Kalahari Energy has sealed an agreement with South African metals and mining giant, Exxaro Resources, for a CBM exploration program to develop a deposit in the Kalahari Karoo Basin in eastern Botswana. Last year, Kalahari Energy and its partners beat a field of 33 bidders for a multimillion pula tender towards the Botswana Power Corp.’s (BPC) 250-megawatt Independent Power Producer (IPP) station. Once commissioned, the IPP will be part of the BPC's short-term interventions to stave off the impact of the prevailing power supply shortage in Botswana. Under the contract, Kalahari Energy will build, own and operate the CBM methane-powered gas production and processing station that is anticipated to become the largest of its kind in the world.

Announcing the latest developments, Kalahari Energy's Craig Kirkland explained that the agreement with Exxaro was to conduct CBM exploration within the prospecting licenses that Kalahari Energy presently holds. "The purpose of the partnership is the development of three of Kalahari Energy's leases to prove commercial gas flows and to explore the feasibility of a gas-based energy business. The focus of the feasibility study will be to highlight the commercial (development) options available and to reach a production decision for implementation," he said.

Kirkland said the Southern African energy market held great potential for a CBM power business due to the regional shortages and rising energy prices. "This energy economy is, however, heavily reliant on coal and imported crude oil. CBM provides the opportunity to diversify the region's energy portfolio," he said. He added that Kalahari Energy holds five prospecting licenses in the eastern part of the Kalahari Karoo Basin, with early indications, due to its location in the basin, that the area is highly prospective for CBM.

"The quality and extent of the Kalahari Karoo Basin CBM deposit requires further verification, and exploration activities have already commenced," he said.

It is anticipated that with the inclusion of experienced development partners such as Exxaro, Botswana's potential to join world leaders in CBM power could be realized. The BPC's extension of an IPP tender based on CBM has already kick-started the graduation of the industry from a dream to reality. Estimates are that local CBM resources could support power development of up to one gigawatt. Kalahari Energy and its partners in the IPP project are expected to supply power to the BPC for an initial period of 15 years.

The partners signed an engineering, procurement and construction (EPC) contract with Group 5 for the power station last year, and commercial operations based on CBM are expected to commence in 2010. Kalahari Energy's five prospecting licenses cover an area of 3,12 sq km in the eastern part of the Kalahari Karoo Basin (around Mmashoro), while Exxaro Resources is one of South Africa's largest mining companies with a diverse commodity portfolio consisting of heavy minerals, coal, base metals and industrial minerals. March 30, 2009