Local energy developer, Shumba Energy says recent feelers put out for funding in Asia for the P20 billion Coal to Liquids (CTL) plant were positive, adding confidence for the development of a project that would revolutionise the local and regional fuel industry.
Should it come to fruition, the ambitious project, planned to be located at Mabesekwa near Francistown, would be powered by a one billion tonne resource of coal and produce 20,000 barrels of diesel and 5,000 of petrol per day when fully functional.
Shumba has partnered with PowerChina International Group and Wison Group, major Chinese energy players involved in construction as well as engineering. On Tuesday, Shumba managing director, Mashale Phumaphi told BusinessWeek that the proposed plant was receiving positive interest from both potential financiers and offtakers.
“We were actually in Shanghai and Beijing about four weeks ago and there’s a huge amount of funding interest out of China, both debt and equity,” Phumaphi said in an interview.
“We have also had interest in terms of offtake and in fact, we are in quite advanced discussions with a company in South Africa that is a major supplier of fuel to government departments, mines, parastatals, the transport sector, agriculture and others.” The project’s fundamentals are robust, with a solid coal resource, water and other infrastructure, established technology partners and a domestic market for fuel estimated at P6 billion per year. Shumba also believes it holds the aces in terms of quality, as it says the potential fuel from the CTL planned would be cleaner than the current fuel the local market is importing.
In addition, Shumba believes the environmental approvals previously granted for the mine and a power station at Mabesekwa either already cover the planned CTL plant or lend themselves well to any new approval process.
At a national priority level, Botswana’s economy would be significantly aided by moving from being a full time importer of billions of pula in fuel
The deciding factor will be whether Shumba secures the confidence of funders and offtakers, a fact Phumaphi acknowledged.
“That’s the critical factor,” he told BusinessWeek.
“By this time next year, the offtake should be pretty much finalised as well as the funding commitments and we should be in the process of taking this towards financial close.
“We should be doing the final detailed design and others.
“In the next months, we want to seal our funding commitments and by this time next year, we should be saying ‘we are between six to nine months away from financial close’.”
On another front, the energy group says another key factor, the costs of the fuel the plant will produce, will be helped by the proximity to the fuel source and technology. Phumaphi said the local pump price is largely determined by transport costs it travels to reach local shores, import excise and taxes and exchange rate factors.
Local production would cut through that, he said. “Our priority is to start at home, talk to the local players and work with them where they benefit from the lower cost fuel, before looking outside.
“The market here, consisting of the oil companies who have the retail distribution infrastructure, is more than big enough to accommodate us.
“We will be supplying a cleaner, lower cost product and we have already started discussions locally, but there’s nothing to report now.
CTL technology involves the conversion of coal to liquid fuels. CTL projects are considered as ultra-clean liquid fuels because of the “top of the range clean coal liquefication processes that capture and store potentially harmful emissions from the manufacturing process”