Sable Chemical Industries and Invictus Energy have entered into a non-binding Memorandum of Understanding for an offtake agreement of gas from the Cabora Bassa Project.
The deal is however subject to a commercial gas discovery being made.
In terms of the MOU, Invictus and Sable have agreed to jointly work together and cooperate with regards to investigating the economic and commercial viability of supplying natural gas from the Cabora Bassa Project to the Sable fertilizer plant located in Kwekwe.
It is expected that the move by Sable Chemical is part of efforts to localise the production of ammonium nitrate fertiliser.
Sable Chemical currently operates a fertilizer manufacturing plant which produces ammonium nitrate fertilizers from ammonia gas feedstock that is currently imported from South Africa.
Previously, the firm used to get most of its gas from the now defunct Ziscosteel.
“We are extremely pleased to enter into this MOU with Invictus and potentially secure an indigenous natural gas supply to produce ammonia gas for our fertilizer plant. Sable Chemicals currently has a capacity to produce 240 000 tonnes of ammonium nitrate per year and has historically played an important anchoring role in the agricultural sector of Zimbabwe, thus ensuring that well priced fertilizers, with formulations that are optimized to suit local conditions, are made available to farmers in a timeous manner each year,” said Sable Chemicals chief executive Bothwell Nyajeka in a joint statement.
“The potential future supply of gas by Invictus is also critical for Sable’s medium-term expansion program aimed at increasing production to 600 000 tonnes of nitrogenous fertilisers.”
Sable Chemicals requires at least US$2.8 million on monthly basis to import ammonia gas.
Earlier this year, the fertilizer company announced that it will utilize $25 million on plant refurbishment.
Invictus managing director Scott Macmillan said the MOU marks a significant milestone in the company’s commercial negotiations as it look to progress the Cabora Bassa Project.
“Sable is the sole producer of nitrogenous fertilizer in Zimbabwe and a well-recognised brand in the country. We are proud to work with them to fulfil their ambition of becoming the preferred manufacturer and supplier of fertilizers and other chemical products in Africa,” he said.
“The potential gas supply of up to 70 million cubic feet per day for 20 years is a substantial volume which will help underpin the development of any commercial gas discovery we make in the Cabora Bassa Project. This MOU demonstrates the huge local gas demand in an energy starved market in Zimbabwe and we expect to enter into additional gas supply MOUs in the future.”
Other key terms of the MOU includes a supply term of 20 years from the date of first commercial gas production and gas sales price commercial in confidence.