Tlou Energy (LSE:TLOU) was up 2.7% to 5.8p on Tuesday afternoon after revealing that it has re-started drilling at its at its advanced-stage Lesidi project in Botswana.
The business is focused on developing gas-to-power projects in southern Africa using coal bed methane (CBM). To do this, it drills a single vertical production well that is intersected by two lateral or horizontal wells. The two wells then drill through a gassy coal seam, where gas is extracted, gathered, and used for production.
Tlou plans to drill three of these ‘dual lateral pods’ at Lesedi. The third of these pods is called Lesedi 5 and is contingent on the results of the first two pods, Lesedi 3 and Lesedi 4.
In today’s update, Tlou said it has now drilled the top-hole sections and vertical wells for the production pods. It will now begin drilling the lateral well sections for Lesedi 3 and Lesedi 4.
If successful, the production wells currently being drilled will form part of the company’s initial gas-to-power project. Following installation of surface production facilities, the completed wells will then begin production testing. This will aim to de-water and lower pressure in the coal seam to achieve potential gas flow.
An environmental impact assessment (EIA) for the power generation facility and transmission lines to connect the project to the electricity grid was submitted late last year.
Lesedi currently has sufficient gas reserves for an initial development of 10MW based on 2P gas reserves of around 41 billion cubic feet (BCF). Meanwhile, 3P gas reserves are estimated at 427BCF, while contingent gas resources of c.3,044BCF provide plenty of additional potential.
The company is also waiting for Botswana’s government to respond to its proposal for the supply of up to 100MW of CBM generated power.
Tlou’s Managing Director Tony Gilby said: ‘Thus far, drilling operations at the Lesedi CBM Project have been progressing according to plan. Following the Christmas break, our field team have re-mobilised and have now recommenced drilling activity to complete the production pods at Lesedi from which we intend to produce gas to potentially supply the initial stages of our proposed CBM gas-to-power project.
‘In October 2018, Tlou submitted a comprehensive tender to the Government of Botswana’s request for proposal for the supply of CBM generated power to the Botswana grid. While we await a response to our tender, we are pushing forward with a number of workstreams including the drilling of our gas production wells, the lodgment of the downstream Environmental Impact Assessment, evaluating membership of the Southern African Power Pool, negotiations for a power generation license and discussions to secure development finance upon acquiring an appropriate PPA.
‘Tlou Energy has the most advanced CBM gas to power project in southern Africa (as defined by being the only CBM company in Botswana to have independently certified gas Reserves and a Mining License for production amongst other things). Our gas Reserves are large enough to supply significant amounts of clean power to Botswana for many years.’