The Importance of Production Sharing Agreements (PSAs) in Oil and Gas Drilling: A Case Study of Zimbabwe’s Cabbora Bassa Basin

Zimbabwe is new to the field of oil and gas extraction, hence many, including government officials, should be excused for their lack of familiarity with a crucial enabling tool called the Production Sharing Agreement (PSA).

We hope that this brief article will help not just the man and woman on the street, but also government officials and Members of Parliament, all of whom have a role to play in ensuring that Zimbabwe can exploit and benefit from its newly discovered wealth in the Cabora Bassa Basin. Members of the 4th Estate too, the Press, need to know more!

 

Understanding Production Sharing Agreements (PSAs)

Joined at the hip: Invictus Energy and the Government of Zimbabwe!

A PSA is a contract between a government and a resource extraction company (or consortium) that details how much of the resource extracted will be allocated to each party.Typically, the agreement specifies the percentage of production that will go towards covering the company’s exploration and development costs, with the remaining production being split between the government and the company based on negotiated terms. PSAs are crucial for:

a) Risk Management: They distribute financial risks between the government and the investor, encouraging foreign investment in potentially high-risk regions.

b) Revenue Sharing: They ensure the host country receives a fair share of the resources, contributing to national revenue.

c) Operational Clarity: They provide a clear framework for operational responsibilities, timelines, and procedures, facilitating smoother project execution.

 

The Muzarabani Gas Discovery and the Role of PSAs

The discovery of significant gas reserves in Zimbabwe’s Cabora Bassa Basin by Invictus Energy has generated substantial excitement and potential for economic growth. This find represents a transformative opportunity for Zimbabwe, potentially reducing energy imports, creating jobs, and boosting local industries. However, the progress towards drilling and eventual production is heavily contingent upon the finalization of a robust PSA.

Extract from March 2024 quarterly activities report: Commercial update

 

Impediments Due to Delayed PSAs

That there have been delays in getting the Invictus Energy and Government of Zimbabwe PSA signed is not a secret! The signing has been promised for what looks like eternity now!

Perhaps unrecognized, particularly by officials representing the Government officials, is the detrimental impact that such a delay has, not only on investors in this project, but on Zimbabwe as an investment destination overall.

Several critical aspects of the project that have been affected by these delays as as follows:

The Oil Rig standing Tall and Proud – at a cost!

a) Financial Investment: Investors require the certainty that comes with a signed PSA to commit substantial financial resources. Without this agreement, securing necessary capital becomes challenging, slowing down the entire project lifecycle. As it happens, Invictus Energy have a piece of equipment (an oil rig) on long-term hire, stationed in Muzarabani, waiting to be deployed, but can not do so, until additional funding, which mostly depends on having a signed PSA, is secured. Several millions of dollars will be wasted due to costs related to this item alone!

b) Operational Planning: Drilling operations depend on detailed planning and scheduling, which are outlined in the PSA. Delays in the agreement mean delays in operational timelines, affecting everything from workforce mobilization to equipment procurement. Again, that oil rig, which we like to see in pictures as evidence of work, is sitting there, doing nothing!

c) Regulatory Approvals: A signed PSA is often a prerequisite for obtaining various regulatory approvals. Without it, the project cannot proceed to the drilling phase, leading to further postponements and increased costs.

d) Market Confidence: The international investment community closely watches how resource-rich countries manage their agreements. Delays can erode market confidence, potentially leading to a reluctance to invest in future projects within the country. Claiming to be Open for Business means nothing, if business is then unable to proceed.

Extract from March 2024 quarterly activities report: Regulatory framework

 

The Way Forward

To capitalize on the Muzarabani gas discovery, it is imperative for the Zimbabwe government and Invictus Energy to expedite the PSA finalization process. This will not only unlock immediate project activities but also signal to the global market that Zimbabwe is a viable and reliable destination for energy investments. Clear and swift action in this regard can set a positive precedent, encouraging further exploration and development in the region.

 

In conclusion, Production Sharing Agreements are foundational to the successful development of oil and gas projects. In Zimbabwe’s Cabora Bassa Basin, the timely signing of the PSA with Invictus Energy is crucial for turning the promising gas discovery into tangible economic benefits. By addressing the delays and fostering a collaborative environment, Zimbabwe can pave the way for a prosperous future in its energy sector.

The purity of whats underground: But what use is it underground?

 

 

 

 

 

 

Enjoyed this post? Share it!

 
 

Zimbo Marlon Hove receives Mzansi Arts and Media Awards nomination

Natasha Mutsiba,mutsibanatasha@gmail.com South Africa-based Zimbabwean musician and music producer Marlon Hove has been nominated for the Mzansi Arts and Media Awards (Mamas). Hove, who is no stranger to industry accolades, expressed his gratitude and excitement following the announcement of his nomination. In an interview with Chronicle Showbiz, Hove whose track, “Umile njalo ft Innora and […] …
Continue reading…

Enjoyed this post? Share it!

