A UNITED Kingdom-registered oil company with strong South African links, Coven Energy Limited, has tabled an ambitious US$850 million investment proposal to construct Zimbabwe’s second fuel pipeline in a deal that is set to rattle the country’s fuel industry and dismantle businessman Kuda Tagwirei’s Sakunda monopoly, The NewsHawks reported.
The deal, which is now being assessed by the Zimbabwe Investment Development Authority (Zida), entails that Coven Energy will form a joint venture (JV) company with state-owned National Oil and Infrastructure Company (Noic) to construct a second fuel pipeline linking Beira to Zimbabwe.
As part of long-term plan, the company also wants to connect the pipeline to South Africa, Botswana, Zambia, Malawi, and the Democratic Republic of Congo (DRC).
The Coven deal would radically transform Zimbabwe into a regional petroleum hub, but effectively tilt the dynamics of the local industry largely against Tagwirei, a dominant player through his company Sakunda, which has close ties to multinational oil consortium Trafigura.
According to the project proposal seen by The NewsHawks, Coven Energy plans to roll out the project in phases, with the first stage set to receive US$850 million capital injection if the deal is approved by President Emmerson Mnangagwa, who remains the key to the opening up of the fuel industry which has been in the grip of cartels.
Tagwirei, who has strong ties to the presidium, was bought out of Sakunda Holdings in 2020 by Trafigura.
At the time of the transaction, observers said the move was meant to fend off US sanctions under which Tagwirei was designated last year for his role in aiding an oppressive regime.
Earlier plans to set up a second pipeline were frustrated by cabinet after South African-based Mining Oil and Gas Services (Mogs) had approached the government.
Factional fights between the Mnangagwa camp and the military faction led by Vice President Constantino Chiwenga frustrated the deal which was expected to significantly reduce fuel prices and increase supply, which was a huge challenge at that time.
In the latest investment proposal, Coven Energy’s involvement of Noic is expected to give the bid impetus, although the buck stops with Mnangagwa.
The deal’s sensitivity is also expected to ruffle feathers within the rank and file of Zanu-PF.
Noic chairperson, who is also Zanu-PF Midlands chairperson Daniel Mackenzie Ncube, said he would no comment as negotiations were at a “critical” and delicate point.
“I wish I could assist you, but the negotiations are at a very critical point,” Mackenzie Ncube told The NewsHawks.
“You will have to contend with no comment.”
The complexities of Zimbabwe’s fuel industry have often triggered a fierce tussle within the government between factions in favour and opposed to construction of a second fuel pipeline.
As reported by Africa Confidential on 10 June, Coven Energy’s ambitious bid had set Mnangagwa and his deputy Chiwenga on a collision course, with both powerful men angling to safeguard their wealth and political interests.
Chiwenga, who as army commander orchestrated the 2017 military coup that propelled Mnangagwa to the helm and now harbours presidential ambitions of his own, is perceived to be opposed to plans to set up a second pipeline.
Mnangagwa has reportedly thrown his weight behind the Coven Energy proposal and is not keen to have it tabled before cabinet where it may face resistance.
A source close to the Coven Energy proposal told this publication that the matter was “complicated and confidential” due to competing interests of the presidium, fronting for competing cartels.
“This is a complicated and rather confidential project given the conflicting interests. The Feruka pipeline now is underutilised because it is overpriced. The reason for that relates to the people who control the pipeline in Mozambique. This is something that has to be attended to in the short term,” the source said on condition of anonymity.
“The Feruka Pipeline does not have the capacity to supply the needs of the other Central African nations such as Zambia, Botswana, Malawi and DRC. Even to meet its Polokwane demand. So, the justification for a second pipeline is clear. We need about six million metric tonnes of fuel every year. Mabvuku is the logical centre to do that. The Coven Energy and Noic proposal is in the process of being handled by Zida on behalf of the Government of Zimbabwe. It will be implemented as a JV.”
Coven Energy, a multi-million-dollar company, was incorporated in the UK on 25 August 2020 under registration number 12835465.
Details filed by Companies House show that Stephanus Du Toit Burger, Alexander Fraser Russell, and Leon Kendon Appenteng are listed as the firm’s directors.
Errol George Gregor, the records show, became a “person with significant control on 12 October 2020” in the company.
An outfit called the Highlands Group also has significant interest in Coven Energy.
Interestingly, Coven Energy also disinvested in Mogs, partly due to the protracted negotiations with Zimbabwean authorities.
“Mogs decided not to continue with the project because it was involved in an investigation involving the Public Investment Corporation (PIC). The chief executive was taken to court over a particular deal they did. Without PIC supporting Mogs, they did not have the capacity to proceed with the pipeline project,” a petroleum industry expert was quoted as saying this week.
“Over 6 years had transpired when Mogs first expressed interest to build the second pipeline. But lengthy negotiations stalled progress. At the same time, they extended their operations to other parts of South Africa and on the continent. I do not think they had the capacity any longer to pursue this additional project. Coven Energy, on the other hand, is a major multinational and is keen to pursue the project especially after disinvesting from Mogs which established them as a major source of funding.”
Efforts to get a comment from Coven Energy were fruitless.
The company prides itself as a team that has “extensive experience of oil and gas infrastructure projects in many parts of the world including Africa, Europe, Middle East, USA, Indonesia and Hong Kong.”
PetroSA, Petroleum Development Oman, Sasol, OXY, Kuwait Oil Company, ARCO, and Agip are listed as Coven Limited partners.