Tlou Energy gassed up


Tlou Energy Limited has reached yet another milestone in its gas to power project after reaching the critical stage of extracting gas from coal, a development that points to the commercial viability of the gas project.

The Botswana Stock Exchange listed company focused on delivering gas-to-power- solutions in Botswana by tapping on coal bed methane (CBM) natural gas – wholly owns the most advanced gas project in the country, Lesedi CBM project, which it promotes as a solution to the region’s chronic power shortages. On Wednesday, the company announced that the Lesedi 3 – the first dual lateral production pod completed earlier this year – has successfully reached Critical Desorption Pressure (CDP) in the horizontal wells. CPD is the pressure that gas begins to come out of the coal after a careful dewatering process, and the company has defined this as a positive milestone in its operations.

Tlou also disclosed that the next stage of operation at Lesedi 3 involves continued water pumping which should see gas pressure steadily increase inside the casing to an optimal point so that flow testing and flaring of the gas can begin. Lesedi 4 (the second pod drilled and completed) continues to be carefully dewatered in a controlled manner as planned, the company said.

Tony Gilby

“Since the commencement of production testing, the dewatering process at Lesedi 3 and Lesedi 4 has steadily progressed with CDP recently being reached at Lesedi 3. The primary objective remains to demonstrate a commercial gas flow rate,” Tony Gilby, Tlou’s Managing Director, said in a statement accompanying the company’s production update.

It has been a busy and productive half year for the company, underpinned by some achievements that include a new prospecting licence, delivery of drilling operations on time and on budget, production tests, winning tender stages and successfully raising capital.

In the first quarter of the year, Tlou acquired a new 3-year long coal and CBM prospecting licence from Botswana’s department of mines. The licence area is approximately 1,000 km2 and is situated adjacent to the company’s existing licences, and the company believes the area to be prospective given the encouraging results observed at the Lesedi project.

Covering an area of approximately 3,800 km2, and consisting of four coal and CBM prospecting licences and a mining licence, Lesedi CBM project, is currently Tlou’s focal point for operations – which include dewatering the Lesedi development wells. The company said the program was a success – completing on time and within budget, with a significant amount of gas observed bubbling from the production wells.

Last month, Tlou received confirmation from the Botswana government that it has been chosen as a preferred bidder for the development of a “Maximum of 100 MW of Coal Bed Methane fuelled power plants in Botswana”. This follows the company’s October 2018 submission to the government’s Request For Proposal (RFQ) for said project, of which Tlou received the highest pass mark for the compliance, technical and financial stages.

On the corporate side, Tlou succeeded in raising capital from existing shareholders and a new Botswana based fund manager. In the capital raising exercise, the company sold an additional 41.1 million shares to raise P30.1 million. One of the biggest buyers of the shares was Botswana Public Officers Pension Fund (BPOPF), buying about 68 percent shares that were on offer to bring its total stake in Tlou to 47.2 million or 10.49 percent of the company, which makes BPOPF the largest single shareholder in Tlou Energy Limited.

Tlou’s cash balance by end of March 2019 was P48 million, and the company has no debt, which means the company is well funded until the first half of 2020 and has sufficient funds to carry out planned drilling and other activities that have the potential; to further increase existing gas reserves. Moreover, Tlou says it has received indications of funding support from a number of strategic investors as well as from Botswana Development Corporation (BDC).

Botswana moves closer to developing CMB fuelled power plant

Botswana last week revealed that plans were at an advanced stage to develop and pilot a coal bed methane (CBM) fuelled power plant. The Ministry of Mineral Resources, Green Technology and Energy Security said in a statement that the project was undergoing procurement.  According to the ministry, following the approval of two companies, namely Sekaname and Tlou Energy as preferred bidders for the project by the Public Procurement Disposal Asset Disposal Board (PPADB), negotiations with the two companies were due to start in earnest. 

“As per the PPDB Act, the outcomes of the negotiations will go through an approval process by PPADB prior to awarding of the tender,” the ministry said. 

Coal bed methane is a clean energy source capable of earning Botswana carbon credits and positively improve the country’s energy mix, the release said.  The ministry further stated that the project is a government initiative geared towards facilitating the development of the gas industry in Botswana.  Botswana has a significant energy shortage and generally relies on imported power and diesel generation to fulfil its power requirements.

Meanwhile, Tlou also informed shareholders in a statement that having been named a “preferred bidder” for the development of a CBM fuelled power project in Botswana, had received written confirmation of its approval in the tender. The company also confirmed it would now work with the Botswana government to finalise all the project agreements.

This achievement, ensuing from Tlou’s Request For Proposal submission in October last year, is a significant step forward for the company’s gas-to-power ambitions. It follows other notable milestones, including being awarded the first mining licence for CBM gas in the country, flowing gas from the Selemo pilot project for about two years and generating electricity from the pilot gas for several months.

Tlou also established the first independently certified gas reserves in Botswana and has sufficient gas reserves already in place to complete its proposed 10MW power project.

Tlou Managing Director, Tony Gilby, said the proposal was “very competitive” and approval of the tender represents “great progress” for the company.

“The effort put in by our team over recent years has been phenomenal and this result makes it all worthwhile,” he said. 

“The company will now progress with additional work on the ground to deliver a gas‐to‐power solution that can bring significant benefits to the country and to our shareholders.” 

According to Tlou, this proposal submission was for the development of CBM-fired power plants up to a maximum of 100MW. It outlined a staged development starting with up to 10MW of power generation to facilitate the success of the downstream project by requiring relatively minimal upfront capital expenditure, thus reducing risk. The company said based on the electricity price guide provided by the government in Tlou’s tender of about US$0.12 per kWh, a 10MW project could generate gross revenue of about US$10 million per year.

Tlou said the initial 10MW would be a pilot power generation project, with revenues potentially facilitating rapid future expansion.


7 months ago

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