South Africa is witnessing an energy crisis and power blackouts which is hampering economic growth and productivity, with declining gas supplies. Amid climatic concerns that has taken a toll across nations, natural gas is becoming increasingly important as a clean, reliable and affordable energy source.
This has opened up a huge market to address from gas and oil perspective. Moreover, the government wishes to advance business, foster foreign investment and has executed investor friendly reforms as well.
An independent oil and gas explorer, Invictus Energy Limited (ASX: IVZ) is tapping this lucrative opportunity and is focused on high impact energy resources located in the Africa (sub-Saharan region).
IVZ’s asset portfolio - SG 4571 contains the Mzarabani conventional gas-condensate prospect (Total Prospective Resource of 9.25 Tcf + 294 Mn barrels in the Mzarabani and Msasa prospects) which is a seismically defined structure and the largest undrilled one in onshore Africa with TCF+ potential. This is part of Zimbabwe’s extremely prospective slice of the Cabora Bassa Basin.
IVZ has been progressing the Cabora Bassa Basin project and recently reported attractive geochemical results from its source rock analysis. The developments continue as the Company signed another Gas Sales MoU, subsequent to the one with Sable Chemical Industries Ltd.
The Second Gas Sales MoU for Cabora Bassa Project
On 19 December 2019, the Company announced that the Cabora Bassa Project owners and partners - IVZ (80%) and One-Gas Resources (Pvt) Limited (20%) have entered into a non-binding MoU with Tatanga Energy (Private) Limited, which is currently developing 2 solar PV projects in Zimbabwe.
The agreement is to facilitate the gas supply for a ±500MW Gas to Power plant in case of a commercial gas discovery from Special Grant 4571 (in Mzarabani).
Delving further into the MoU:
- IVZ and Tatanga will work collectively in cooperation and investigate the commercial and economic viability of providing natural gas from the Project to the proposed Power Plant.
- The Power Plant is due to be sold to the national grid and / or to captive clients in Zimbabwe, Zambia and Mozambique.
- The proposed Gas to Power plant will be built in a total of 2 phases. The first is projected at ±150MW and the second at further ±350MW.
- The ideal location of the plant will be defined by various factors- proposed pipeline routings and access to transmission infrastructure.
- The Preliminary studies related to the MoU have identified several suitable locations apt to supply electricity to the local grid and export customers via the Southern Africa Power Pool.
Lens through Key terms of the MoU
Let us acquaint ourselves with the key terms of this interesting MoU-
The conditions guiding the MoU include the Confirmation of a commercial hydrocarbon discovery in SG 4571, Completion of a Gas Sales and Purchase Agreement by 18 December 2022 and Feasibility studies to identify suitable location of the plant along with the Project securing a generation license from the Zimbabwe Energy Regulatory Authority.
Tatanga Energy MoU - Significant Step In IVZ’s Commercial Negotiations
The MoU with Tatanga Energy is crucial to the development of the Cabora Bassa Project and IVZ’s commercial negotiations, especially in times when the region is in the midst of an energy crises, enduring acute energy shortages adversely impacting the overall economy.
There will be a gas supply of up to a 100 mn cubic feet daily for two decades, underpinning the growth of commercial gas discoveries in the Project area. Moreover, the offtake volume of up to 730 bn cubic feet is considerable and signifies merely 8% of the independently estimated 9.25 tn cubic feet resource potential of the Project which enables IVZ to tap additional markets (locally and in the wider region).
The Project bears the potential to play a transformational role in the development of the Zimbabwean economy fostering new industries and providing the feedstock for the generation of much needed predictable and affordable dispatchable energy for the national grid, believes CEO of Tatanga Energy, Mr Tunde Akerele.
Notably, this MoU (and the one with Sable) demonstrates the rising demand in energy starved Zimbabwe and explains that the gas market dynamics have changed for the good ever since Mobil Oil (which previously explored the SG 4571) exited Zimbabwe 25 years ago due to the lack of a market at that time.
On 19 December 2019, IVZ quoted $0.027.
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