSA), administered by the Ministry of Energy and Power Development, contains the fiscal provisions of the project, including the Republic of Zimbabwe’s profit/product share, and takes effect following commencement of the production phase of the project.
Macmillan said the PPSA will provide Zimbabwe with a share of any developed resource in addition to the SWFZ equity, if back-in-right is exercised. Together, the Petroleum Exploration Development and Production Agreement (PEDPA) and PPSA form the Production Sharing Agreements (PSA) between the country and Geo Associates, demonstrating the government’s commitment to implementing investor friendly reforms and promoting and protecting foreign investment.
“We are grateful for the constructive efforts by the Zimbabwe government to put the PEDPA and HOA in place and work towards finalisation of the PPSA. This will provide a robust framework to facilitate long-term investment in the oil and gas sector with confidence and ensure the country derives its fair share of any discovered resources” he said.
The PEDPA, which was signed on March 26, 2021, and the PPSA, which is set to be signed after legislative amendments, will establish a predictable, stable, and transparent legal and fiscal regime that is commensurate with regional terms, follows international best industry practice, meets the country’s aspirations, and gives investors and Zimbabwe a fair share of any developed resources.
The PPSA has received independent assessment and will be finalised and implemented in the near future.
Indications are that the area, potentially the largest undrilled seismic (geophysics) structure onshore Africa, may be host to 9,25 trillion cubic feet of gas and nearly 300 million barrels of oil.
Invictus says 1 trillion cubic feet can generate 500 megawatts for more than 20 years.