Botswana’s Shumba Energy has formed a joint venture with two Chinese companies to build a coal-to-liquids plant at a cost of between $1.5 billion and $2 billion, Chief Executive Officer Mashale Phumaphi told Reuters. 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% stake in the joint venture, CoPet, with partners PowerChina International Group, part of state-owned Chinese firm PowerChina, and Wison Group.
The coal-to-liquids plant is expected to produce 20,000 barrels per day of diesel and 5,000 barrels of gasoline per day when it is completed. “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.
Up to 75% of the capital expenditure for the plant could be financed by debt, with Shumba hoping to use its relationship with Power China International and the Wison Group to borrow from Chinese lenders, he said. The coal-to-liquids plant would 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.