Botswana’s LNG to provide ‘energy lifeline’ for impending gas shortage in South Africa

Botala Energy, an Australian energy company focused on exploration and development opportunities for natural gas and renewables in Botswana, has signed a non-binding memorandum of understanding (MoU) with NOVO Energy, a Southern African gas distributor, to jointly develop a liquefied natural gas (LNG) supply chain between the two countries.

Through this partnership, the duo wants to address the region’s increasing demand for natural gas by utilizing Botala’s coal bed methane (CBM) resources in Botswana and NOVO’s established infrastructure and distribution network in South Africa.

According to partners, the MoU outlines the key terms and phased approach to developing an LNG supply chain in Southern Africa. The deal also sets the stage for a binding gas sales agreement (GSA) between the pair, covering pricing mechanisms, production timelines, and logistics. 

Under the terms of the MoU, Botala will be responsible for the development of its Serowe wellfield, gas processing to LNG, and in-country logistics in Botswana, while NOVO will handle LNG off-take, storage, distribution and customer sales in South Africa. The MoU outlines the potential for expanding LNG production to meet growing demand and develop additional gas markets across Southern Africa. 

Once operational, the partnership is expected to generate early cash flows for Botala, strengthen regional energy security, and provide what Botala says is a sustainable and reliable gas supply to Southern Africa from gas exported from Botswana. This is particularly relevant since South Africa is anticipated to experience a gas shortage–known as gas cliff–from mid-2027. 

Botala Energy’s CEO, Kris Martinick, said: “This partnership with NOVO Energy is a game-changer for Botala and for the entire Southern African energy landscape. The anticipated ‘gas cliff’ in 2027, as highlighted by SASOL, has sparked overwhelming interest from gas off-takers across the region. With many industries seeking alternative gas sources to mitigate the looming supply gap, this MoU positions Botala at the forefront of providing a solution. 

“This is more than just a supply agreement – it’s about creating a sustainable energy future and providing a vital energy lifeline to industries desperate for solutions. We’re incredibly excited by the off-take discussions we’ve had. It’s clear that there’s an urgent need for LNG, and we’re committed to working with NOVO to deliver a reliable and scalable supply chain to meet that demand.”

The MoU is set to become a binding agreement once the GSA is concluded, which is expected to be finalized within 90 days of the MoU’s execution. After the GSA is signed, the terms of the partnership will become official, outlining commitments from both parties to move forward with the development of the Serowe wellfield and LNG distribution infrastructure.

An initial production target of 1–2 petajoules per annum (PJ/a) of LNG is envisaged as part of the MoU, with the potential to scale up to meet market demand.  According to Botala, a bankable feasibility study (BFS) for an up to 2 PJ/annum LNG plant is ongoing. 

Building upon previous works completed on the feasibility of the wellfield and a completed pre-feasibility study of the commercialization options, the BFS will provide an assessment of the Serowe project’s feasibility, ensuring that the development of the wellfield and LNG plant is financially and operationally viable.

“The partnership creates an immediate LNG supply value chain by integrating both companies’ respective expertise. This provides NOVO with a secure regional LNG supply, that is very affordable compared to internationally imported LNG and has flexible scalability to meet market demand,” said Andri Hugo, CEO of NOVO. 

“Regional supply also has the benefit of price stability due to the avoidance of volatile international LNG components. Botala would have the benefit of immediately tapping into NOVO’s existing market portfolio and taking advantage of our advanced LNG Programme that includes inland LNG infrastructure and established gas logistics operations.”

In July, TotalEnergies’ South African subsidiary shared it was considering options regarding its stake in Block 11B/12B off the coast of South Africa, following the announcement from its joint venture (JV) partner CNR International to withdraw its 20% interest.

On the other hand, Africa Energy, another JV partner, said it has no plans of withdrawing as it believes that natural gas will play “a critical role” in South Africa’s energy transition, deeming the use of indigenous gas from Block 11B/12B discoveries as “the most material domestic supply option” in South Africa.

The block contains the Luiperd and Brulpadda discoveries. TotalEnergies contracted Odfjell Drilling’s Deepsea Stavanger semi-submersible rig to drill the Brulpadda-1AX re-entry well, which spudded in December 2018. A large gas condensate discovery at the Brulpadda prospect was revealed in February 2019.

More recently, Canada-headquartered oil and gas company Eco (Atlantic) Oil & Gas completed the transaction with compatriot Africa Oil Corp. enabling the latter’s subsidiary to increase its stake in Block 3B/4B offshore South Africa.