Oil, gas firm starts exploration without regulatory framework
GEO Associates, the company that has already invested US$3,5 million exploring for potential oil and gas reserves in Muzarabani, along the Zambezi River basin, has been working in the absence of a hydrocarbons policy and related frameworks necessary in governing and regulating the sector.
Apart from completing the hydrocarbons policy, government, which is priming hopes of addressing the country’s fuel and energy crisis on the oil project, is also yet to finalise the production sharing agreement with Geo Associates. The petroleum, exploration and development agreement is also still being negotiated with Geo Associates.
Australian Stock Exchange (ASE)-listed firm Invictus Energy Resources has an 80% stake in Geo Associates, while One Gas Resources, a local entity, holds the remainder.
Zimbabwe discovered that it has substantial amounts of gas in the Zambezi basin in the early 1990s following exploration work conducted by American petroleum conglomerate, Mobil Oil.
At that time, Brent Barber, who is now Invictus Energy technical director, was working for Mobil, with the primary responsibility of co-ordinating the petroleum giant’s efforts to explore for oil along the vast Zambezi basin.
Leveraging on the geophysical data left behind by Mobil, Geo Associates announced in 2018 that it was analysing the trove of information, with long-term plans of extracting oil in the southern African country.
Nearly three decades after Mobil’s landmark discovery, government, which has since offered Geo Associates the requisite regulatory approvals, is yet to finalise formulation of the hydrocarbon policy and the related agreements that would underpin the sector.
Geo Associates has also obtained the Environmental Impact Assessment certification after it was granted the green light by the Zimbabwe Investment Development Agency (Zida) to set up operations in the country that is a net fuel importer.
Petroleum sources, who spoke to this newspaper this week raised concern that government’s spirited rush to finalise the hydrocarbons policy and related agreement frameworks while Geo Associates has already set up operations in Zimbabwe, posed the risk of monopolising the sector to a single entity, as is the case with the biofuels industry. The biofuels industry, which primarily revolves around petrol blending, is dominated by Green Fuel that produces ethanol in the country.
Geo Associates managing director Paul Chimbodza confirmed to the Zimbabwe Independent this week that the hydrocarbons policy, as well as related agreements, which would govern the industry, were yet to be finalised.
He said: “The hydrocarbons policy, the production sharing agreement and the petroleum, exploration and development agreement, those three documents, we are pushing to have them ready as soon as possible.(On our part) we completed the input work, what is left is for government to approve. All of them are now before the interministerial committee. We will only be guided by the interministerial committee which is chaired by the Finance ministry permanent secretary (George Guvamatanga). Once the committee okays it, it will go to cabinet and if we get authority, we sign.”
Chimbodza said the yet-to-be-finalised agreements would buttress the existing regulatory framework in line with global standard practice.
“These are additional agreements that we are putting to the regulatory framework. But the framework governing the sector is already in place through the Special Grants (SG) granted. But being a new industry, we have seen some grey areas that we are adding some of these legislative frameworks. But that cannot affect the progress of the project. We submit reports after every six months to the Mines and Mining Affairs Board. So the regulatory framework already exists, we are just strengthening it.”
Stakeholders who include the Chamber of Mines, Energy ministry, Mines and Mining Development ministry and Geo Associates, have contributed in the formulation of the hydrocarbons policy and related agreements.
Addressing journalists at the technical presentation of the Muzarabani oil and gas project on Wednesday, Mines minister Winston Chitando acknowledged that government was yet to finalise the production sharing agreement, as well as other policy frameworks with the investor.
He said: “We have been seized with negotiating a production sharing agreement with the investor. The production sharing agreement is almost in place.”
The exploration exercise, which will be undertaken on a land area stretching 100 000 hectares, will require a US$20 million capital outlay.
Part of the exploration exercise will involve the drilling of two test wells, from which the investor will make a determination on whether the area holds oil deposits that can be commercially extracted.
Geo Associates has so far spent US$3,5 million on the project, with the bulk of the resources channelled towards interpreting the geophysical data left behind by Mobil 30 years ago.