Deal in Limbo as government invoices investor US$16 million rental fees
The proposed multimillion-dollar coal-bed methane gas extraction project in Lupane by Discovery Investments is in limbo as the government has invoiced the investor US$16 million in-ground rental fees over four years.
The firm is one of the three entities which were in recent years granted a coal-bed methane concession in Matabeleland North province by the government.
Discovery Investments managing director Mr. Lloyd Hove said one of the challenges delaying implementation of the project was the ground rental fees required by the government.
“We are about to reach financial closure of the project but because of these issues (ground rentals), the investors are concerned.
“They (government) gave us an invoice of US$16 million over a period of four years,” he said.
In January 2018, Discovery Investments announced that it required about US$700 million to start commercial gas production.
Mr. Hove said they have appealed to the government to reduce the ground rental fees, which at this stage, is a logjam to the commercial methane gas extraction by Discovery Investments.
“We are still waiting for them (government) to respond and the major hurdle to the implementation of the project, is the issue relating to the ground rental fees, although there are other issues about the situation in Zimbabwe,” he said.
Among other issues, investments in the country have been scuttled by policy inconsistency and corruption.
Drilling of production wells at the concession to mark the beginning of commercial gas extraction was expected to begin in February last year.
The mining concern, which owns a coal-bed methane gas concession in the Siwale area in Mzola, Lupane recently announced the completion of exploration work with positive confirmatory results of methane gas.
According to the company, its gas reserves could be exploited over a period of 50 years.
It is hoped that through the exploitation of coal-bed methane gas, Zimbabwe could resurrect from being a net importer of fertilizer to a net exporter, and help preserve foreign currency.
Besides heating, power generation, and petrochemical production, coal-bed methane gas is also used to manufacture hydrogen, one of the major raw materials in the production of fertilizer.
This article first appeared in the June 2020 Edition of Mining Zimbabwe Magazine.