Botswana’s Shumba Energy says it has formed a joint venture with two Chinese companies to build a coal-to-liquids plant that will cost between $1.5 billion and $2 billion
The company’s Chief Executive Officer, Mashale Phumaphi, told Reuters in Gaborone that the coal-to-liquids plant was expected to produce 20,000 barrels of diesel and 5,000 barrels of gasoline per day when completed.
Botswana has abundant coal reserves of around 212 billion tonnes but currently imports all its fuel needs of 1.2 billion litres per annum.
Shumba has over the last few years progressed from being an exploration company to an energy development company.
It sits on over 4.5 billion tonnes of thermal coal reserves in Botswana’s eastern coal fields.
Shumba will hold an 80 per cent stake in the joint venture, CoPet, with partners PowerChina International Group, part of state-owned Chinese firm PowerChina, and Wison Group.
“Our primary objective is import substitution, and to this end we have already had fruitful discussions with the largest fuel retailers in Botswana for off-take,” Phumaphi said.
He said up to 75 per cent of the capital expenditure for the plant could be financed by debt, with Shumba hoping to use its relationship with PowerChina International and the Wison Group to borrow from Chinese lenders.
The coal-to-liquids plant will require 3.2 million tonnes of coal per annum, which will be supplied by Shumba’s Mabesekwa coal mine, currently under development.
Shumba aims to reach financial close on the project in the next two years, with construction taking a further four years.
