IKAEGENG CTL PROJECT - A NEW FUTURE FOR BOTSWANA

Over the years, the project has gained traction and currently is at feasibility stage. During the State of the Nation Address of the 9th of November 2020 the President, His Excellency Dr. M.E.K. Masisi, informed that “Government is exploring options to improve fuel supply security by developing a Coal to Liquids (CTL) project” and that “to further ensure national security of fuel supply, additional strategic fuel storage facilities are being developed through Botswana Oil Limited”.

The Ikaegeng CTL Project (“Ikaegeng Project”) gives expression to the above statement of intent by Government and is the facilitation of a private sector project by BOL, through Public Private Partnership (PPP) procurement, to develop a CTL Facility and a CTL Business in Botswana.

The CTL Facility will produce CTL diesel and gasoline from coal and the CTL Business is the wholesale distribution, storage, blending and sales of CTL diesel and gasoline.

The development of the Ikaegeng Project is focused on addressing, amongst others, the following inherent challenges and needs currently present in the Botswana petroleum industry and Botswana as a whole:

- A growing demand for liquid fuel in Botswana

- A growing concern over security of liquid fuel supply in the region

- Over reliance on a single dominant source of import

- Over reliance of the economy on the mineral sector

- Limited development of Botswana’s significant coal reserves

- The need for employment creation and local skills development to enable citizen empowerment - Limited private sector investment.

The procurement of the Project will be in accordance with Botswana Laws and specifically the PPPPIF, which defines the parameters of the procurement and implementation processes applicable to the Project.

The formal procurement process is in two stages, both of which will be evaluated by the relevant Authority:

Stage 1: Pre-qualification of Interested Parties (“PIP”) – in which interested parties will be invited to qualify by satisfying key financial and technical criteria to develop, finance, construct and operate the proposed Project. Only pre-qualified Bidders are eligible to respond to Stage 2. The PIP process was concluded in November 2018 and prequalified Bidders were notified accordingly.

Stage 2: Request for Proposal (“RFP”) – in which pre-qualified Bidders will be invited to submit formal binding proposals in respect of the Project. The purpose of the RFP is to invite the Bidders to conduct a definitive feasibility level study and business proposal for evaluation by BOL and barring the unforeseen, this RFP will be issued on 15 December 2020.

BOL has established a Project Management Office and in partnership with International Transaction/ Technical Advisors has delivered on key milestones including:

- Definition and structuring of the of the Ikaegeng Project.

- Development and approval by Government (PPP Unit of Ministry of Finance and Economic

Development [MFED]) of the Ikaegeng PPP Feasibly Study.

Development of the RFP

It is important to note that BOL is currently in the PPP procurement stage of the project.

As stated above, the project team plans to issue the RFP to the market by 15 December 2020.

Critical to the successful implementation of the Ikaegeng Project will be the close working relationship and collaboration of all key governmental departments and other stakeholders. The scale and magnitude of the Ikaegeng Project is such that both public and private sectors will need to work closely together.

BOL is aware of the strong interest from the private sector for ownership and control of the investment in the Project. Through the Project, BOL aims to ensure that there will be appropriate participation by Batswana entities. Furthermore, BOL aims to ensure that opportunities are created for participation in downstream co-product industries by citizens.

As a general principle, BOL sees the private sector as the main source of capital and development expertise for the Project and in the RFP, BOL will provide further clarity regarding citizen participation and the general Citizen Economic Empowerment Policy (CEEP) requirements for the Project.

The Ikaegeng Project is a capital-intensive mega-project that has the potential to deliver a broad range of economic and social benefits for Botswana. A CTL facility is a very technically advanced plant and therefore requires a high level of technical skills in both the construction and operation of the plant. There are a significant number of jobs and tasks which can be performed using local skills and local companies and a summary estimate of the possible direct socio-economic benefits areas is given in the figure below: