Invictus Oil Project:$26.5 mill required for drilling

Oil company Invictus Energy which has been prospecting for oil in Muzarabani’s Cahora Bassa basin will sink its first two wells in six months. Having signed a contract for the #202 rig, currently in Tanzania, Invictus looks set to start drilling at the Mukuyu-1 and a second newly identified basin in Muzarabani. Company managing director, Scott Macmillan says the two-well drilling program will cost approximately US$26.5 million to complete with available seismic data showing potential for large accumulation. Macmillan (SM) spoke to The NewsReport (NR) and below are the excerpts of the interview:

NR: You have made great strides on the Muzarabani project. Kindly tell us about your current progress and what to expect in the next six months?

SM: We have brought the project a long way in the last 12 months with completion of large Cabora Bassa 2021 infill seismic survey where we acquired, processed, and interpreted 840 kilometres of new high-resolution data. That has revealed some additional prospectivity in a shallower horizon in the Mukuyu (previously named Muzarabani) prospect. Over the next 6 months we will be mobilising the Exalo #202 rig to the basin and commence drilling 2 wells, the Mukuyu-1 well and a second well along the newly identified basin margin play which is being matured at present to select the best target.

NR: Seismic data shows large deposit. Are you able to quantify what you are expecting in your first year of drilling?

SM: The seismic data shows the potential for a large accumulation; however, its existence can only be proven through drilling. We hope to make a basin opening discovery this year in our drilling campaign.

NR: How much are you going to spend on the rig and initial drilling. The last time you were concerned about where to source the rig, has this been taken care of?

SM: The 2 well drilling program will cost approximately US$26.5 million (gross). We have contracted the Exalo #202 rig and will commence mobilisation from Tanzania in May where it is currently drilling.

NR: As we all know Zim economy is struggling, do you think this is the right time to inject millions in investments?

SM: Whilst local economic conditions have been challenging, the oil and gas industry also is strongly driven by macro factors such as oil and gas price and that has improved significantly over the last 12 months. Oil and gas is a cyclical industry and developments take place over decades and companies have take a long term view on projects and the jurisdictions that they operate in. We are very comfortable with the investment environment in Zimbabwe and if we are successful in the exploration campaign we will be operating in the country for the long term. If we make a commercial discovery, then this will also have a positive impact on the economy

NR: Oil is a resource prone to conflict. With conflict unfolding in Cabo Delgado, is the project not exposed to insurgents? Have you made that risk assessment and what are your findings?

SM: Oil and other resources can give rise conflict under some circumstances but that is not a universal observation and there are many jurisdictions where oil has been discovered which has resulted in a huge positive impact to people’s lives and the economy.

We have and continue to extensively engage and take guidance from our local communities, local chiefs and all key stakeholders to inform our socio-economic and political impact in the project area resulting in extremely cordial relationships with all our key stakeholders. The project has already created hundreds of jobs for the local youths (both men and women) and our Corporate Social Responsibility initiatives have been well received by our communities.

We believe these interactions with our community will bring the much-needed socio-economic security for the project.

The key to avoiding conflict is to have the correct governance structures in place prior to discovery so that the rules are laid out and expectations and responsibilities of all the parties involved from government, local community and investors is understood, agreed upon and managed correctly.

This is precisely the reason that the Petroleum Exploration Development and Production Agreement (PEDPA) which was signed last year, and the forthcoming Petroleum Production Sharing Agreement being put in place. This ensures that the obligations of government and investors is laid out and the country will receive a fair share of the resources.

NR: Government is reported to have equity in the business. Kindly explain the rationale behind this decision.

SM: The Government will not have direct equity in the project but under a back-in right agreement, the Sovereign Wealth Fund of Zimbabwe will have equity in the project.

In addition, through the Production Sharing Agreement that we are currently finalising the Government of Zimbabwe will be entitled to a share of the product/profit from the project to ensure that the country derives a fair share of any developed resource. The SWFZ and Government will also be involved in the operational and technical management committees to facilitate capacity building and ensure that its share is responsibly managed as well as enable the development of expertise in the upstream, midstream, and downstream sectors which is currently lacking.

NR: How many jobs will be created from this project.

SM: The seismic survey completed last year created around 200 direct jobs for the community and a variety of ancillary opportunities created from service provision by both local and national contractors

During the exploration drilling campaign, most positions will be filled by highly specialist contractors from rig operator Exalo. There will be approximately 50 local positions during the drilling plus the ancillary services to support the operation. However, if a commercial discovery is made and it goes into development then thousands of jobs will be created during the construction phase ranging from the facility, pipelines, civil works, and development drilling. This will then reduce to a few hundred permanent positions during the production phase but will also spawn many more jobs in the midstream and downstream projects that will be developed off the back of it.