Sable Chemicals, Invictus Energy strike MoU for gas supply to fertilizer plant

Zimbabwe Invictus
A section of the Sable Chemicals plant at Kwekwe. (Photo: Aaron Ufumeli/EPA-EFE/Shutterstock)

Sable Chemicals and Invictus Energy have signed a Memorandum of Understanding (MoU) that could see the supply of natural gas to Zimbabwe’s sole ammonium nitrate producer, should a commercial gas discovery be confirmed at Invictus’ Cabora Bassa prospect.

Under the MOU, Invictus would supply up to 70 million cubic feet of gas per day for 20 years, which would be enough to sustain production for Invictus and at the same time meet the supply needs of Sable’s Kwekwe plant, one of the country’s biggest consumers and importers of gas.

This would mean Sable replacing imported ammonium gas with natural gas from Invictus’ Muzarabani project.

“Signing this MOU with Sable marks a significant milestone in our commercial negotiations as we look to progress the Cabora Bassa Project. Sable is the sole producer of nitrogenous fertilizer in Zimbabwe and a well-recognised brand in the country,” Invictus Managing Director Scott Macmillan said on Tuesday.

“The potential gas supply of up to 70 million cubic feet per day for 20 years is a substantial volume which will help underpin the development of any commercial gas discovery we make in the Cabora Bassa Project. This MOU demonstrates the huge local gas demand in an energy starved market in Zimbabwe and we expect to enter into additional gas supply MOUs in the future.”

Invictus last year announced major oil and gas potential at the Muzarabani prospect, which awaits a drilling well in 2020 for confirmation. Analysis of seismic data by Netherland, Sewell & Associates, an independent consultancy that analyses reserves for energy companies, found potential of 181 million barrels of condensate, which refers to a light oil associated with natural gas.

The data, and the latest Sable MoU, will help Invictus as it goes into the “farming-out” stage of its project. Farming out is the process where a company such as Invictus explores for oil, then finds a partner to develop the resource. By securing a potential off-take agreement for the gas it may produce, Invictus is making itself more attractive to farming out partners and potential financiers. Invictus shares on the Australian Stock Exchange rose 5.4% after the Sable announcement.

The Sable MoU is subject to confirmation of a commercial hydrocarbon discovery at Muzarabani, the completion of a gas sales and purchase agreement by June 2021, and feasibility studies to upgrade Sable’s existing process and replace the feedstock with natural gas. Sable, which runs an old plant established in 1969, currently uses ammonia gas.

Sable currently has capacity to produce 240,000 tonnes of ammonium nitrate, its CEO Bothwell Nyajeka said.

“We are extremely pleased to enter into this MOU with Invictus and potentially secure an indigenous natural gas supply to produce ammonia gas for our fertilizer plant,” Nyajeka said. “The potential future supply of gas by Invictus is also critical for Sable’s medium-term expansion program aimed at increasing production to 600,000 tonnes of nitrogenous fertilisers.”

Earlier this year, officials at the plant said they need to spend up to US$24 million a year to import ammonia gas from South Africa in order to produce at optimum levels.

Previously, Sable said its production targets could only be met with the long-delayed exploitation of coal-bed methane at Lupane or natural gas which can be exploited locally or in Mozambique. The company said In January it had capacity to move 3,000 and 4,000 tonnes of ammonia gas every month from South Africa. However, the company only had 34,000 tonnes at Sable, about half of its needs, due to foreign currency shortages.

Sable last year produced 39,000 tonnes of AN fertilizer, a fraction of the national demand 150,000 tonnes per year.

Sable is majority owned by Shingi Mutasa’s Masawara Holdings and 36% held by state-owned Chemplex.