[Premium] China Signs $1Bn Zimbabwe CBM Deal

Zimbabwe has signed a deal with Chinese company Sinosteel Corp worth $1 billion under which the latter will build a 400 MW coalbed methane-fired power plant that would start up in 2025. Sinosteel would use power from the plant to run four chrome smelting furnaces, selling any surplus electricity generated.

The late start-up date, however, is because Sinosteel's subsidiaries will first need to prove up and develop CBM production in Zimbabwe. According to a timeline released when the deal was signed in Harare May 14, the power station at Lupane in western Zimbabwe will start operating only in 2025 as part of a larger phased investment that will entail first drilling two production wells at concessions owned by Shangani Exploration Energy (SEE), a Sinosteel subsidiary, to fire a 12MW pilot facility. More wells will be drilled in the second phase, leading to the expansion of generation capacity to 400 MW. 

Another Sinosteel local subsidiary, Zimbabwe Mining and Smelting Company (Zimasco) will build three chrome smelters in central Zimbabwe to add to the one it already has that produces 120,000 metric tons of ferrochrome yearly.  

Sinosteel Corp president Andong Liu said at the signing ceremony that Zimasco will increase output to 300,000 metric tons in the next five years and 500,000 tonnes by 2028, thus requiring more electricity.

Zimasco in August 2017 announced a plan to switch to CBM to fire its furnaces, saying reliance on the grid was expensive. Also then, the government extended SEE's three exploration grants for three years. 

Zimbabwe's new president Emmerson Mnangagwa said May 14: "We are gathered here today to witness our country taking massive strides to tap into coalbed methane industry.  As a country, we are endowed with a substantial number of minerals most of, which are still to be exploited including coal bed methane. The untapped sector presents unique and competitive investment opportunities."

Zimbabwe's gas reserves are undeveloped but have attracted increased investor interest during the first five months of Mnangagwa's rule.  In February, London-listed coal miner Hwange Colliery Company Limited and government-owned Zimbabwe Mining Development Corporation issued tenders for investors to help them explore and develop their CBM permits in Lupane.  Two months later, Interpose, an Australian company bought an 80% stake in a gas-condensate prospect in northern Zimbabwe.