Lu­pane gas re­serves: The miss­ing link

Chronicle (Zimbabwe) - - Business -

pro­duce hy­dro­gen, which in turn is used in the man­u­fac­ture of am­mo­nia for fer­tiliser. Fer­tiliser maker, Sable Chem­i­cals, has also hinted on plans to trans­form its pro­duc­tion pro­cesses to us­ing gas as op­posed to high cost elec­tric­ity.

Iron­i­cally, Zim­babwe still im­ports the prod­uct mainly from South Africa, years af­ter dis­cov­er­ing its own re­serves. Im­ports con­trib­ute to the widen­ing trade deficit es­ti­mated at $3 bil­lion an­nu­ally.

Al­though the Gov­ern­ment granted the ex­plo­ration of gas a Na­tional Project Sta­tus in 2007, it did not take off un­til 2014.

To date, no concrete steps have been put to guar­an­tee quick ben­e­fits to the econ­omy. Lu­pane Gas, a unit of the In­dus­trial De­vel­op­ment Cor­po­ra­tion (IDC) that has been do­ing some ex­plo­ration work on one of the re­source sites has failed to raise the $12 mil­lion re­quired to prove whether the re­source is com­mer­cially vi­able or not. Hwange Col­liery Com­pany Limited has also failed so far to grab the op­por­tu­nity to di­ver­sify its op­er­a­tions by ex­ploit­ing gas in its Lu­bimbi coal con­ces­sions. Another com­pany, China Africa Sun­light En­ergy has, since 2014 when it launched its $2.1 bil­lion project, failed to bring tan­gi­ble re­sults. The firm had pro­posed to in­vest in gas wells for power gen­er­a­tion as well as set­ting up a 600MW ther­mal power plant.

So far Dis­cov­ery Resources is the only com­pany that has made progress at its con­ces­sions in Si­wale area in Mzola, Lu­pane. Af­ter suc­cess­ful ex­plo­ration work in the last two years, the firm has started pro­duc­ing gas, which en­gi­neers say is ready for com­mer­cial ex­ploita­tion. Vice Pres­i­dent Phelekezela Mphoko vis­ited the site last Fri­day where he was briefed about progress on the plant.

How­ever, key share­holder Mr Tha­bani Lloyd Hove told the VP and his del­e­ga­tion that the gas they were pro­duc­ing could only be used for in­dus­trial pur­poses as it needed to be pu­ri­fied fur­ther to be suit­able for do­mes­tic use. He stressed the need to de­velop a value chain ap­proach and rel­e­vant in­fra­struc­ture, which re­quires more in­vest­ment and part­ner­ship.

Be­sides gas for elec­tric­ity gen­er­a­tion, Mr Hove said more in­vest­ment op­por­tu­ni­ties lie in down­stream in­dus­tries such as pro­duc­tion of a va­ri­ety of chem­i­cals, fer­tiliser pro­duc­tion and gas to liq­uids pro­duc­ing diesel, spe­cial­ist lu­bri­cants and waxes. The coun­try does not have this model for in­vest­ment at present.

With es­ti­mates in­di­cat­ing that Zim­babwe has 40 tril­lion cu­bic feet of po­ten­tially re­cov­er­able gas in the Lu­pane-Lu­bimbi area, prob­a­bly the largest in South­ern Africa, a suc­cess­ful ex­ploita­tion of the re­source could place Zim­babwe in the league of this bil­lion­dol­lar in­dus­try in the re­gion and abroad. This re­quires a quick re­sponse in align­ing the gas in­fra­struc­ture, which is non-ex­is­tent at the mo­ment, with that of elec­tric­ity. VP Mphoko has said gas pro­duc­tion was a low hang­ing fruit that could trans­form the coun­try’s econ­omy. He pledged to en­gage the rel­e­vant min­istries to come up with a rel­e­vant leg­is­la­tion to sup­port the new in­dus­try and in­vest­ment along the value chain.

Mata­bele­land North Pro­vin­cial Min­is­ter of State Cain Math­ema said the power util­ity, Zesa, should be roped in to part­ner gas com­pa­nies as it would be the pri­mary ben­e­fi­ciary of power gen­er­a­tion. He said the project re­quired a multi-sectoral ap­proach that pro­vides for the in­volve­ment of the lo­cal com­mu­nity for it to yield ad­e­quate and sus­tain­able re­sults. Mines and Min­ing De­vel­op­ment Deputy Min­is­ter Fred Moyo said the Spe­cial Eco­nomic Zones model, whose law has since been passed by Pres­i­dent Mu­gabe, pro­vides the frame­work for de­vel­op­ing ro­bust value chain in­dus­try for gas.

Ob­tain­ing quick gains from this re­source would not come eas­ily out­side ro­bust lob­by­ing, creation of an en­abling leg­is­la­tion and part­ner­ship with po­ten­tial in­vestors. This is cru­cial given that Zim­babwe is not the only coun­try with these re­serves. A 2016 base­line study on Sadc en­ergy sec­tor shows that the en­tire re­gion is en­dowed with sig­nif­i­cant de­posits of coal and as­so­ci­ated meth­ane gas, crude oil, shale gas and nat­u­ral gas.

About 15 African states are al­ready in­volved in nat­u­ral gas pro­duc­tion with ma­jor play­ers be­ing Al­ge­ria, Nige­ria, Libya, Mozam­bique, Tan­za­nia and Equa­to­rial Guinea.

South Africa, An­gola, Morocco, Tu­nisia and Ivory Coast are some of the no­table pro­duc­ers. Last year Egypt also dis­cov­ered its huge nat­u­ral gas re­serves off its coast – the largest find in the Mediter­ranean Sea, me­dia re­ports said.

De­lays in op­er­a­tional­is­ing the ex­ploita­tion of these re­serves de­prives the coun­try of op­por­tu­nity to di­ver­sify its en­ergy mix, re­duc­ing the cost of en­ergy and im­prov­ing its ac­ces­si­bil­ity to con­sumers as well as re­duc­ing car­bon emis­sions, which are blamed for caus­ing global warm­ing and cli­mate change. In view of com­pe­ti­tion for in­vest­ment and mar­kets, Zim­babwe needs to move with speed in ad­dress­ing high­lighted bar­ri­ers.

More in­vest­ment should be di­rected to ro­bust ex­plo­ration work to in­crease the size of proven re­serves, de­vel­op­ing the nec­es­sary hu­man skill and the es­tab­lish­ing the req­ui­site in­fra­struc­ture such as pipe­lines, stor­age and re­fin­ing fa­cil­i­ties to en­hance ca­pac­ity and safe ex­trac­tion of the re­source. On these, the coun­try is heav­ily found want­ing.

Vice Pres­i­dent Phelekezela Mphoko tours a meth­ane gas ex­trac­tion site in Lu­pane re­cently

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