Botala Energy (ASX: BTE) has secured its first major LNG offtake agreement for its Serowe coal bed methane project in Botswana.

The company has signed a binding letter of intent for the negotiation of an LNG offtake agreement with SCAW South Africa, a leading industrial manufacturer specialising in various steel products that require significant natural gas supply.

Botala chief executive officer Kris Martinick said securing its first major LNG offtake agreement is the company’s most significant commercial milestone to date and significantly de-risks the project as Botala moves towards development.

Option to expand

Under the anchor offtake, SCAW will purchase up to 3.5 petajoules per annum (PJ/a) of LNG in Phase 1, with an option to expand to 4.7PJ/a in total.

SCAW has also agreed to jointly participate in the bankable feasibility study (BFS) for the project and have direct involvement in LNG storage, transportation and delivery.

“With this commitment to the BFS and infrastructure development, we are not just securing an LNG customer but optimising the entire supply chain,” Mr Martinick said.

“This milestone sets us on the fast track to first revenue, demonstrates our leadership in the regional gas market and provides strong commercial validation for project investment and growth.”

Significant return

Botala has identified the potential to earn approximately $381 million annually and is now targeting first LNG supply in 2027/2028.

The proposed partnership will be for an initial 10-year term, with an option to extend up to 20 years.

Botala has committed to exclusive negotiations with SCAW for Phase 1 volumes in the lead-up to signing the final documentation.

Regional gas crisis

Botala is one of a number of Australian companies targeting a South African market facing a severe natural gas shortage, with pipeline supplies declining and no major new domestic sources coming online.

This has created urgent demand for LNG alternatives, boosting LNG prices and, with the ongoing issues facing the nation, South Africa is actively encouraging gas investments to bridge the energy gap.

Meanwhile, Botala is continuing negotiations with other major industrial players, identifying an independently certified 2C resource of 454 billion cubic feet in the immediate vicinity of 11 wells drilled within these tenements and a total prospective resource of more than 7 trillion cubic feet within the total project area.