Power generation from Coal bed methane gas in Botswana is possible, Tlou Energy has established. Country Manager at Tlou, Gabaake Gabaake, this week at the Botswana Resource Sector Conference, revealed that CBM resources for energy generation are commercially viable.
The Conference, which was held at Gaborone International Conference Centre (GICC) on 9th and 10th June, brought mineral sector players together to discuss industry matters.
Gabaake said that the cheaper option of power generation, compared to burning coal or using diesel, is a combination coal, gas and renewable energy such as solar, whose infrastructure is steadily becoming reasonably priced in the country.
Gabaake said that Botswana is an immature market for gas and is still developing. The company, whose resources are located on the eastern margins of the Kalahari and Karoo basins, has two gas wells, Selemo and Lesedi.
“With 239 tcf (trillion cubic feet), you can supply Orapa with gas energy for thirty years,” said Gabaake, putting into context, the magnitude of the gas resource that Tlou has.
“Using all the data we have collected, we have been able to delineate an area that we think is a sweet spot for developing gas in this area,” said Gabaake.
“We have completed a preliminary study for a 90 megawatt pipeline, which is the only feasible option as compared to trucking the gas.”
“The technical challenges, we believe, have been overcome, in terms of can one turn gas into power, it is commercially viable,” stated Gabaake, categorically, adding that “it is an opportunity that this country cannot afford not to take advantage of.”
“To make these things happen, will require innovation from both parties; it is not going to happen if we follow the normal rules that we usually follow.”
Gabaake said that the biggest challenge is to get gas off take agreements the company always runs the risk of shareholders pulling the plug on funding for prospecting and the challenge is to find a formula to turn resources into money returns for the shareholders, hence the company will start small to offset the risk.
“How we would like to build a pipeline that takes gas to Orapa but that comes with risk and we think that the best approach to de-risk the project we will start small and to that effect we have made an unsolicited approach to BPC for a 10 megawatt power station,” said Gaabaake though declining to reveal details of the proposal.
Gabaake said that “We can save BPC over a million dollars an hour, even on the same terms the diesel contracts.”
In recent years that saw players in the prospecting space leaving the scene due to the high costs associated with the activity, Australian Stock Exchange listed Tlou Energy, decided to stick it out for the long haul. The company has since proposed a 10 megawatt power station, for Orapa, to Botswana Power Corporation, an unsolicited bid, as Gabaake revealed, which comes in the midst of a process by BPC to procure gas for Orapa.
“The solution that we are proposing, through the 10 megawatt project, if done, can save BPC over a million dollars because the price we proposing, is way lower than what they are burning with diesel.”
“We are talking of a contract that is exactly on the same terms as that of diesel but at a lower price and we are awaiting feedback on that one.”
“There is no natural gas market in Botswana and there basically is no price so somebody has to come up with a price; we have come up with a price that we feel is reasonable and we have made those proposals but they remain only proposals.”
“Gas compared to coal, is just wonderful because all you do is literally bring an engine and create a slab, plug in and scale up from 1 megawatt to literally any level that you want; that is the advantage over coal.”
“We think that if us and government can work together, we can effectively turn BPC into the next net exporter of power in the region, before South Africa can deliver all those nice projects that it is planning, if they happen; it is not by accident that Eskom gives us power even when they have their own shortage, they are making a decent amount of money; with power you are literally printing money.”
“The biggest impact will be on the bottom line for BPC,” adding that to make these things happen there will have to be innovation by stake holders and it can take anything from five to ten years if but only innovation can make the projects move faster.
Gabaake said that Tlou Energy has other downstream agreements with a South African company CNG who will take gas from the gas field to clients, in their trucks, as well as a bigger deal with General Electric.
Encouragingly, pressure in the lateral well-head has been building up since the Selemo pilot was shut-in to allow pressure build-up data to be accumulated and assessed prior to the recommencement of longer term production testing in early 2015.
Tlou Energy is a Coalbed Methane (CBM) natural gas company, established in 2009 to develop prospective CBM opportunities in Botswana.
Its principle assets are in Botswana, where it has one of the most advanced CBM projects in the country. Tlou’s 100 percent owned Lesedi CBM project has an independently certified contingent resource of 2.3 trillion cubic feet (TCF) (3C).
Tlou aspires to supplement the energy needs of the rapidly growing southern African region through supplying natural CBM gas to generate new electrical energy as well as to replace existing diesel and coal fired power generation.
Tlou expects that additional wells placed near the Selemo Pilot will assist in maintaining and even enhancing the longer term gas flow rate given a significantly larger area of the coal seam would be dewatering and maintained below the gas desorption pressure.
This century is always looking at improving new super high speed technology to make life easier. On the other hand, beckoning as an emerging fierce reversal force to equally match or dominate this life enhancing super new tech, comes swift human adversaries which seem to have come to make living on earth even more difficult.
