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Minister Walter Chidhakwa

Business Editor
The Government and Sakunda Energy have signed a $63 million agreement to explore for gas in the Lupane area in Matabeleland North province, Mines Minister Walter Chidhakwa has said.

Through the Zimbabwe Mining Development Corporation (ZMDC), a state-owned company, Government is set to own 40 percent of the venture to explore gas in Lupane, said Minister Chidhakwa in an interview with Bloomberg last Friday.

He said under the agreement, Sakunda Energy will provide the equipment to conduct the exploration works. Previous efforts to extract gas at the reserve rich belt have failed as the Government and its companies had limitations in raising funds for the project, first mooted in 2010.

“We know that there’s a significant quantity of gas underground, with a purity of 95 to 96 percent,” Minister Chidhakwa said. Sakunda has signed a non-disclosure agreement with ZMDC, he added.

Minister Chidhakwa first announced the $60 million deal in December last year where he stressed the need to bolster the exploration of coal-bed methane (CBM) gas in Lupane.

Natural gas reserves were discovered in the Lupane-Lubimbi area, in Matabeleland North a few decades ago but commercial exploitation has not taken off.

Exploration and pilot production works have been conducted and proved that the resource can be exploited commercially for domestic and industrial use.

“We are putting in $60 million for the development of gas in the Matabeleland North in the Lupane-Lubimbi area. So, $60 million is coming your way in Lupane,” said Minister Chidhakwa at that time while giving a brief overview of the performance of the mining sector in the country.

Although the Government granted the exploration of gas National Project Status in 2007, it did not take off until 2014. As such, there have been concerns over lack of concrete steps to guarantee quick benefits to the economy from gas. Lupane Gas, a unit of the Industrial Development Corporation (IDC) that has been doing some exploration work on one of the 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. In an era where oil and gas are driving the global economy, Zimbabwe stands to benefit immensely from exploitation of gas, which accounts for around 23 percent of the global commercial energy mix, according to the Organisation of Petroleum Exporting Countries (Opec). The appetite for gas consumption is growing in Zimbabwe with the Zimbabwe Energy Regulatory Authority (Zera) reporting that the country has experienced a significant rise in household consumption of liquefied petroleum gas (LPG) in the past three years.

Many people view gas as a cheaper alternative heating energy compared to grid electricity. LPG usage rose by 182 percent from 6.6 million kilogrammes in 2012 to 18.6 million kilogrammes in the nine months to September this year, data from the regulator shows.

Through exploitation of coal-bed methane gas, analysts say Zimbabwe could turn from a net importer of fertilisers to a net exporter. Coal bed methane gas is used to 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.