Botala Energy (ASX:BTE) executed a non-binding memorandum of understanding to jointly develop a liquified natural gas (LNG) supply chain with Southern African gas distributor NOVO Energy, according to a Monday Australian bourse filing.

The agreement seeks to address South Africa's anticipated gas shortage from mid-2027, the filing said.

Botala will be responsible for the development of the Serowe Wellfield in Botswana, processing of the natural gas to LNG, and in-country logistics, while NOVO will handle LNG off-take, storage, distribution, and customer sales in South Africa.

The initial production target is 1-2 petajoule per annum of LNG.

The firms intend to finalize a binding gas sale agreement within 90 days of signing the memorandum.