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Tlou Energy sees short-term gas rates ‘significantly’ ahead as dewatering continues at Botswana CBM project

The Botswana focussed firm said it is very pleased with the performance of both production pods at the Lesedi coal-bed-methane project.

Tlou Energy Limited - Tlou Energy sees short-term gas rates ‘significantly’ ahead as dewatering continues at Botswana CBM project
Tlou aims to establish minimum sustained production rates of 80,000 to 100,000 cubic feet per pod, per day

Tlou Energy Ltd (LON:TLOU) has said that gas flows continue at the Lesedi coal bed methane project, with recent short-term rates seen ‘significantly’ ahead of its previously reported performance.

For context, the company has previously told investors that the initial gas flow rates were marked at 20,000 cubic feet per day, from each of the Lesedi-3 and Lesedi-4 production pods.

“To date, the company is very pleased with the performance of both wells,” Tlou said in a statement.

The company noted that the dewatering/ramp-up process continues, with reaching commercial level production rates being the primary goal. It aims to establish minimum sustained production rates of 80,000 to 100,000 cubic feet per pod, per day.

READ: Broker details Tlou's opportunity to develop 'regionally significant' gas project

As dewatering continues, Tlou explained that: “the continued production of water from the coal is a sign of good reservoir permeability which potentially means that the wells will, with time, produce gas from a larger area and at a higher rate than would otherwise be the case.”

It added: “The company has no reason to believe that the targeted commercial gas flow rates will not be achieved.

“However, due to a lack of comparable data in the Company's operating environment (being that Tlou is the first to attempt dewatering of the Lower Morupule Coal at depth in Botswana) the company cannot predict exactly when potentially commercial gas flow rates will be achieved. 

“With initial flow rates already announced, short term rates being higher, and the coal seam still to become gas saturated, the company is very confident that sustained commercial gas flows will be attained from the Lesedi pods.”

Efforts towards a power deal

Tlou also today noted the recent appointment of a new minister, Lefoko Maxwell Moagi, at the Ministry of Mineral Resources Green Technology and Energy Security (MMGE), as the company continues to negotiate a power purchase agreement for the electricity generation element of its coal bed methane-based gas-to-power project.

In its statement, the company noted: “Tlou recognises that progress has been slower than anticipated in recent times, particularly in relation to the PPA. 

“However, the company is reassured by the continued performance of the Lesedi 3 and 4 production pods which continues to build the business on very solid operational foundations. 

“The long period of time that it has taken to advance a PPA will hopefully be soon resolved following the appointment of the new minister to the MMGE and project finance options should come to fruition once a PPA and/or a generation licence is in place.”

Project finance

The company noted that it has been negotiating project finance for some time, and, the leading candidate for capital investment Botswana Development Corporation (BDC) has now indicated that it will deliver a funding proposal in the near term. 

It is envisaged that BDC may provide US$30mln to develop the first 10 megawatt Gas-to-Power project.

Tlou said it has also advanced other potential sources of financing if the agreement with BDC does not materialise in a timely manner. It has received expressions of interest from third parties.  

The company said that the concept of a ‘low carbon power bond’ is also being considered, with a view to funding combined gas and solar power generation.

There is a strong interest in solar energy in Botswana and solar often works efficiently when supported by gas-fired baseload power, Tlou highlighted.

Internally, Tlou has existing environmental approval for up to 20MW of gas-fired power generation and up to 20MW of solar power generation.

Quick facts: Tlou Energy Limited

Price: 3.85 GBX

AIM:TLOU
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Market Cap: £17.33 m
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