Botala Energy (ASX: BTE): Interview with CEO Kris Martinick

 

Botala Energy (ASX: BTE)

We spoke to Kris Martinick, CEO of Botala Energy (ASX: BTE), about his company’s top-class Serowe Coalbed Methane project in Botswana and its 317 bcf in 2C resources.

We talked about the potential of Serowe to help alleviate the marked energy shortages currently being experienced by southern Africa, the potential upside once the Serowe-6 and Serowe-7 wells have been fully developed, and the valued that can be created in Botala’s proposed Leupane Energy Hub and Industrial Park.

Full transcription below.

 

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Transcription

 

Stuart: Hello, and welcome to “Stocks Down Under.” My name is Stuart Roberts, and I’m one of the co-founders of our service. And joining me today on Tuesday the 16th of May, 2023 from Perth is Mr. Kris Martinick, who’s the CEO of Botala Energy, ASX: BTE. I’m lucky to find you in Perth because ordinarily, you would be over in the opposite side of the world in Botswana proving up your very interesting coal bed methane plant in Serowe, in Eastern Botswana.

Kris: Yes, we’ve spent a lot of time over there. We’ve very active, we’ve been very active since we’ve listed on the stock exchange July last year, we’ve done two additional wells and we’re flow-testing a third, or our third well, which was Serowe-3. So, yeah, we’ve been incredibly busy since the listing, lot of stakeholder engagement. And now we’ve just announced, I think it was last week that the gas has broken out at Serowe-3. So very exciting times, fair bit of celebration last week, bit of a milestone for the company, so yeah, good times.

Stuart: And this whole development has come at a perfect time. The whole of Southern Africa is running out of energy at a rapid rate thanks to the…to way in which ESCOM has been mismanaged over the last 25 to 30 years. And you’ve got suddenly some energy which could be rapidly converted to molecules that’s available for everywhere.

Kris: Yeah. You’re spot on there, but yeah, I mean, every day we read more and more articles about the failure of the Southern African power grid there in terms of the production of energy. So you’ve got this fantastic grid network throughout the whole of the South African Power Pool, runs all the way from Cape Town up to the DRC and runs right next to our field. So, that’s how we see we would monetize the gas, assuming we get to commercial flow rates. And the timing could not be better in terms of the unfortunate events there with rolling brownouts, load-shedding that they have every day in South Africa. In fact, last week there was a country-wide blackout in Botswana as a result of the brownouts.

And you know, if we can convert these gas molecules to energy, we would like to convert it in the hybrid with solar panels. So that gives us a hybrid cost model, it also reduces our CO2 emissions. So that’s what we’re looking at in terms of our commercialization strategy. And we are seeing that, you know, we’ve gotta do a fair bit more in terms of the exploration and appraisal to get to that point. But with gas breaking out, we are confident that we can progress to the next stage. So we’re gonna produce…we’re gonna go and drill four more pilot wells around the Serowe-3 well, and dewater that, and that will give us our commercial flow rate…well, ideally our commercial flow rate indicator by the start of next year.

Stuart: Right. And at that point, yeah, once the field is fully desorbed [SP] and we know what the right flow rate is, you’ll be in a position to talk about your reserve estimates. They’re not bad at the moment. We’re talking…I’m looking at the figures here, 317 bcf on a 2C. Not the biggest field in Southern Africa, but that’s a pretty good start.

Kris: Yeah, it’s a great start. And it’s more than enough to actually supply Botswana’s existing power station there. The Orapa Power Station is 90 megawatts, that’s 20 years worth of gas for that power station should we get it up and running. And also we’ve got 420,000 hectares. When you look at the amount of drilling that we’ve done, Serowe-1 through to Serowe-3 is a 26-kilometer step out. And realistically, we’ve got so much more acreage to go and explore, we’re only really on the tip of the iceberg here. We’ve got a lot more exploration to do, a lot more ground, virgin ground that we’ve not explored in. We know that there has been gas produced in the area, so a lot of upside in terms of the exploration, a lot to learn. And as some people might be aware with the coal bed methane, the recipe to get the gas to work in one area might be different to the recipe to get the gas to work in another area. So, a lot of appraisal to go ahead, but we’ll be confident from Serowe-3 and the immediate area where we’re in by the start of next year.

Stuart: Right. And part of the secret to your success is another man named Martinick, Dr. Wolf Martinick, your father, who’s executive chairman. He’s an old hand in terms of having worked for many years professionally in South Africa and the greater Southern Africa region. He spends a heck of a lot of time working on local stakeholder relations so that you get on well with everyone, right?

Kris: Yeah, yeah. So one of the key lessons that I’ve learned about doing projects, and in particular my time with oil search in Papua New Guinea, is, you know, you can throw as much money as you want at a project. The engineering will work, or the rocks will produce the gas or the oil, but stakeholder engagement is crucial to getting a project across the line. And that’s from the regulatory bodies through to the community engagement aspects.