 
 

Masvingo achieves 77% of winter wheat planting target

Lingani Nyika in Masvingo MASVINGO Provincial Agricultural Advisory and Rural Development Service (AARDS) says the province has achieved 77 percent of the expected winter wheat planting target with the ongoing seed and fertilizer distribution process progressing smoothly. In an interview, AARDS provincial agriculture specialist, Mr Jonas Chinyavada, said Masvingo District has been the most productive […] …
Continue reading…

Enjoyed this post? Share it!

 
 

Chinese man (51) rapes girl (17)

Innocent Manjengwa, Online reporter A 51-year-old Chinese national was arraigned before the Gweru Magistrates’ Court on allegations of raping and impregnating a 17-year-old. According to a statement by National Prosecuting Authority of Zimbabwe, the accused person and the complainant worked together at a mine in Gweru.The complainant who is 17 years old was employed as […] …
Continue reading…

Enjoyed this post? Share it!

 
 

Man rapes woman, with infant by the side

Innocent Manjengwa, Online reporter A MACHETE wielding man raped a woman in the presence of her baby, then fell asleep which enabled the victim to escape from her attacker. In a statement, the National Prosecuting Authority of Zimbabwe (NPAZ) said the 29 year old man from Lower Gwelo was arraigned before the Gweru Magistrates’ Court […] …
Continue reading…

Enjoyed this post? Share it!

 
 

Intombi Zomnqangala, Asante Mo wow crowds at Samuriwo’s Chillspot

Sipepisiwe Moyo, moyosipepisiwe@gmail.com Sunday nights at Old Luveve have transformed into vibrant gatherings, drawing crowds across Bulawayo to Samuriwo’s Chillspot now popularly referred to as koSambhida. Attendees mingle while enjoying live performances from local groups. This past Sunday, the spotlight was on Intombi Zomnqangala and Asante Mo culture groups, captivating the audience with their dynamic performances. […] …
Continue reading…

Enjoyed this post? Share it!

 
 

Kaindu’s transfer headache 

Source: Kaindu’s transfer headache -Newsday Zimbabwe Kaindu, who has previously admitted that there is no depth in his squad, was visibly shaken after the draw to Bikita Minerals at Barbourfields Stadium in Bulawayo  on Sunday. HIGHLANDERS coach Kelvin Kaindu has indicated that he might be forced  to sign on two strikers in the upcoming mid-season […]
The post Kaindu’s transfer headache  appeared first on Zimbabwe Situation. …
Continue reading…

Enjoyed this post? Share it!

 
 

Man kills wife, buries corpse in shallow grave 

Source: Man kills wife, buries corpse in shallow grave -Newsday Zimbabwe The murder took place in a bushy area near Shweshwe village on June 4. POLICE in Insuza, Lupane in Matabeleland North province have arrested a local man for killing his wife, accusing her of infidelity. The murder took place in a bushy area near […]
The post Man kills wife, buries corpse in shallow grave  appeared first on Zimbabwe Situation. …
Continue reading…

Enjoyed this post? Share it!

 
 

Gardener, maid steal employer’s US$25K 

Source: Gardener, maid steal employer’s US$25K –Newsday Zimbabwe Magistrate Simon Kandiyero granted Noah Defred (54), Beauty Ushendibaba (52) and Priscilla Gwasira (22) US$100 bail each and remanded to July 14. A HARARE gardener, house maid and her daughter yesterday appeared in court for allegedly stealing US$25 000 from their employer. Magistrate Simon Kandiyero granted Noah […]
The post Gardener, maid steal employer’s US$25K  appeared first on Zimbabwe Situation. …
Continue reading…

Enjoyed this post? Share it!

 
 

Harare residents fume over council’s shambolic billing system

Source: Harare residents fume over council’s shambolic billing system –Newsday Zimbabwe Mayor Jacob Mafume told a full council meeting last week that the local authority had no information on the number of households it is billing for services. HARARE residents have rapped the city council for having no database of its billing system, arguing that […]
The post Harare residents fume over council’s shambolic billing system appeared first on Zimbabwe Situation. …
Continue reading…

Enjoyed this post? Share it!

 
 

Only 1 in 5 African countries funding elementary education 

Source: Only 1 in 5 African countries funding elementary education –Newsday Zimbabwe Unicef warned that without urgent attention, the huge gaps in financing for education will be catastrophic for a generation of students and the future economic growth and stability of the continent. THE United Nations Children’s Fund (Unicef) has raised concern over how African […]
The post Only 1 in 5 African countries funding elementary education  appeared first on Zimbabwe Situation. …
Continue reading…

Enjoyed this post? Share it!