BOL kicks off bids for coal to liquids plant
Mbongeni Mguni | Monday December 11, 2023 06:00
Interested bidders have until December 22 to submit their proposals for the project, which will be developed on a Public Private Partnership (PPP) model. According to the bidding note published recently by Botswana Oil, investors will be required to design, build, finance and operate the plant based on an off-take agreement with the state oil firm.
“The project will be tendered on a turnkey basis and Botswana Oil is looking for a single consortium to provide all aspects of the project, technical, design, environmental, construction, commissioning and financing under a Public Private Partnership agreement,” reads the bidder’s note. “The project also entails operating and maintaining the facility for a specified period, and ultimately transferring it back to the Botswana government at the end of the operation and maintenance period.”
Known as Ikaegeng XTL (coal-to-liquid), the ambitious project has been in the works for about a decade and has climbed up the levels of priority in government. A previous attempt by government to self-finance the project was abandoned in July 2021 in favour of the PPP arrangement. At that time, Botswana Oil had a list of 11 companies, which it later whittled down to a shortlist of two.
The push to accelerate the country’s sources of fuel comes as local supply comes under pressure from troubles in South Africa’s refining capacity. South Africa, which supplies nearly all of Botswana’s petroleum products, has suffered a rapid loss in refining capacity with several major plants suspended or ageing out of use.
Figures shared last year by Botswana Oil show that from a refining capacity of 703,000 barrels of oil per day in March 2020, South Africa by March 2022 was down to 303,000 barrels per day.
“We are relying on a country that is now also importing and we have to do something so that we don’t put the burden on them,” Botswana Oil’s senior manager (New Ventures) Gamu Mpofu told a conference last year. “There is no investment in refining capacity taking place in the region. There are some developments in Angola due to come on stream, but those alone are not enough for us to rely on.”
Ministry of Minerals and Energy technocrats are studying a proposal by the Angolan government for Botswana to take up equity in the upcoming Lopito Oil Refinery, a 200,000 barrels per day facility planned on the Atlantic coast. The proposal emerged after official talks in July between President Mokgweetsi Masisi and his Angolan counterpart, João Lourenço in Gaborone.
Botswana Oil, meanwhile, has floated the Ikaegeng XTL to the United States market with its transactional advisor, Hatch Africa, engaging a local law firm, Minchin & Kelly, to provide legal advisory services.
“The firm engaged their colleagues in DLA Piper USA to assist with scheduling of meetings in the United States with various entities of interest in the area of coal to liquids,” Minchin & Kelly managing partner, Terence Dambe told BusinessWeek in April.
The progress on Ikaegeng comes as Botswana Oil prepares to take over 90% of the country’s fuel imports, a move authorities say will boost its ability to secure the best price, improve stability and diversity of sources and allow for citizen economic empowerment in the sector.
The import quota arrangement is expected to kick off next April.