Botswana strikes gas - African Decisions/Jillian Starke

23rd June 2006

Botswana will soon be producing vast quantities of coalbed methane gas (CBM), to be marketed both locally and internationally.

Botswana is sitting on massive, potentially lucrative gas resources on the eastern side of the Kalahari Karoo basin, according to findings in the Coalbed Methane Exploration Study.  The report states that 15 to 20 percent of the CBM could potentially be developed at a price as low as US$2 per GJ.

Kalahari Energy (KE), which controls a 3,200,000 acre gas field in the Kalahari Karoo basin, has started drilling for commercial gas reserves.  Julian Scales, MD of KE stated that gas production wells will be drilled and completed in line with the gas demand.  "The beauty of coalbed methane wells lies in that they present a low risk, incremental investment and gas wells can be completed to suit demand.  Hence, the number of holes for a (say) 1000 MW power station would be twice that required for a 500MW power station.  Wells could then be brought on line as the power station (or other gas consumer) demand comes on line - thereby enabling KE to fund itself once initial production has started.  At present our strategy is to prove up our reserves of between 0.5 to 1 Tcf which will make KE bankable.  Our initial test 5 spot has been under test for 3 to 4 months and we are about to sink another 12 wells and core holes".

With the increase in power demand in South Africa, Eskom is expected to stop providing cheap surplus electricity, industrial heat production, cooking purposes and gas to liquid production.  Motor performance is enhanced as natural gas burns cleaner than other fuels, providing longer engine life and lower maintenance costs.

Unlike coal, CBM does not contain environmentally harmful pollutants, and its production byproduct, water, can be used for irrigation or industrial-process water.

The Overseas Private Investment Corporation (OPIC) has provided an $8.5 million investment guarantee to KGC to finance the purchase of equipment and the drilling of coalbed methane.

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