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The Mukuyu-1 new-field wildcat will target Upper Karoo
sandstones in a 4-way faulted anticline present in license area SG
4571 of the Rufunsa Basin. The structure potentially contains
multiple stacked reservoirs with the primary target consisting of
fluvial sandstones of the Triassic Angwa Formation.
Added upside potential exists in the overlying fluvial and
alluvial sandstones of the Pebbly Arkose and Forest formations, and
the post-Karoo Dande Formation. Mukuyu-1 will be the first well
drilled in the Rufunsa Basin and with success, will become a play
opener, having proved a working petroleum system in the Zambezi
Valley.
Invictus Energy Limited will start drilling the Mukuyu-1 well
towards the end of August / beginning of September with the Exalo
Rig 202. The rig has arrived at the well site and preparations are
underway. Invictus Energy Ltd plans to test seven major targets
using a deviated well, providing multiple opportunities to make a
material hydrocarbon discovery in the 2,700 m well.
Exploration success should facilitate fast-track development
options for early monetisation ahead of full field development and
pipeline infrastructure. For the low field estimate cases at 1,000
Bscf (billion standard cubic feet) and below, it was assumed that
products would be consumed locally via a 260 km pipeline. Sable
Chemicals and Invictus Energy Limited signed a memorandum of
understanding (MOU) in May 2017, in which Invictus would supply up
to 70 million cubic feet of gas per day to Sable's Kwekwe
fertiliser plant for 20 years from the Mukuyu project. An
additional MOU was signed with Tatanga Energy for the development
of a 500 MW Gas to Power project for gas supplied at 100 million
cubic feet of gas per day, showing that the local market offtake
agreements are in place, should Mukuyu-1 find success. For the
higher recoverable volume cases, it was assumed that an 800 km
pipeline would be constructed that ties into the Rompco pipeline in
Mozambique. Additional local downstream users include Small Scale
LNG modular units where LNG can be used in heavy transport section
or power generation. Similarly, Compressed Natural Gas is seen as
an option for the transport sector as well as small-scale Gas to
Power development. In Figure 1, the shaded area to the right of the
plot shows where the downstream market is yet to be developed.
Figure 1 Mukuyu Prospect Valuation
At a gas price estimate of USD 4/Mscf (thousand standard cubic
feet), the minimum economic field size is estimated to be around
750 Bscf recoverable, while a discovery in the region of 12.3
trillion cubic feet is expected to have a Net Present Value (NPV)
of around USD 3.6 billion. With gas prices expected to remain above
USD 6/Mscf for the foreseeable future, a discovery of 8.2 trillion
cubic feet is expected to have an NPV above USD 5.3 billion,
expected payback within 10 years and an IRR of 17.7%. Invictus
Energy Limited has recently reported that the targeted prospects
could hold in excess of 20 Tcf (trillion cubic feet). For the
purpose of this this exercise, recoverable volumes were limited to
12.3 Tcf, and any additional discovered volumes would be
commercial. The breakeven price (BEP) for a discovery of between
4.1 to 12.3 Tcf remains below USD 3/Mscf but the BEP stabilises
above 8.2 Tcf. This is attributed to the fact that the extended
pipeline costs are included in the CAPEX from a 4.1 Tcf discovery
and higher, but the only additional cost would be drilling of more
wells, not additional infrastructure. For a discovery below 4 Tcf,
the BEP increases more drastically closer to USD 4/Mscf.
Should the Mukuyu-1 findings be a success, the robust positive
economics and favourable fiscal terms point to an onshore project
that could potentially change the economic landscape for Zimbabwe
and potentially stabilise the energy and electricity supply for the
Southern African region.
Posted by Analene Enslin, Erik Meyer and Semieu
Djimalssifou.
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