So, yeah, so Dad has spent numerous months in-country, he loves it, he loves Botswana, loves the area, goes over there. He would’ve spent collectively, I think about three months this year and nearly three months last year since listing over there, meeting with the Kgotla. So that’s the local community meetings that they have with the chiefs, with the farmers, with any of the landowners, the orphanages, through to the Department of Mines and the Department of Energy and the…oh, sorry, Ministry of Mines and Energy and the Department of Environment. So, yeah, he loves it, he’s good at it, enjoys it, and it keeps him out of my hair when he’s over there and I’m over here.

Stuart: So, what I like about Botala is, you’re not trying to do everything all at once. There’s potentially a local power option, a mere 20 megawatts or so in the Serowe area. You’re talking about a larger project at Lupani which isn’t far away. And then if you prove your smarts, then maybe you’re up or down the track. So we’ve got various growth angles, slow and steady rather than all at once, raise countless amounts of capital to do all this.

Kris: Yeah. And you’ve gotta be realistic what you can actually achieve as a small company. We’re not a Santos, we’re not a multi-billion dollar company who can go after a multi-billion dollar downstream development. So, you know, we’re targeting a small 20-megawatt power station with our first initial gas. It’s bite-sized, it’s something that we know will make money, it’ll make a good revenue stream, especially in this climate where energy prices are soaring. Our competitive fuel is diesel, we’re not competing against international oil prices. So a 20-megawatt power plant, it’s pretty feasible and it’s not a huge number of wells to get up and develop. So, yeah, it’s really bite-sized and it’s real…it’s quite a good proof of concept that the government there has had 20 years of drilling that’s had some gas flow. It’s building the existing power station, but it really hasn’t taken off. So we’ve now seen this energy crisis really relax or open up the market for independent power producers such as ourselves or what we would be aspiring to be, to get into that market. So the wheeling arrangements are now starting to take place. That allows us to potentially sell gas or electrons in Botswana to anyone in the South African Power Pool.

So, that’s the big market, at the end of the day, we’ll start selling to the local market, build up our repertoire, and we don’t wanna do anything where we can’t deliver. So take a bit of a pragmatic approach and say, look, we’ll do 20 megawatts, 10 of that of gas, 10 of solar. That’s really something we know we could deliver, and I’m comfortable with the team that I’ve got, we could deliver that.

Stuart: Right. Let’s talk briefly about Botswana, for those who don’t know the Southern Africa very well. If there is an analog to heaven here on Earth, there are various candidates such as New Zealand, for example, but Botswana would have to be up there, right? 2.4 million people in a pretty large country that’s been managed like a Honda factory, basically, in terms of its efficiency since independence in 1966. It’s fair to say you don’t have any regulatory issues operating in what is a fairly free and prosperous country.

Kris: Yeah. No, no, it’s actually been a fantastic place to operate. It’s an amazing place. Lots and lots of friendly people dying to see this project go ahead. And, you know, they’ve got an amazing grid, an amazing network. They’ve got well-established regulatory bodies, and where there are gaps, they listen to you. You know, we take them to quarterly workshops and we sit down with the Department of Mines and they’ll happily workshop things with you to make sure that, oh, okay, here’s a gap, here’s how we can fill it.

So, we’ve found the regulatory bodies incredibly engaged and on board with what we are trying to succeed with. And they’ve been quite helpful, so it’s been a great journey, it’s a very pleasant one working in Botswana. It has its perks because it’s a beautiful country. It’s arid where we are, we’re in the sand field, so that’s the Kalahari Desert. But you’ve got the beautiful Okavango Swamps to the north and plenty of safaris in the area for anyone who wants to go on a tourist vacation.

Stuart: Tell us about yourself. So you graduated Curtin University in geophysics, kicked around mostly on the engineering side of things, and then oil search took you internationally, shall we say. Yeah, you handled a big power project for that company up in Port Moresby. What have been the highlights of your career prior to starting at Botala?

Kris: Yeah, look, I really enjoyed my time with oil search. I was working in projects, so the projects division there. Really enjoyed getting in and out of Papua New Guinea. Focused on working in the Highlands with the projects, also down in the Gulf. Yeah, worked on the Port Moresby Power Station and…but also spent a lot of time in Sydney working with the corporate guys, making sure that we were aligned as a project manager should. So I think my highlights there, just the key learnings that you get from working on those big projects around how to actually get a project from start to finish. How to make sure that you’ve got the stakeholder engagement aspects working. And so, yeah, I really enjoyed my time and in particular that last one, which was on the Port Moresby Power Station. That was a big project and a great project actually. Kudos to that, we did that with no…I think there was no LTIs on that entire project, over a million in man hours. So it was a really good project for us.

Stuart: Right. If there was one thing oil search knew how to do it was operate well in Papua New Guinea.

Kris: Yeah. Operate in a tough environment. Operate in where you gotta learn to roll with the punches. Every plan can come undone and you’ve gotta be able to adjust on the fly.

Stuart: Right, right. And a special message to all those central shareholders. They’re grateful for all that shareholder value created, which they were able to buy very inexpensively.

Kris: Oh. Yeah, yeah. At least a dollar worth of value.

Stuart: Well, Kris Martinick, well done on what you and your dad and the rest of the team have achieved at Botala, it’s a very exciting project, and looking forward first quarter of next year as to how big Serowe can turn out to be, so keep up the good work.

Kris: Thank you very much.