The recent discovery of a pandemic, Covid-19, which moves at a pace of unimaginable and unpredictable proportions; locking people inside homes and barring human interactions with its dreaded death threat, is currently being felt.
Member of Parliament for Kanye North, Thapelo Letsholo has cautioned Government against excessive borrowing and poorly managed debt levels.
He was speaking in Parliament on Tuesday delivering Parliament’s Finance Committee report after assessing a motion that sought to raise Government Bond program ceiling to P30 billion, a big jump from the initial P15 Billion.
Government Investment Account (GIA) which forms part of the Pula fund has been significantly drawn down to finance Botswana’s budget deficits since 2008/09 Global financial crises.
The 2009 global economic recession triggered the collapse of financial markets in the United States, sending waves of shock across world economies, eroding business sentiment, and causing financiers of trade to excise heightened caution and hold onto their cash.
The ripple effects of this economic catastrophe were mostly felt by low to middle income resource based economies, amplifying their vulnerability to external shocks. The diamond industry which forms the gist of Botswana’s economic make up collapsed to zero trade levels across the entire value chain.
The Upstream, where Botswana gathers much of its diamond revenue was adversely impacted by muted demand in the Midstream. The situation was exacerbated by zero appetite of polished goods by jewelry manufacturers and retail outlets due to lowered tail end consumer demand.
This resulted in sharp decline of Government revenue, ballooned budget deficits and suspension of some developmental projects. To finance the deficit and some prioritized national development projects, government had to dip into cash balances, foreign reserves and borrow both externally and locally.
Much of drawing was from Government Investment Account as opposed to drawing from foreign reserve component of the Pula Fund; the latter was spared as a fiscal buffer for the worst rainy days.
Consequently this resulted in significant decline in funds held in the Government Investment Account (GIA). The account serves as Government’s main savings depository and fund for national policy objectives.
However as the world emerged from the 2009 recession government revenue graph picked up to pre recession levels before going down again around 2016/17 owing to challenges in the diamond industry.
Due to a number of budget surpluses from 2012/13 financial year the Government Investment Account started expanding back to P30 billion levels before a series of budget deficits in the National Development Plan 11 pushed it back to decline a decline wave.
When the National Development Plan 11 commenced three (3) financial years ago, government announced that the first half of the NDP would run at budget deficits.
This as explained by Minister of Finance in 2017 would be occasioned by decline in diamond revenue mainly due to government forfeiting some of its dividend from Debswana to fund mine expansion projects.
Cumulatively since 2017/18 to 2019/20 financial year the budget deficit totaled to over P16 billion, of which was financed by both external and domestic borrowing and drawing down from government cash balances. Drawing down from government cash balances meant significant withdrawals from the Government Investment Account.
The Government Investment Account (GIA) was established in accordance with Section 35 of the Bank of Botswana Act Cap. 55:01. The Account represents Government’s share of the Botswana‘s foreign exchange reserves, its investment and management strategies are aligned to the Bank of Botswana’s foreign exchange reserves management and investment guidelines.
Government Investment Account, comprises of Pula denominated deposits at the Bank of Botswana and held in the Pula Fund, which is the long-term investment tranche of the foreign exchange reserves.
In June 2017 while answering a question from Bogolo Kenewendo, the then Minister of Finance & Economic Development Kenneth Mathambo told parliament that as of June 30, 2017, the total assets in the Pula Fund was P56.818 billion, of which the balance in the GIA was P30.832 billion.
Kenewendo was still a back bench specially elected Member of Parliament before ascending to cabinet post in 2018. Last week Minister of Finance & Economic Development, Dr Thapelo Matsheka, when presenting a motion to raise government local borrowing ceiling from P15 billion to P30 Billion told parliament that as of December 2019 Government Investment Account amounted to P18.3 billion.
Dr Matsheka further told parliament that prior to financial crisis of 2008/9 the account amounted to P30.5 billion (41 % of GDP) in December of 2008 while as at December 2019 it stood at P18.3 billion (only 9 % of GDP) mirroring a total decline by P11 billion in the entire 11 years.
Back in 2017 Parliament was also told that the Government Investment Account may be drawn-down or added to, in line with actuations in the Government’s expenditure and revenue outturns. “This is intended to provide the Government with appropriate funds to execute its functions and responsibilities effectively and efficiently” said Mathambo, then Minister of Finance.
Acknowledging the need to draw down from GIA no more, current Minister of Finance Dr Matsheka said “It is under this background that it would be advisable to avoid excessive draw down from this account to preserve it as a financial buffer”
He further cautioned “The danger with substantially reduced financial buffers is that when an economic shock occurs or a disaster descends upon us and adversely affects our economy it becomes very difficult for the country to manage such a shock”