Invictus Energy, listed on the Australian Stock Exchange, will start drilling an exploration oil well at its Muzarabani prospect in 2020, President Emmerson Mnangagwa announced Thursday.
The drilling will be at a cost of $20 million, the President said at a press conference also attended by Scott Macmillan, Invictus’ Zimbabwean-born CEO.
The company and Government have agreed to enter into a production sharing deal once the prospect reaches full commercial production, Mnangagwa said.
“As part of its exploration studies, Invictus has engaged a number of worldwide professional companies with extensive experience in oil and gas. We have since been advised by Invictus that the findings are positive and point to oil and gas deposits in the area,” said Mnangagwa, calling it “an exciting development for our country”.
This does not mean that Zimbabwe has discovered oil, but that Cabora Bassa Basin possess all the elements for a working petroleum system, a discovery that can only be confirmed through drilling of the exploration well.
“Further exploration and appraisal may be required to determine the existence of a significant quantity of potentially moveable hydrocarbons,” Invictus said in a cautionary released to the ASX.
Ahead of the announcement, Invictus had suspended trading in its shares on the ASX. In a notice on Wednesday, the company said it would go under a trading halt “pending the release of an announcement regarding the Maiden Prospective Resource Estimate”.
In a separate update this week, Invictus said the subcontractor transcribing the seismic, gravity and aeromagnetic data from the original field tapes to digital format started work at the Zimbabwe Geological Survey in Harare in August and finished the job in late October.
Speaking after meeting Mnangagwa, Macmillan said: “We are honoured to have been received by President Mnangagwa and Minister Chitando to provide an overview to the Zimbabwe Government of our exploration activity and progress to date in SG 4571. We are extremely pleased to have the support of government as we progress our work program towards the drilling of the first exploration well in the Cabora Bassa Basin. We look forward to working with the Government on Zimbabwe on this exciting project which if successful can make a significant contribution to Zimbabwe.”
The drilling of the exploration well precedes any commercial exploitation of the field. Further geophysical work is being carried out to identify additional exploration targets, Mnangagwa said in his statement.
Invictus been prospecting for gas and oil in the Cabora Bassa Basin, decades after major oil firm Mobil abandoned a search for oil there.
The company raised some A$4.5million on the ASX for the exploration phase. It also acquired the Mobil survey data, which despite being over 25 years old has never been made public.
Invictus has been selling its Cabora Bassa project to ASX investors as “the largest, undrilled, seismically defined structure in onshore Africa”, a claim repeated on Thursday by Mines Minister Winston Chitando.
Invictus has been cautious about the prospect of an oil and gas find on its last update in September. In that earlier statement, Invictus said although a survey showing good prospects for oil was “far more sophisticated than anything created previously for the Cabora Bassa Basin”, the modelling was reliant on a series of assumptions that were still to be cleared.
[Click here to read our earlier report on Invictus getting gas and oil concessions in Zimbabwe]
If indeed Invictus does eventually strike oil, it will not mean Zimbabwe will immediately produce its own fuel. To do that, it would need a refinery, which costs at least $5 billion, depending on capacity and the nature of the oil find itself.
In any case, in some instances, it takes years before exploratory drilling and commercial production. It takes long to complete pre-drilling activities, such as locating the best drill site and setting up what is needed before commercial production, such as access roads, water, power and a broad range of other key infrastructure.
Not all countries that produce oil actually refine their own fuel, due to the high cost of refineries. Angola, Africa’s second largest crude oil producer, imports 80% of its fuel products, mostly from Swiss commodity trader Trafigura and from Vitol. It is only this year that Angola’s state oil firm, Sonangol, announced plans to build two refineries by 2020.
Nigeria, the continent’s top crude producer, has spent over $35 billion on fuel imports over the past year. Aliko Dangote is building a refinery there, which will be one of the world’s largest, at a cost of $10 billion.
Getting any oil to market also comes at a massive cost. Zimbabwe would have to build an oil pipeline to the coast. While it is hard to estimate that cost, a planned 800km pipeline from Kenya’s oil fields, also under development, has been reported at up to $5 billion.