Talks kick off for 100MW coal bed methane project
The Ministry of Mineral Resources, Green Technology and Energy Security has notified the country’s two most advanced Coal Bed Methane (CBM) producers that talks towards awarding the long-awaited tender to produce 100MW for grid supply, will begin next month.
Both Tlou Energy and Kalahari Energy Botswana (KEB) were named government’s preferred bidders for the pioneering project in 2019, meaning negotiations would then be hammered out towards a Power Purchase Agreement and spades in the ground.
Tlou Energy and KEB are both sitting on trillions of cubic feet of gas reserves in the Central District and are at different, although advanced, stages of progressing the country’s first-ever extraction of CBM for national grid use.
Although many factors will be considered, one major determinant will be the final tariff being offered by the bidders.
On Tuesday, Tlou Energy managing director, Tony Gilby said the Company had received written confirmation from the ministry of government’s intention to ‘fast-track’ CBM development in the country.
“MMGE also stated that it is ‘happy to provide the necessary support to ensure commercial development of CBM,’” Gilby told investors.
“The company welcomes this update and looks forward to negotiation and finalisation of the tender process in the near term.”
Gilby said government’s letter to the preferred bidders also stressed its ‘full commitment’ to seeing the project come to fruition “as it will promote the gas industry, contribute toward import substitution, as well as to improve the livelihood of Batswana”.
The letter of commitment by government is critical for both bidders and their shareholders after the CBM tender was disrupted some years ago due to procedural hiccups in the ministry.
“The company welcomes this update and looks forward to negotiation and finalisation of the tender process in the near term,” Gilby said.
The managing director also told investors Tlou Energy had recommenced negotiations with Botswana-based project financiers with a goal to close a deal for funding as soon as possible. Last November, the CBM developer said it was hunting for $10 million (P110m) to advance its flagship Lesedi project, near Lephephe.
The funding is required for Phase 1 of the project which would include transmission line construction, transformers, grid connection, electricity generators and potentially the drilling of additional gas wells.
KEB, meanwhile, previously indicated it was ready to raise funding for the project, which it estimates could inject P5.85 billion into the economy.
The 100MW CBM tender dates back to July 2016, when the government again shortlisted both Tlou Energy and KEB, before suspending the process. At the time, government was willing to split the tender 50/50 for the joint provision of 100MW.
While the upcoming negotiations could result in a winner takes all, the wording of the specifications required by the Public Procurement and Asset Disposal Board (PPADB) is unclear.
The May 7, 2019, PPADB statement naming Tlou and KEB as preferential bidders refers to the “development of CBMfuelled pilot power plants,” suggesting a split could be possible.