Tlou Energy Limited (LON:TLOU) is making good progress at its Lesedi coal bed methane (CBM) – fired power project in Botswana, says house broker Shore Capital.
A contract for a 250km seismic survey that starts this quarter and a mining licence application at the Lesedi CBM-to-power project in Botswana were lodged recently.
Through the seismic, Tlou aims to extend the base of reserves and resources, while a mining licence will give long term tenure and rights to commercialise the Lesedi gas.
Gas to power proof
A new gas generator also came on stream recently and has started to produce the first power from the project.
It is cheaper than diesel-generated power said Shore and provides an effective proof of concept for the future.
“We continue to believe that Tlou is in pole position to emerge as the winner in the current RFP tender process and that the stage is now set for its transition into a leading Botswana independent power producer,” said the broker.
Botswana the focus
Lesedi is one of two projects Tlou has in Botswana and comprises five CBM prospecting licences covering an area of approximately 3,800 sq km.
Tlou has already been invited to put forward a proposal from the Botswana government for a 100Mw power plant at Lesedi.
Partners in Place
Tlou’s partner on the project is UK-based Independent Power Corporation, which is responsible for the power plant side while Tlou focuses on the gas production.
IPC recently set up its own US$250mln venture with Quantum Global and engineer Tome to develop other power stations in sub-Saharan Africa.
Cleaner than coal-fired power
Gas has been produced in the Selemo area of the Lesedi operation for around a year, and overall Lesedi is estimated to host some 3.2trn cubic feet of gas.
It is the most advanced CBM asset in Botswana.
"First Gas-to-Power via CBM in Botswana is an extremely significant milestone for the Company and in effect a proof of concept of 'first gas monetisation',” said Tony Gilby, Tlou managing director.
“This is the first power generated from CBM in the country and this achievement reinforces our view that CBM Gas-to-Power is achievable in Botswana using gas from the Lesedi Project.
“CBM gas is a cheaper and cleaner alternative to diesel generation and is significantly cleaner than coal fired power generation."
Reducing fuel purchasing costs at Selemo
It expects to replace another diesel generator in the near term, which will save further fuel costs at the project.
The company said that it expects it will initially reduce its diesel requirements by around 50,000 litres per year, and its savings should grow over time as the second gas generation unit is installed.
Mamba another option
In addition, Tlou owns 100% of the adjacent Mamba field covering an area of approximately 4,500 sq km.
In the event of a gas field development by Tlou, the Mamba area provides the Company with considerable flexibility and optionality.
Renewal applications were submitted for the Mamba licences in March 2017.