Tlou Energy (LON:TLOU) re-submitted its tender for the 100Mw Lesedi coal bed methane-powered power station contract in September,
Both short-listed bidding companies were asked re-submit bids by the Botswana Ministry of Mineral Resources, Green Technology and Energy Security.
Even though there has been no indication when the result of the tender will be published, Tlou has started drilling at Lesedi to test gas flows in the area where the power station is planned.
The first well, 'Lesedi 3P', is scheduled to go down to a depth of 580m and should covert a significant portion of the currently established gas resources to the more certain reserves category.
Tlou said it will drill the Lesedi production wells as 'dual lateral pods', comprising a single vertical production well intersected by two lateral wells. This will be followed by production testing
Production from Lesedi 3P is targeted to commence in early 2019 with the well set for an extended test to de-water and lower the pressure in the coal seam to achieve gas flow.
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.
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.
First power from CBM at its field in Botswana followed the installation of a gas generator at the Selemo project area in June.
It is already the most advanced CBM asset in Botswana.
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 flexibility and optionality.
25p fair value target
House broker Shore Capital said: “Lesedi 3P” is a vertical well and the first in Tlou’s planned production drilling programme, which aims to provide gas flow data in the proposed initial development area.
Shore Capital’s fair value estimate for Tlou stands at approximately 25p/share and with a very active work planned the broker sees ‘excellent scope for Tlou to become a leading Southern African-focused independent power producer’.
At 5.6p, Tlou is valued at £22.3mln.