Scott Macmillan, Managing Director from Invictus at Africa E&P Summit 2019

Interview Conducted by Our Summit Journalist, Ed Reed



EP Summit0598.jpg

ER: Zimbabwe is an untapped – and in many ways unthought of – frontier. Can you maybe explain a little about the opportunity you saw and how it came to pass?

SM: I first came across the opportunity maybe 10 years ago and it was actually really surprising. Having worked in new ventures in Africa for previous operators, there was nothing really on the radar about Zimbabwe. I remember Mobil’s exploration programme from growing up there, but nothing had really been publicised about the results and everyone assumed that there was nothing worthwhile. It remained dormant for 20 years and, coupled with the economic and political situation in Zimbabwe, it fell off people’s radars and has never been thought of as an E&P jurisdiction. I was actually looking for a coal-bed methane (CBM) project when I came across this project and our local partner was talking about the conventional potential of Zimbabwe. I was a little sceptical at first, until I went into the geological survey office and read these old reports. Then I realised it was quite a staggering opportunity. They had identified this big prospect but at that stage had thought it was more gas prone than oil prone and in the early 1990s there no structural market for gas. So it was relinquished and it sat untouched. We came in and we’ve reworked it and looked at it with fresh eyes. We’ve reprocessed some of the original field data that Mobil acquired and it’s been a very pleasing result. What’s come out looks very encouraging and I think it’s something that hasn’t been seen before. It has giant-scale potential and it can move the needle for the bigger companies. It’s a similar size to the Brulpadda discovery in South Africa that everyone is talking about. At the moment it is estimated to hold 850 million boe, nearing 1 billion boe, from an earlier estimate. We’ll have an updated one soon, based on the new work that we’ve been doing. 

ER: This idea of domestic supply in Africa is gaining more and more attention and that’s clearly critical to what you’re doing. How is that going to work?

SM: Zimbabwe has been off the radar for such a long time that people actually don’t realise how industrialised it is. It has built up a huge industrial base, from the 1960s onwards, and it’s self-sufficient in everything but petroleum. As a result, there is a huge energy demand in the country – and in the rest of the region – and as it’s grown, supply hasn’t kicked up. Plants are ageing and companies are looking for new feedstock and new energy sources. Sable Chemicals, which is the largest fertiliser manufacturer in the country, has been trying to move away from importing ammonia from South Africa, but this has become unaffordable. Sable approached us looking for gas supply and saw our project as the most likely near-term solution for them – obviously that’s assuming a success case in our exploration programme. That’s one example of demand, but there’s substantial room for expansion, there are other industrial customers in Zimbabwe, as well as the rest of the region. South Africa, Zambia and the Congo are all eager for more gas. Mining operations tend to use imported diesel and something like small-scale trucked LNG to those facilities would be a very elegant solution, which is an option that’s taken off in Australia. 

ER: To get to a point where you can provide gas to this untapped demand, how do you get there? Obviously you need to drill a well, what sort of partnering plans have you got?

SM: We’ve spent the last nine to 12 months maturing this project from a technical perspective. De-risking it, re-working the data, updating it and applying some of the key learnings from other successful interior exploration. We’re now looking to de-risk it from a commercial perspective and that means bringing in a partner to help share the risk – and potentially the massive reward. It is a high-impact, basin-opening programme that we are looking to achieve. We have a high amount of equity in the project, at 80%, so there is room to bring in another partner. We will launch a farm-out campaign to bring in a partner and take it from there.

ER: Historically there have concerns about expropriation and things like that in Zimbabwe. How has that changed?

SM: There has been a complete 180 by the new government. They have recognised that the expropriation that happened has led to quite a lot of damage to the economy and the perception of Zimbabwe as an investment destination. And it has been off the radar for 20 years because of that. The government has reversed that and it has done away with the indigenisation law. 100% foreign ownership is now allowed in the country. The mantra that Zimbabwe is open for business has really resonated with foreign investors and you’re starting to see foreign companies come back into Zimbabwe. And they’ve managed to do that because of these reforms that they’ve brought in as well as signing up to some bilateral investment protection treaties that guarantee investor rights, offering very attractive investment policies, such as special economic zones, and these will help safeguard foreign investment and contribute to the local economy.

ER: What do you think is the greatest challenge facing Invictus? 

SM: For our company, the greatest challenge has been convincing people about the above-ground issues, because of the historic perception people have had about Zimbabwe. That perception is starting to change now. I think technically the project stands on its own and it is one of the largest targets going around. That does help to get people interested and now that people are beginning to understand the change in the investment environment in Zimbabwe that’s making it easier.