The development of the Lupane coalbed methane gas project has potential to boost the country’s energy generation capacity, provided enabling policies are put in place to attract investors, a World Bank report has revealed.
Methane gas is one of the projects government believes could be developed through a public-private partnership (PPP), but no feasibility study has been conducted to determine the success rate of the proposed project.
The cost of a feasibility study for the electricity generating project is estimated at $12 million.
A Zimbabwe Rapid Needs Assessment report prepared by Castalia Advisory Services on behalf of the World Bank says the government should come up with a clear strategy to extract the gas.
“This is a sector that appears to have great potential in Zimbabwe,” reads part of the report.
“However, the government of Zimbabwe should undertake certain steps to provide more clarity to potential investors in this sector.
“Firstly, the government should develop a clear strategic plan for the use of coalbed methane.
“Secondly, the government should identify policy and regulatory changes needed to implement that strategy successfully.”
The project consists of progressive construction of coalbed methane-based electricity generation plants.
The Ministry of Energy and Power Development believes an initial investment in drilling around five wells and installing five to 10 megawatt-generating turbines could be a low-risk initial investment.
It believes this would allow the investor to start generating revenues early and avoid committing to a large investment before finding out how well the project will perform.
According to the report, coalbed methane gas was a good candidate for PPPs as it enjoyed strong government support and the projects were economically and financially viable.
“There is currently a gap between the demand and supply of electricity in the country.
“In addition, the demand for electricity in Zimbabwe is expected to increase sharply over the next few years as the economy recovers,” reads part of the report.
“There is a need for the energy that coalbed methane generators would produce.
“Also, coalbed methane generation could be a low-cost generation alternative and financially viable under the current tariff structure.”
The report noted that given investments would be made incrementally, this was a project with low-risk for investors as no large investments would be made until the potential of the site had been understood.
“This makes it a sector with great potential to attract investors if the right policy and regulatory frameworks are in place,” the report said.
The report suggests the coalbed project could be developed either through a build-operate-and-transfer concession or an independent power producer.