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Tlou Energy highlights “excellent progress” at Botswana coal bed methane project

Drilling operations are setting up what, subject to results, can become the basis of an important gas to power project
oil and gas operations
The lateral drilling is due to be completed in 'early 2019'

Tlou Energy Ltd (LON:TLOU) said excellent progress has so far been made with the drilling operation at its Botswana coal bed methane (CBM) project, which began recently.

In its third quarter report, Tlou also highlighted that it has submitted an environmental impact assessment (EIA) for the downstream operations attached to the CBM project and noted that it lodged its re-tender to the Botswana government for the proposed CBM fuelled pilot power plant.

READ: Block Energy upbeat as it heads into 2019

The recently launched pilot well drilling campaign will, subject to positive results, create the basis for the initial gas-to-power project.

“The wells are being drilled as 'dual lateral pods', comprising a single vertical production well intersected by two lateral wells,” Tlou explained.

“The lateral wells will be drilled through the gassy coal seam with gas extracted from this coal produced through the vertical production well where it can be gathered and used for power generation. Up to three pods are planned.”

Each pod comprises three wells, for example, Pod One consists of the vertical Lesedi-3 production well plus two lateral wells labelled Lesedi-3A and Lesedi-3B.

Following the completion of the Lesedi-3 and Lesedi-4 pods (so a total of six wells) the company intends to use a workover rig to open up the wells and connect them to surface production facilities which are yet to be installed.

Dewatering and production testing activities to begin

In the terms of the current progress, Tlou noted that in the past quarter, it drilled both the Lesedi 3 and Lesedi 4 top-hole sections and it expects to complete the drilling of the lateral sections in ‘early 2019’.

“All of the production pods are being drilled in the area proposed for the initial project development and are aimed at confirming gas flows as well as ensuring production readiness prior to commencement of development operations,” Tlou said.

“Dewatering and production testing activities will begin immediately following the completion of the production pods.”

In a note to clients, analysts at ‘house’ broker Shore Capital said: “Our fair value estimate stands at approximately 25p/share and, with a very active work programme underway and strong progress being made at Lesedi, we continue to see excellent scope for Tlou to become a leading Southern African-focused independent power producer.”

Shares in Tlou Energy were changing hands at 5.40p in early afternoon trading, down 0.9% on Tuesday’s close.

 -- Adds analyst comment, share price --

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