BPC signs CBM deal with Tlou Energy

Pioneering: Tlou Energy has been active in eastern Botswana since 2009 PIC: TLOUENERGY.COM
Pioneering: Tlou Energy has been active in eastern Botswana since 2009 PIC: TLOUENERGY.COM

Tlou Energy has scooped the country’s first contract to provide power from Coal Bed Methane (CBM), a deal expected to boost the development of a largely untapped renewable resource estimated to measure 40 trillion cubic feet in Botswana.

Twelve years after its establishment in the country’s eastern gasfields, Tlou Energy executives this morning signed a Power Purchase Agreement (PPA) with the Botswana Power Corporation (BPC). The deal is for the supply of 10 megawatts over a period of five years and while financial terms were not disclosed, Tlou Energy has said it expects revenues of US$10 million (P110 million) annually from the contract.

Tlou Energy’s biggest shareholder is the Botswana Public Officers Pension Fund and it expected that the expansion to produce 10MW will result in 300 jobs created. About 100 workers will be required to operate the plant after expansion.

Speaking at the signing, Mineral Resources, Green Technology and Energy Security minister, Lefoko Moagi revealed that government had committed itself to procuring up to 100MW of CBM from local developers in the next few years, as part of a shift towards renewable energy.

“The CBM resources still remain largely unexplored and thus not yet available for base-load generation,” he said. “However, I am pleased to inform you that further prospecting work is on-going to prove commercial viability of CBM, with method of extracting being one of the main areas of focus.”

Moagi said government was looking forward to ensuring that projects under the 100MW committed to CBM would reach commercial production.

At present, besides Tlou Energy, only one other company is at an advanced stage of CBM development. A 2003 study by the Ministry indicated that the country had 60 trillion cubic feet of CBM with between 30 to 40 trillion cubic feet available for commercial extraction.

Tlou Energy’s country director, Gabaake Gabaake said the company expected to provide the first supply under the contract in the next 48 months. Tlou’s CBM licences are estimated to hold about 41 billion cubic feet of natural gas and gas wells in the area have already been tested operationally.

Tlou Energy’s share price on the London Stock Exchange’s Alternative Investment Market rose by more than 20% earlier today on the back of the BPC deal, as market analysts spoke of a renewed interest in taking up equity in the company.

“Since our establishment in 2009, our investors have put in 500 million pula studying the viability of CBM and that commitment is because they believe the gas’ development is possible in Botswana. “We know the funds Botswana is spending in importing power and if that money could be invested into the economy, one wonders what we could achieve in terms of employment and generation of wealth,” Gabaake said.

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